Elon to Give Away Teslas

Guest Post by Eric Peters

When Chevy couldn’t sell the Volt  electric car (RIP) it resorted to leasing them. Which at least gives the impression that people are buying them.

In fact, they were renting them – for well below what it would have cost to buy, which is precisely why leasing is attractive to those looking to drive more car than they could otherwise afford.

Or are willing to pay for.

GM offloaded Volts for just under $200 a month – before the proverbial plug was finally pulled. It doesn’t take green eyeshade to see the problem with a $200 monthly lease payment  . . . when the car stickered for $33,520.

A two-year lease cost the buyer $4,800.

It cost GM a great deal more.

But it was preferable, apparently, to the embarrassment of unsold Volts collecting bird droppings on dealership lots. GM eventually decided it made more sense to just stop making the Volt – at least until it becomes possible to force people to buy them (directly, rather than merely mulct them, via taxes, in order to “help” the virtue signaling affluent buy them via wealth-transfer subsidization of EVs).

Tesla is now following the same policy – and for the same reasons.

The company will begin leasing Model 3s to “boost demand” (italics added) according to the EV fanboi blog Electrek.

This shouldn’t be surprising given that Tesla has not been able to deliver the “affordable” Model 3 it has been promising (and taking deposits on) for years. This is the Model 3 that was supposed to have been buyable for about $35,000.

It has yet to appear.

Instead, the only Model 3s available are those which start at $44,000 – with actual transaction prices well over $50,000.

That is a lot of shekels for a smallish hatchback sedan that – were it not electric – would be a tough sell on the merits vs. a $20,000 Honda Civic sedan.

Which explains the resort to leasing.

It is a way to hide the car’s otherwise-unaffordability – or least, the difficulty of cajoling a sufficient number of fools to part with their money. No matter how “green” one may wish to appear to be, it’s ultimately a dollars-and-cents proposition for everyone who hasn’t got unlimited green.

It is also a way for Elon – as GM – to pretend the cars are “selling.” They are transacting – but that is a different thing.

And leasing an EV is uniquely and hugely problematic – for the lease-issuer – because of the catastrophically high depreciation which afflicts EVs.

While all cars lose value, no car loses value faster than an electric car. AAA reports the average is $6,000 annually.

This is a function of the EV’s power source – the thing which makes it go.

Its battery pack.

Plugging in is not like filling up. When you put gas in your tank, you aren’t wearing out your car’s transmission. When you put volts into your EV’s battery pack, you are doing pretty much exactly that.

Just sub battery for transmission.

And the more often you do it, the faster the “wear and tear” – the erosion of the battery pack’s capacity to hold a charge. So-called “fast” charging is particularly hard on an EV, by the way.

The more often you do it, the shorter the battery pack’s useful life.

This is another one of the “compound interest” problems with EVs no one except a few unbelievers wants to discuss – for the same reason the credit card companies prefer you not read the fine print at the bottom of your monthly statement.

EVs already have the functional gimp of comparatively short ranges; if regularly driven, the EV will likely need to be charged several times a week – as opposed to refueling an IC car once a week. Inc old weather, recharge frequency increases again, as the useful range decreases.

Once again, for emphasis: The more often you discharge/recharge, the shorter the useful life of the battery pack.

And EV batteries are very expensive to replace.

About $10,000 for Teslas – which have “high performance” batteries. How else do you suppose they get these heavy cars (the Model 3 weighs close to 4,000 lbs., about 400 pounds more than an otherwise similar compact sedan) to accelerate so quickly – one of the things aggressively touted by Tesla? And the more often you accelerate rapidly, the more rapidly the battery charge depletes.

Muscle cars burn gas.

Muscular EVs burn cash.

But even those EVs which are not-so-muscular hemorrhage value – due to the halting cost of battery replacement. There is a reason why you can find two or three year-old Nissan Leaf EVs – which sticker for $30k new – on the used car market for less than $10k. Their  original owners dump them when the range begins to droop due to a decline in battery capacity – and they discover that recovering the as-new range will cost them $5,499 (see here) for a new battery pack.

This is the equivalent, in terms of the cost, of replacing the engine and transmission in a typical non-electric economy car.

With Teslas, the depreciation problem is compounded – there it is again – by the fact that they are luxury cars that happen to be electrically powered. And the second-fastest depreciating new cars are luxury cars. Toss in the ruinous effect on long-haul value of having to spend $10k on a new battery – probably before the thing is ten years old – and you have what Houston might describe as a “problem.”

At least insofar as Tesla – the company – is concerned.

But this leasing business gives the public an opportunity to turn the tables. Instead of being forced to subsidize Teslas, they can get Tesla to subsidize them for a change.

If you could drive a new $50,000 Model 3 for a couple hundred bucks a month – and then walk from the thing after two years and leave Elon holding the bag for the depreciation – that’s not a bad deal at all.

Of course, it’s a deal Elon (like GM) probably won’t be able to offer for very long.

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Donkey Balls
Donkey Balls

Star…

A
A

A traditional auto lease is essentially the lessor pulling forward the future anticipated value of the car at the end of the lease. So value at start X minus value at return Y = cost of the lease Z, divide by months of the term and there you have it. Yes, it’s a long term rental but no, you’re not getting a “deal” other than a lower monthly nut because you agree at the end you don’t own anything because you already sold it back to the mfr.

A lease can work out in your favor if you time a market change right, like leasing a Prius when gas is $4/gal and returning when it’s $2 as if you were on the hook for selling it might not be so easy. That’s pretty hard to do without a crystal ball and beyond that leases have all kinds of rules that carry penalties that can gouge you bad. In reality, if the leasing company (manufacturer) was losing money on the deals they wouldn’t be doing them. In the commercial world there are a ton of leased vehicles from trucks to airplanes. It’s a very established and proven business model.

A low lease rate is no different than a cashback incentive at sale. Just another way to move product. Maybe GM did that for the Volt, I don’t know. Maybe Tesla needs to do that for the Model 3 to move metal, again, I don’t know. Either way, I wouldn’t view a lease program as a sign any company is in trouble.

Dutchman
Dutchman

Tesla Tumbles After Consumer Reports Drops Model 3 Recommendation

Consumer Reports has now pulled its recommendation of the Model 3 based on reliability issues. “Members say they’ve identified a number of problems with their cars, including issues with its body hardware, as well as paint and trim,” Consumer Reports said.

The survey found that the Model 3’s sole touchscreen would often malfunction. “The touch screen would intermittently begin acting as if someone was touching it rapidly at many different points. This fault would cause music to play, volume to increase to maximum, and would rescale and pan the map in the navigation system,” one CR survey respondent said.

Other owners complained about paint trim defects and windows cracking. “Earlier this year, our test vehicle developed a large crack in its massive rear window during a cold spell when it was parked outside,” Consumer Reports said.

https://www.zerohedge.com/news/2019-02-21/tesla-tumbles-after-consumer-reports-drops-model-3-recommendation

TampaRed
TampaRed

i read on a site that won’t be named that tesla expects 1st qtr delivery dropoffs to be 55-60% lower than q4,2018,and that layoffs are occuring–

Llpoh
Llpoh

Toast!

Stucky

Yup. Tesla is the new Yugo.

bob
bob

I would love to get a free Tesla. I’d park it near the truck-bed-converted-to-trailer that’s rusting where we parked it on the hill in the pasture as a sort of pasture ornament. Of course I’d drain it of all toxic fluids so it didn’t pollute the ground water and the pasture grasses before I drug it out into the pasture. The goats would have a ball climbing on it.

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