For years, the Tesla Model S has stood as the premiere electric vehicle in the United States, at a price tag few people can afford. Interest and pre-orders of the newest Model 3 have been quite high, since that vehicle comes with a base price tag that’s a fraction of the Model S. Tesla’s issues with ramping up manufacturing production have always been a matter of some concern, but the company may have just taken a nasty, self-inflicted blow. Multiple Model 3 customers report being pushed at the dealership to purchase a Model S instead. In some cases, they’ve been lied to about the relative cost of each vehicle, as shown below:
As others on Reddit have pointed out (hat tip to Jalopnik) this is highly misleading for a few reasons. One, while the “average pretax selling price of $ 57K” may be technically true, it’s only practically true for the handful of wealthy investors and individuals who have taken delivery of the car already. Since the base price of the car is supposed to be $ 35,000, the $ 57K figure means Tesla is at least in part making you purchase expensive add-ons and doesn’t offer the vehicle without them yet. The less expensive cars are arriving later this year.
But Tesla not only doesn’t want you to wait, it doesn’t want you to buy the Model 3 at all. According to the letter, the pre-tax credits you get with the Model 3 are going to expire by the end of 2017. Other redditors report being told those tax credits could be gone as early as September. This is flatly ludicrous. It’s true that these tax credits will expire, once Tesla sells 200,000 vehicles, but the company has several quarters before it’ll be near that point. No reasonable projection of Tesla’s sales has them hitting it in 2017, unless Elon just figured out how to ship 2x more cars per quarter, overnight.
Second, the letter states that the $ 7,500 tax credit will expire. This is a beautiful demonstration of how companies lie without technically lying. It’s true that the $ 7,500 tax credit expires, but the tax benefits don’t go away — they diminish. Once Tesla has shipped 200,000 vehicles, the tax break drops to $ 3,750. That’s a significant cut, to be sure, but the letter doesn’t try to clarify the situation. It could have said “The $ 7,500 Federal Tax Credit will be cut to $ 3,750.” It doesn’t.
Multiple people on reddit have reported being hit with similar, hard-sell tactics. So why does Tesla, which just announced a vehicle people have been waiting years for, want people to buy the Model S? There are a few reasons, none of them great. Maybe Tesla fears the Model 3, its newest vehicle, won’t ship in the volumes it needs to fill orders in a reasonable time frame. Maybe the company is having trouble with margins or facing investor pressure to cut its losses per vehicle sold. Maybe it’s having problems manufacturing some of the vehicle’s components. While this might not seem possible, the Model 3 being less expensive than the Model S, it can be harder to make a good product at a low price as it is to make a good product at a high price.
Tesla claims not to have been aware any of this was going on, which is farcical under the circumstances. The company is contacting would-be buyers to tell them they really ought to go buy a Model S instead, even though the Model 3 is the car that’s been sold to the public on the promise of being affordable. Either Elon Musk has the most incompetent sales staff ever (they don’t make commissions on individual sales), or a directive came down from someone in a position of authority authorizing sales reps to push the Model S at Model 3 customers.
Now, how much did Tesla craft this message? I don’t know. But the fact that multiple people have reported getting similar letters supports the idea that this was something management decided to try to see if it would work, only to pull back now and blame it on some low-level flunkies.
Luckily, we’ll soon know the situation one way or another, when Tesla’s Model 3 deliveries either pick up and start hitting company and investor targets, or don’t.