Tesla Motors ended its buyback program promising customers the retail value of its vehicles, and slashed the price of its Model X SUV Wednesday in hopes of giving it the extra money needed to weather recent financial storms.
The electric automaker stopped the program in an effort to free up cash that was reserved to purchase back Model S cars from customers after a handful of years at a value half that of the original retail price.
The changes come as Tesla’s financial concerns continue to roil the company and its stockholders.
The company is dealing with the fallout from its decision to propose a merger with solar panel company SolarCity, which is also run by Tesla CEO Elon Musk. Shareholders balked at the proposal, claiming a fusion could be unethical.
In fact, CtW Investor Group, which holds 200,000 shares of Tesla, wants the beleaguered company to shake up its board of directors after discovering six out of seven board members with SolarCity have direct connections to Musk.
It’s facing other challenges as well – in particular regulations associated to Tesla’s Autopilot technology following a May 7 wreck that killed a Model S owner while using the car’s self-driving feature.
Tesla could pay a maximum of nearly $200 million to cover resale value guarantees on 4,209 vehicles, which is a maximum liability of $45,711 per car. It could offset that price by reselling repurchased cars.
The decision to end the program may allow Tesla to hold less money in reserve, Patrick Min, an analyst with Automotive Lease Guide, told reporters. The company suggests it can end the buyback program because it believes Tesla’s vehicles can hold value in the market. The Silicon Valley-based automaker might be wishing on a wish, though, as the Nissan Leaf consistently loses value on secondary market.
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