Published on December 17th, 2012 | by Jo Borrás
The Long Con: Tesla to Gamble on Battery Futures With YOUR Money
Would you buy an electric car if you didn’t know the price of a replacement battery? What if you knew what the price would be – maybe – in about 8 years? Those are some of the questions electric car-maker Tesla is hoping will get lots of “yes” answers.
Tesla is offering replacement battery packs on its new Model S sedan in the form of a “Replacement Battery Option“, which recently appeared on its website. I’ll let Tesla’s PR-people explain it, so no one accuses me of skewing it weird-ways.
The option allows you to pre-purchase a new battery to be installed after eight years for a fixed price: $8,000 for 40 kWh batteries, $10,000 for 60 kWh batteries, and $12,000 for 85 kWh batteries.
That’s right, kids – Tesla wants you to give them cash money NOW. Then, EIGHT YEARS FROM NOW, you can go to a designated Tesla-authorized service and repair facility to get a fresh new battery.
There are so many problems with this, I don’t know where to start. Please find a few of my favorites, below …
1. TESLA MAY NOT BE AROUND IN 8 YEARS
Tesla has been in business for nearly a decade now … and it has yet to turn a profit.
Keep in mind, this is a car company that has been heavily subsidized with federal funds, gotten envious gobsmacks of free publicity, free celebrity endorsements, has appeared in movies, has appeared in video games, been granted access to Toyota and Mercedes’ R&D know-how, scored some big contract deals, and, still: nothing.
Nada. Zero. Less than zero, in fact.
There are no guarantees in the auto business, and the automotive landscape behind Tesla is littered with names like Tucker, American Motors, Hummer, Saturn, Pontiac, Plymouth, Mercury, DeLorean, and more. All of which, it should be noted, were profitable on at least 1 ledger before closing their doors.
2. WHO KEEPS A NEW CAR FOR EIGHT YEARS
Nobody, that’s who.
In this Wall Street Journal article from January 2009 (the deepest, darkest days of the Great Recession), the average new car was being kept 6.8 years. That was up, dramatically, from 5.8 years in 2007 … and quite a bit higher than it is now.
3. BATTERIES ARE NOT THE ONLY THINGS THAT BREAK
More than once, someone has told me that they’d have a problem buying an electric car (or a hybrid, even) without knowing the price of a replacement battery. The one that stuck out in my mind was this article from The Truth About Cars, which seems to sum up the general public’s sentiment on the matter nicely.
That said, I call bullshit. Not on the hairdresser quoted in the article, but on the entire sentiment. The people making comments like that are utterly full of it.
To wit: they’re not walking into dealerships to buy Hyundais and asking the salespeople how much a replacement transmission costs and they aren’t buying Mercedes form salespeople who have a handy “Engine Replacement Cost” pocket guide nearby. This isn’t about a class of car or the affluence of its buyer, it’s a complete lack of understanding about cars, how they work, and what they cost, plain and simple.
If you think “I won’t buy an electric car because I don’t know how much a new battery will cost.” is a cogent argument, you let me know. I’ll get you a sweet deal on rust-proofing, nitrogen-filled tires, and VIN-coded window etching. If you buy an extended warranty with all that, the deal gets even sweeter.
4. YOU LOSE NOTHING BY NOT DOING THIS
This whole thing only pays off for the buyer if, in 8 years, the cost of a Tesla battery has NOT, in fact, dropped by some 70% to below the magical $10K mark.
If it has, then you were better off to wait and buy the battery (assuming you still want to keep the 8 year old Tesla and that nothing but the battery needs replacing).
If it hasn’t, THERE IS NO GUARANTEE YOU’LL GET YOUR BATTERY, ANYWAY. If things go south and this battery-focused Ponzi scheme doesn’t pan out in Tesla’s favor, I’m sure Tesla already has contingencies in place for “Electric Motors Liquidation Company” to be the ones stuck with paying back the Battery Replacement Option funds in the event of a government-managed bankruptcy filing, even Tesla does – somehow – manage to stay in business.
I don’t know about you, but I think this is a crap deal for Tesla buyers. Time will tell, won’t it?