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Deal or No Deal – Tesla Motors’ Innovative Replacement Battery Program


Tesla Motors Skateboard and Battery PacksTesla Motors has always been an ambitious gamble to grab the attention of the driving public. The very much luxurious Model S is still way behind on deliveries, over 10,000 still waiting in the wings for their piece of the brand.

We all know that rechargeable batteries do not last forever. After about five hundred cycles, maybe 100,000 miles on a Tesla Model S, the lithium-ion [Li-ion] battery packs start to degrade, and drivers will experience reduced range and power output.

A thousand cycles is about the maximum you could expect for an automobile Li-ion battery, under ideal conditions, which would be about 200,000 miles or seventeen years. Does anyone keep their cars that long anymore? Right now, the average age of vehicles on the road is only nine years, and new cars are typically only being kept six years, which makes Tesla’s offering all the more disturbing.

Tesla Motors Battery Replacement Option [BRO] “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.” Are any of these Model S going to be on the road in eight years? Are any Model S owners going to keep them after eight years? Is Tesla Motors even going to exist in eight years? (e.d. Let’s hope so, for the sake of the clean automobile industry).

I believe that Tesla Motors has a great product and that more people should be interested in the technology, but is Tesla asking for a little bit too much faith with the BRO program? Considering that batteries aren’t the only thing that tend to wear out on vehicles of any kind, asking for this kind of money up front could be too far out there. Besides, the battery warranty is already eight years or 100,000 miles. I don’t know what they consider a warrantable battery replacement condition though.

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  1. I suppose one reason for fast replacement of cars (6 years) is a situation like planned obsolescence .. in other words, cars wear out and it’s the engines that wear out the fastest.  The Model S, lacking an engine, and having a sturdier construction, could very well last much longer than 6 years.  But it remains to be seen what the actual replacement rate will be.  And of course, just because someone sells their Model S in 5 years doesn’t mean the car will be destroyed.  That second owner will perhaps be leery of getting a service plan from Tesla and who knows what kind of service plan Tesla will offer to second or third owners of a car.  Having a known battery replacement cost will give people information with which to decide what to do.
    How do you figure “way behind on deliveries”?  That’s nonsense.  The 10,000+ reservation holders – that’s the number last summer, and I suspect there’s been more reservations placed since – knew they were in a long wait because Tesla is going to be ramping up manufacturing.  The manufacturing did start on schedule last summer but didn’t ramp up quite as fast as they thought, meaning for a 2 month slip in the schedule.  There’s no way you can call this “way behind”.

    • @robogeek
      UPDATE: I wrote, without checking my figures, on Tesla Motors’ financial situation. I don’t know Tesla Motors’ books, and so to make any assumptions could be perceived as slanderous, which was not my intention.
      The reality of the situation is that Tesla Motors, like any startup, is still in its infancy. Pretty much anything can happen, because of the very nature of business. Other startups have failed even though they offered technologies that were, and still are, important for the advancement of a green economy, and it’s quite possible that the same might be said of Tesla Motors.
      The point of my article was addressing vehicle ownership as a whole. Almost no one keeps their vehicles past five or six years, or even up to the 8 year-100,000 mile warranty period of the Model S battery pack. As a Lexus Senior Technician, I used to service owners’ beloved LS 400s, some dating back to the first Lexus LS 400 released in 1989. It was not uncommon to perform a full suspension replacement on these vehicles, costing thousands of dollars on a vehicle with fifteen years and 200,000 miles.
      Given that the battery pack isn’t the only thing that wears out on a vehicle, including suspensions, air conditioners, window and lock motors, audio/visual systems, all components common to electric vehicles and their gasoline-powered ancestors, are those considering a Model S going to take that into consideration along with buying a battery pack ahead of time?
      In any case, I am personally very much in favor Tesla Motors’ technology, and I hope for all the best as Mr. Musk navigates the uncertain market for electric vehicles.

      • @bnjroo I have been writing news articles about Tesla for over 4 years and have read many of their 10Q filings with the SEC.  It’s quite possible to familiarize yourself with their books, just by looking at their SEC filings.
        What do you think will happen to the second or third owner of the Tesla Model S?

        • @robogeek Thanks for the links.
          If the first owner buys the replacement battery, will the second owner be willing to pay more for it?
          On the other hand, if the first owner doesn’t buy the replacement battery, will the second owner force the price down, knowing he’s looking at a $10,000+ battery in the next couple years?

    • @robogeek just out of curiosity, when Mr. Musk mentions having just built their 500th vehicle body, this would tell me that there’s somewhere close to 10,000 customers waiting in the wings for theirs. True, as he states, this is only a few weeks behind schedule, and you’re right, not “way behind,” which was a poor choice of words on my part. http://www.teslamotors.com/blog/update-elon-musk i could have misenterpreted.

  2. kjennerator-
    You are absolutely correct regarding delivery dates, and the waiting clients haven’t been inconvenienced or left in the dark. On the other hand, there was a tweet by Mr. Musk regarding Tesla Motors’ first full week of profitability. I was wrong to state anything at all about loan repayments, since I do not know Tesla’s books. I will be updating this post shortly.


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