Early in the evening of April 11, Tesla (TSLA) finally started to offer leases to the United States on Model 3. Many people, on both sides of the Tesla debate, were waiting for a lease. Bulls believes that demand will increase significantly as Model 3 customers (unlike S and X customers) will often not be able to handle a 100% cash transaction. According to Bears, the more competitively model 3 competes with competitively priced vehicles, the more the lack of demand will become apparent.
However, when we review the details of the proposed leases, it is hard to believe that this is a serious attempt to generate revenue or increase volumes, and so it seems that buyers and buyers will be disappointed.
What does the rental price look like?
I recently (December) rented a new Volvo XC40 2019 (as part of Volvo's new innovative subscription program (OTCPK: VOLVY)), and I therefore offer readers a comparison in order to Analyze the relatively affordable character:
As you can see, the cash price of the Volvo (a very optional Momentum AWD T5) is approximately equal to the spot price of the Tesla M3 SR +. Based on the lease term, the Volvo is superior to both Tesla models presented even without whereas, as part of the Volvo program, all insurance and maintenance operations are chargeable, while Tesla tenants must fend for themselves BMW (OTCPK: BMWYY) tells us that a lease for its 330i (slightly more expensive than the M3 SR +) is only $ 449 per month, with $ 3,925 in advance and for its X6 sDrive35i (at a price comparable to the M3 P) is only $ 599 per month , including $ 4,425 in advance (all three years, 10,000 miles per year).
So who would conclude a lease on such terms, especially given the lack of an option to buy? But perhaps the lack of an option to buy is more important than the fact of the lease. Tesla explains the lack of option to purchase as follows: "Customers who opt for the rental rather than the property will not have the option to buy their car at the end of the lease because with complete autonomy coming via a live software update, we plan to use these vehicles when traveling Tesla network in trouble."It is therefore the real interest of this initiative not to attract leasing customers (what Musk has already told us is bad for the finances).
It seems that the real purpose of this announcement is to refocus attention on the history of Tesla Mobility – the hope that the true value of Tesla does not lie in its manufacture as a "product". automobile, but as an electric vehicle Uber equipped with autonomous cars. Now, Elon can say, I have a plan for the car park – the 3 ex-leasing models. All that remains is autonomous driving. It's no coincidence that Tesla has an important presentation on this subject scheduled for April 22nd. The combination of this rental announcement and the self-driving presentation may distract investors from the first quarter financial release on April 24.
Evaluating Tesla's chances of building an autonomous mobile phone network goes far beyond my skills. My background is financial and not automotive. I refer readers to real experts, such as Paulo Santos, who provided excellent recent coverage here. My view today is that the conditions under which Tesla leases are proposed seem less designed to attract tenants, and more designed to change the stock price discourse – to help dispel the discussions about production problems and lack of demand and towards the glorious future as Uber-without-without-drivers.
Investors should not expect this leasing initiative to have a substantial impact on Tesla's financial results. I do not expect a strong adoption of the offer. Rather, they should consider this as part of an effort to reorient Tesla's story. Is this reorientation an honest attempt to illuminate the future that Musk & Co. is considering for Tesla, or is it a desperate attempt to hijack the company? Paying attention to Tesla's current problems and future first quarter financial results likely to be terrible? Investors must use their own judgment.
I will, however, offer one last thought to readers. Tesla's announcement was not just about leasing, but about the SR that would now be offered as SR + with only software limitation. In other words, you can buy the promised version of Model 3 at $ 35,000 (plus various fees) and it will be exactly the same car as a SR +, with the exception of $ 30,000. a limitation that may be removed during a future payment. But the cost of producing the car for Tesla is the same, whether you buy the SR or SR + version. There are two possible explanations for this. The first is that the demand for SR + in North America has evaporated so much that it is ready to sell the same vehicle (from Tesla's point of view) for a lower margin and the expectation of a license fee. at future level. The second (my favorite) is that he finally agreed that he could not sell the RS at a profit and just hoped to sell some to say he had kept the promise, but not enough to make the losses much worse. . I think this is corroborated by the fact that you can not buy the SR online – you have to call Tesla or go to one of its remaining stores to make a purchase. Readers are invited to give their own point of view in the comments below.
Disclosure: I / we have no position on the actions mentioned, but I can initiate a short position on TSLA within the next 72 hours. I have written this article myself and it expresses my own opinions. I do not receive compensation for this (other than Seeking Alpha). I do not have any business relationship with a company whose actions are mentioned in this article.