Tesla Employs ‘Aggressive’ Discount Ploy To Inflate Delivery Numbers
Tesla Motors has been offering an “aggressive” secretive discount program as a ploy to drive up automaker’s delivery numbers, according to a report published Tuesday.
“We found Tesla has been employing a deeper discounting formula to drive sales of inventory models, with all offers expiring this Friday, the last day of the quarter,” analyst Brad Erickson of Pacific Crest Securities wrote in a research note.
Erickson said he “detected aggressive Model S discounting at U.S. sales centers to maximize third-quarter deliveries.” He said the company’s deliveries for the third quarter will be about 22,000, or 90 percent higher than at the same time last year.
Erickson criticized Tesla for offering steep discounts on Model S vehicles sitting in inventory, not those custom built for special orders. The move was meant to boost the company’s delivery count.
Tesla’s missed a quarterly delivery mark in July. It’s delivery count that month was 15 percent less than forecast and was even lower than the first quarter of this year. The California-based company manufactures cars after they are purchased.
It sold 14,370 cars that month, down from the 17,000 it expected to sell, according to a letter sent to shareholders in July. Worse still, the company managed to deliver only 14,820 vehicles, not the 16,000 vehicles it promised in the first quarter.
Tesla indicated at the time that it would not be able to produce the 80,000-90,000 vehicle deliveries for the year — the company justified the slowdown in production by suggesting it has had to focus on the production of the Model X, a sport utility vehicle.
Tesla CEO Elon Musk responded quickly to the flap, writing in an email to his employees “It is absolutely vital that we adhere to the no negotiation and no discount policy that has been true since we first started taking orders 10 years ago.”
The tech entrepreneur said discounts could be given to customers wishing to buy inventory vehicles, or those badly damaged.
“However, there can never – and I mean never – be a discount on a new car coming out of the factory in pristine condition, where there is no underlying rationale,” he said.
Tesla has lost money in 14 consecutive quarters and negative cash flow since early 2014. The company posted a quarterly loss of $293.2 million, or $2.09 per share in August, up from about $184.2 million last year.
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