Boosting range, power and price of Model S
April 13, 2015
DETROIT — Electric car maker Tesla Motors is going after mainstream luxury car buyers by adding all-wheel-drive and more range and power to the base version of its only model.
But the added features at the low end of the Model S lineup will come with about a 7 percent price increase, to $75,000 for those buying the cars. The base lease price will rise to $838 per month from $796 for 12,000 miles per year.
As of Wednesday, Tesla will stop selling the old base Model S called the 60. The $70,000 rear-drive car with a 380-horsepower motor could go 208 miles on a single charge and from zero to 60 mph in 5.9 seconds.
The new all-wheel-drive model, called the 70D, can go a government-certified 240 miles per charge, has 514 horsepower and can go from zero to 60 in 5.2 seconds. Buyers also get free access to Tesla's network of quick-charging stations and some other standard features.
CEO Elon Musk says with a $7,500 federal tax credit that takes the price to $67,500, plus tax credits in some states, the new version is price-competitive with BMW's midsize 5-Series, or the Mercedes E-Class when you add in savings from not buying gasoline. BMW's 5 Series starts around $50,000, while the E-Class starts at close to $52,000.
He said Tesla, which is based in Palo Alto, California, needed all-wheel-drive to appeal to luxury buyers, especially in colder climates such as the Northeast, where most luxury cars are sold. About 58 percent of the luxury car market in the U.S. is all-wheel-drive, according to Kelley Blue Book.
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"It's also good in warm climates where there's heavy rain or slippery roads for any reason," Musk said in an interview. "We've seen a strong interest in all-wheel-drive in all climates, really."
Tesla's next vehicle, the Model X SUV due out late this year, will be offered with similar features at the low end of the lineup, Musk said. The company also is planning a $35,000 mainstream car called the Model 3 with a 200-mile range that's due out in 2017.
Even with the added features, the 70D will have trouble competing with Mercedes and BMW solely on price, said Tom Libby, an analyst with IHS Automotive in Southfield, Mich.
Extreme competition between BMW, Mercedes and Audi is driving luxury lease prices down, Libby said. For instance, an all-wheel-drive BMW 5-Series can be leased for around $600 per month. "He has to compete against that," Libby said of Musk.
"He has to emphasize the benefits of the Model S versus the traditional luxury cars" which include using no gas, performance, safety and handling, Libby said.
Tesla requires about $6,500 due at signing for its 12,000-mile lease, while BMW requires just over $4,300.
Musk said he has no plans to spend more on marketing to match Mercedes and BMW even though he's going after more mass-market customers.
The company will continue to host events for customers but "there are no plans yet to do advertising or endorsements or any discounting," Musk said.
Tesla Motors Inc. shares rose $3.02, or 1.5 percent, to $206.27 in morning trading. Its shares are down almost 4 percent over the past year.