Tesla enhances ownership experience

Tesla is VERY committed to promoting the viability of electric vehicles.

Every element of buying a new car has been placed under the microscope by the Palo Alto-based American firm. Most of those elements as they play out in a conventional context have been found wanting.

Tesla doesn't sell through a dealer network as such. It sells directly to customers, saving commission on each sale. Buyers can even make the purchase online, but it has not been well received by other car companies and their respective dealers.

The company claims that the purchase price of a Model S represents good value, measured against a similarly-equipped prestige sedan from another company. Given its zero-emissions powertrain, the Model S saves the buyer as much as $4570 in Luxury Car Tax, which is subject to the green car dispensation for vehicles using fuel at the rate of 7.0L/100km or less.

Car companies and their dealers typically make money not so much from the initial sale of a new car, but from service and parts. Where there's some extra cream to be made during the sale process, it usually comes from finance and insurance, arranged by a specialist called in by the salesperson during the 'talking turkey' phase of the transaction.

Leopold Visser, Tesla's Asia/Pacific Director of Financial Services, admitted to motoring.com.au that Tesla makes its money from the sale of the car.

"Our focus is that we will make money when we sell the vehicle, so our margin is pegged to the vehicle. We have our price parity – transparent pricing all around the world – and that's where Tesla generates its income from. We need to be sustainable."

Tesla does not make money from finance arranged for the buyer, although Tesla in Australia favours Macquarie Leasing to supply buyers with financial products. Visser, who sees upselling and making commission on finance as a barrier to selling the car, says that Macquarie can provide loans at an interest rate of 4.75 per cent. None of that comes back to Tesla.

"What we do is we go into markets, and because we're not at the size where we can have our own finance companies in all markets, we find the appropriate partner in the market. In Australia we're teamed up with Macquarie Leasing. We went for Macquarie Leasing because we want to have a finance partner that has access to really low-cost capital..."

Visser says that Macquarie can call on just under $9 billion under management and over 300,000 customers, making it "really strong in the market".

"We work with them to pass on the most innovative financial products we can directly to the customer. There's no additional margin that Tesla makes on top of that, there are no additional fees..."

The 4.75 per cent interest rate is not a short-term enticement campaign. It's locked in for the foreseeable future, according to the Tesla exec.

A servicing program and pricing structure for the Australian market is yet to be set in concrete, but Visser did say that American Tesla owners are paying around US $600 a year to have their cars serviced. By virtue of Tesla models' electric powertrain, there are fewer moving parts, fewer consumables and servicing costs can be kept lower. It's a similar situation with parts for the Model S.

Visser says that the Model S can typically save an Australian family as much as $14,000 in fuel costs, over five years. This is information published on the company's website, and is based on an average distance of 15,000km travelled each year. With premium petrol selling for $1.52 a litre, and internal-combustion cars averaging 13.7L/100km, fuel costs could be as high as $3100 per annum. That's about nine times the cost of recharging a Model S. Tesla stores have configurators that allow prospective buyers to compare their existing car and driving history against a Tesla.

"The easiest way to do it is to actually go in the stores," Visser said. "We have in the stores calculators; [buyers] can look [up] what is the current car they drive, what is the fuel consumption... and then what are their driving habits... but we use as an average about 15,000km."

By consistently charging the battery from the company's superchargers, the day-to-day cost of running a Model S can be reduced to zero. The superchargers are currently limited to Sydney's Lower North Shore and Pyrmont, and Richmond in Melbourne. More are to follow by the end of the year, along the Hume Highway, connecting Melbourne and Sydney (and Canberra). Each supercharger can provide up to 80 per cent recharge within 40 minutes for the Model S 85D. 

All of these add up to reasons to buy, own and run a Tesla. The icing on the cake is the resale value guarantee. Tesla promises to buy back the car after three years – as a trade-in – at 50 per cent of the standard purchase price, and 43 per cent for the value of any options fitted. There is some fine print in that guarantee. If the car travels more than 60,000km during the three-year period, Tesla will assess the car for excess wear and tear, adjusting the resale value accordingly.

Although Visser didn't make this point himself, the Tesla business model is arguably more sustainable than that of other car companies. The profit reaches Tesla at the earliest opportunity – the point of sale – rather than over the life of the car. Tesla spends less on R&D, because it's not dealing with complex fuel delivery systems or the sort of convoluted packaging constraints of plug-in hybrids and fuel-cell vehicles.

And so much of Tesla's Model S is modular and upgradeable – just like an old-fashioned desktop computer. It means that Tesla can afford to abide by longer model life cycles – provided capricious consumers don't become bored with looking at much the same car they were buying 10 years earlier. That could also be decided by how the market responds to the threat Tesla represents.

With Audi committed to a Q6 SUV that will rival the Model X, and BMW rumoured to be working on an (i5?) sedan to rival Model S, the rest of the world is beginning to follow Tesla's lead. On balance, that could be a very good outcome for the world in the future.