Last week, Tesla Motors [NASDAQ:TSLA] published its official Q3 earnings for 2014, posting a non-GAAP profit of $3 million, a GAAP loss of $75 million, and posting record Model S deliveries despite a one-month shutdown of its Fremont production facility to ready it for the upcoming Tesla Model X.
Overall, Tesla’s Q3 shareholder letter is full of good news for the Californian automaker and its shareholders, with the only confirmed blip on the horizon for U.S. customers being an official push-back of the launch of the Model X from Q2, 2015 to Q3, 2015.
In the subsequent shareholder’s call with CEO Elon Musk, however, some more more bad news emerged for Tesla fans in Europe: Tesla will probably push up the list price of its Model S luxury sedan in the face of a weak euro.
“We’re probably going to have to adjust the price of our car in euros upwards because there has been a 7 percent change in the exchange rates of the euro versus the dollar,” said Elon Musk in the official shareholders’ call after the release of its Q3 earnings. “So we’ll periodically have to make pricing adjustments if the exchange rate band gets too wide.”
Ever since it launched the Model S outside of its home market of the U.S., Tesla has always tried to keep the local price paid for its cars on par with its domestic U.S. pricing. Unlike other automakers — who often dramatically mark up the cost of their cars in foreign markets — Tesla has always tried to maintain an export pricing structure that is equivalent to the price paid in the U.S. when relevant exchange rates and shipping costs have been considered.
As a consequence, the entry-level Tesla Model S in the U.S. starts for $71,070, while the entry-level Model S in the UK retails for £54,380. Take that UK retail figure and convert it to U.S. dollars, and you’re left with a price of $86,158. That’s far more than the entry level U.S. price, until you account for the inclusion of the mandatory 20 percent VAT sales tax on the UK market car.
Remove that sales tax, and you’re left with a pre-tax sticker price of £45,316, or $71,797, with the slightly higher price accounting for any shipping costs to the UK.
The situation is similar in other European countries, where prices range from €59,440 in France to €66,640 in Belgium, including local taxes. But with the dollar now worth €0.81 rather than the €0.72 it was at the start of the year, Tesla says it will need to increase prices to keep things on an even keel.
“I would certainly encourage anyone in Europe to purchase their car soon because we probably will have to make an adjustment there,” continued Musk in the earnings call.
With falling global gas prices, this potential price increase comes at the wrong time for both Tesla and its European customers, many of whom will have to work harder to justify spending so much on an electric car when owning an equivalent gasoline car is getting cheaper and cheaper.
To be fair to Tesla however, it is at least warning customers that prices may soon have to go up, something that not every automaker would be so open about.
Finally, it’s worth noting that this price increase doesn’t indicate a one-way street when it comes to Model S pricing: earlier this year, a weaker dollar and a stronger Euro prompted Tesla to slash a massive €7,000 from the price of its Model S in Europe.
Are you considering buying a Tesla Model S? Are you worried about a future price increase? Will you bring your reservation forward as a consequence?
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