Tesla cutting Model X price, ends resale buyback guarantee
Tesla Motors Inc said on Wednesday it had discontinued its resale value guarantee program that assured buyers that cars would retain value over time, and lowered the starting price of its Model X crossover, the second time it has lowered prices this year.
Tesla, Silicon Valley's electric vehicle maker, has been facing problems on several fronts, most recently an investigation by federal regulators over its Autopilot technology following a May 7 fatal crash.
The discontinuation of the buyback program, as of July 1, shows the company stepping back on a pledge begun in 2013 that Tesla would buy back its cars financed through specified loan partners for a predetermined resale value after three years. The program was intended to help Tesla control its secondary market and assure buyers that cars would retain value.
A Tesla spokesperson said the program was discontinued to "keep interest rates as low as possible and offer a compelling lease and loan program to customers."
Tesla valued the liability created by the resale value guarantee at $1.58 billion US as of March 31, according to its latest quarterly filing with the Securities and Exchange Commission. The resale value liability had increased by more than 20 per cent since the end of 2015.
Also on Wednesday, Tesla said a new version of the Model X crossover, the 60D, will be priced from $74,000 US, $9,000 US less than the Model X 75D. Equipped with a 60kWh battery, the 60D has less torque and a shorter range than the 75D.
The crash in Florida, disclosed last month, has focused attention on Tesla's Autopilot system, and whether the company was too hasty in rolling it out. Analysts and investors also have questioned the wisdom of Tesla's proposed $2.8-billion US takeover offer for SolarCity. Tesla Chief Executive Elon Musk is a major shareholder in both companies.
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Musk tweeted on Sunday he planned soon to publish part two of his "top secret Tesla masterplan," prompting speculation he might reveal more details about a possible Tesla-SolarCity merger.
On Wednesday, Barclays analyst Brian Johnson gave Tesla a D grade for financial stewardship, noting that Musk's original 2006 masterplan "dug a $4.2 billion hole" for the company.
Last month, Tesla cut the base price of its Model S sedan to $66,000 US. Earlier this month, Tesla said it missed its sales targets for the second consecutive quarter.
Tesla shares were down 1.2 per cent in afternoon trading at $221.93.