Tesla Increases Prices on Locked-In Orders

Update: Tesla Motors announced the new options and pricing to all owners on Friday, January 16th. I've posted an updated analysis.

Tesla Motors is in the process of rolling out price increases to their customers who have pre-ordered a 2008 model year Roadster which has not yet entered production. Customers whose cars are about to enter production, after a two-year wait and a fourteen-month delay, are right now getting phone calls in which they are told they have to accept this price increase and re-select options before their car can go into production. This price increase applies to all 2008 Roadster orders starting with VIN 210.

These 2008 model year customers were given a base price of $92,000 and required to make a substantial deposit at a small start-up company with no experience in producing cars. Those early deposits of $30,000 to $50,000 were used along with investment capital to fund the development and early production of the Roadster. Around the time that Tesla delivered their first production car in February of 2008, they opened orders for 2009 model year cars at an increased base price of $109,000 to reflect both increases in their cost projections and also the then-proven ability of the company to produce cars.

Customers whose cars are going into production this month were required to lock in their option selections in September. All customers with orders for 2008 model year orders, some 600 cars, were required to lock in their selections by November of last year. Tesla Motors is unlocking those selections, raising the prices, and requiring owners to reselect their options with the higher prices.

This is coming as a big surprise to owners being informed of this given that they locked in their options and price months ago. A casual reading of our contract sure makes it sound like once we locked in our choices we were committed to buying the Roadster with those options, and Tesla Motors was committed to delivering that package for the price we agreed to.

Here is the table of original and current options and prices as provided by Tesla Motors on January 14th, 2009.

The most obvious price increases are from the unbundling of the high power connector (HPC) and a $1,000 increase in the destination charge. The HPC connects the Roadster to home power for rapid charging. Previously, the HPC was included in the price of the Roadster for early orders. (Tesla had previously unbundled the HPC for 2009 model year orders.)

A second big change is the removal of à la carte audio upgrades. Previously, owners could choose to separately upgrade the speaker system and head unit (including a navigation system). With the upgraded head unit, owners could choose to add support for Sirius satellite radio and/or Bluetooth mobile phone integration. Now all of these items are available only as a single bundle for $3,000, which is $500 more than the total system cost originally. The option of spending just $800 for the built-in premium speaker system is no longer available, a disappointment to owners who wanted the factory speaker look with an aftermarket head unit.

There's also a subtle change in the mobile connector. Previously, owners were able to order a mobile connector for charging away from home. The promised mobile connector was to be compatible with both 120-volt and 240-volt connections using a variety of outlet adapters. Tesla later discovered regulatory hurdles to selling a 240-volt connector, so now owners have only a 120V/15A connector that takes about 37 hours to charge a fully depleted battery pack. Said another way, the mobile connector charges at a rate of about 6 miles of added range per hour of charging. Tesla is now including that 120V low-power mobile connector at no charge, with no timeframe or cost estimate for the 240V/40A mobile connector.

According to Doreen Allen, Tesla Motor's reasoning for the price increases is that they are working hard to get to being profitable on each Roadster delivered, and that the federal tax credit of $7,500 which became effective on January 1, 2009, means that the net effective price of the Roadster decreased at the beginning of this year. Additionally, the à la carte audio options were creating too much complexity in production and had to be consolidated to be sustainable.

This owner finds it particularly galling that he and his wife got the message from Tesla that our car is being held from starting production until we agree to these sudden, retroactive price increases on the same day that Tesla Motors published a blog Tax Incentives: Why the Roadster costs less than its sticker price.

On a personal note, we complained a lot, but in the end picked a set of options and agreed to pay the price increase because we want Tesla to be successful and we want our car as soon as possible. It didn't seem worth it to spend a week complaining and arguing about it, not when our car was ready to go into production.