Tesla Unveils Loan Program To Make Electric Cars More Affordable
PALO ALTO (CBS SF) — Tesla Motors chief executive and co-founder Elon Musk on Tuesday announced a new financing plan for its Model S electric cars that’s aimed at making them affordable for more people.
During a much-hyped conference call, Musk said his Palo Alto-based company has partnered with Wells Fargo and US Bank to provide a financing plan that he said provides the best elements of ownership and leasing.
Noting that some potential customers are nervous about buying an electric car because they’re concerned they might depreciate in value quickly, Musk said, “Our goal is to give customers complete peace of mind” by offering customers the same residual value as the Mercedes S Class after three years.
He said customers “are guaranteed to be on a par with one of the best cars in the world,” adding that Daimler, which makes Mercedes cars, is a partner with Tesla and an investor in it.
Musk said he’s confident that Tesla, which announced on Sunday that it will have its first quarterly profit in its 10-year history, will be successful enough to have the money to back up his guarantee.
But he said that as an additional guarantee, he’s offering to dip into his personal fortune to pay customers if necessary.
“I’m putting my money where my mouth is,” Musk said.
Forbes magazine has estimated that Musk has a net worth of $11 billion and he admitted the magazine was “not far off.” But after laughing he said, “They’re being too generous” and the $11 billion figure “sounds a bit high.”
Tesla is making the Model S at the former New United Motors Manufacturing Inc. facility in Fremont, which has a long history as an auto plant dating back to 1960.
The NUMMI plant shut down on April 1, 2010, after General Motors and Toyota Motor Corp., ended their partnership to make cars there, but Tesla announced it would buy the factory on May 20, 2010.
The deal was completed in October 2010 and Tesla began delivering the first Model S cars last June 22.
In announcing its firs quarterly profit, Tesla said it delivered more than 4,750 cars in the first three months of this year, beating its forecast of 4,500.
However, Tesla said only 4 percent of its customers have chosen the least expensive version of the Model S electric sedan, which has a base price of $59,000, so it will stop making the cheaper model and only make more expensive versions that range from $70,000 to $95,000.
Musk said, “I’d like to broaden the affordability of the car” and he hopes the new financing plan will accomplish that goal.
He said US Bank and Wells Fargo have agreed to provide 10 percent down financing on the purchase of a Model S for customers with good credit and that payment will be covered by federal and state tax guarantees that range from $7,500 to $15,000, depending on each state.
Musk said that he believes the true net out-of-pocket cost of owning a mid-range Model S will drop to less than $500 a month when considering the savings from using electricity instead of gasoline, depreciation benefits and other factors.
After 3 years, customers will have the right, not the obligation, to sell their Model S to Tesla for the same residual value as the Mercedes S Class car, he said.
“It’s not like a lease per se, it’s financing a car over three years and a loan you can collapse and be done with it,” Musk said.
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