Yesterday, Tesla Motors, the electric-car company owned by Elon Musk, announced a new financing scheme for its Model S, a sedan that it’s been offering for a few years now, and which currently starts at $62,400. They’ve gotten a couple of banks to agree to something of a hybrid financing-lease deal: You can put a 10 percent down payment on the car, which is almost covered by the tax credits available in all 50 states and more than covered by the credits available in a few (California, Colorado, etc.), and then make financing payments on the car until you own it — unless you want to get rid of it at the end of the normal 36-month lease term, at which point you’re allowed to sell it back to Tesla for a price depreciated at the same rate as “the iconic Mercedes S Class, one of the finest premium sedans in the world, made by Daimler (also a Tesla partner and investor).” This probably isn’t actually a bad deal, if you want an (admittedly quick and comely) electric car for the same price you’d pay to buy, well, one of the world’s finest premium sedans.
But wait, you won’t actually be paying such a dear sum, Tesla says: Musk claimed at his press conference yesterday that the financing option above, along with all the advantages of an electric car, means you can own such an expensive car for about $500 a month, or, in fact, “quite a bit less than that.” The Tesla website has an ownership-cost calculator which shows you how you can get there. It originally explained, “When considering the savings from using electricity instead of gasoline, depreciation benefits and other factors, the true net out of pocket cost to own a mid-range Model S drops to less than $500 per month” — despite the finance payment being $1,199 a month.
Business Insider and Quartz have already pointed out that this arithmetic is completely bizarre — for instance, it relies on assuming that one saves five minutes a day in commuting (because all electric cars can use carpool lanes in California) and one hour a month in pumping gas, with that time valued at $140 an hour. Somehow, those savings reduce the “true net out of pocket cost” of the car. In fact, if your time is worth $325 an hour, Quartz points out, Musk apparently thinks the “out of pocket cost” per month for the car is . . . $0. If you make any more than that, of course, Mr. Musk is actually paying you to buy his car. After this embarrassment, Tesla amended their wording:
We also encourage you to think about Model S ownership in terms of true out of pocket cost. When considering the savings from using electricity instead of gasoline, depreciation benefits, and other factors, buyers will save hundreds of dollars per month compared to owning a gasoline powered car.
While they’ve removed the tendentious $500-a-month claim (though it is still made elsewhere on the site), the math remains ridiculous: You can certainly look at commuting and time spent pumping gas as carrying an opportunity cost, but it really only makes sense to claim a specific reduction in the cost of your car if you happen to be paid hourly, earn $100 or $200 an hour, and would spend that saved time working. Otherwise, your benefits are just . . . the privilege of not pumping gas anymore, which I don’t think ranks among people’s most time-consuming chores, and the opportunity to drive in the carpool lane — if you live in a state where electric cars can use HOV lanes, which is only worthwhile if you commute along one (my otherwise very green home state, Massachusetts, contains a grand total of about seven miles of HOV lanes).#more#
And Tesla also pretends that not having to pump gas saves you time — except your car’s range is now only about 200 or 250 miles (versus 400 or so for a gasoline car), and you must spend time charging your car, which takes much, much longer than pumping gas. The quickest way to get a full charge is at one of Tesla’s Supercharger stations, where it takes a mere 60 minutes (there are two in Connecticut, one in Delaware, and several in California), and charging is free. Public electric-car chargers, meanwhile, are much, much slower, providing about 22 miles of travel per hour of charging, meaning it takes about ten hours to fill up Tesla’s shortest-range model. Charging at home, meanwhile, takes at a minimum of four hours (if you buy Tesla’s “high power wall connector” and twin chargers), and up to eight hours from a 240-volt outlet. Obviously, one can do this overnight, when the opportunity cost is nil, but just generally speaking, charging your Tesla is much more time-consuming than filling a car with gas, and you have to do it about twice as often. If time is money, well . . .
Further, the company seems to imply the “depreciation benefits” are a positive “compared to owning a gasoline powered car,” when the Model S’s resale advantage has nothing to do with the car’s powertrain and everything to do with their being marketed by a billionaire who’s desperate to get cars out the door anyway he can, even by guaranteeing he’ll buy the car back in 36 months for much more than it’s worth. In reality, absent such a guarantee, electric cars will depreciate much quicker than standard vehicles, because they’re only appealing to a tiny slice of the market, and no one knows how reliable their powertrain is in the long term. In fact, Tesla explains the following:
Not only is Tesla guaranteeing that resale value, but Tesla CEO Elon Musk is personally standing behind that guarantee to give customers absolute peace of mind about the value of the asset they are purchasing.
That is, okay, maybe you don’t trust the company from which you just bought a car, which turned a profit for the first time this quarter — but don’t worry, worst-case scenario, its founder promises to write you a personal check for more than the car is worth. That guarantee is apparently necessary from a company that’s now being called a fantastic success. And you can imagine the downside risk: Tesla, and Musk himself, have now accepted the responsibility of buying back thousands of Teslas, in the event people don’t like them (like, say, one New York Times reviewer), and then would have to get rid of them. That’s a pretty hefty bet and, remember, one that’s being backed in part by $465 million in loans from the federal government.
Motor Trend may have named Tesla’s Model S “Car of the Year” last year (an award restricted only to American-built cars, and in the past awarded to such triumphs as the Chevy Volt, the new Thunderbird, and the Ford Probe) but both Tesla’s business and electric cars in general are a long, long way from commercial viability. It’s possible electric charging and storage capacity could advance in the near future to the point where electric cars make sense for more than just image-conscious Silicon Valley millionaires, but subsidizing and obsessing over the “EV” industry isn’t even necessary, because those innovations will be of great benefit to other fields, too. The tangible benefits of promoting electric-car development are as illusory as the $500-a-month Tesla Model S.