Tesla Increases Prices for Existing 2008 Orders part 2
Jan 21, 2009
dba
I certainly wish this would be the case, but I have very little hope of it short of TM being forced into it by legal action. I have followed every public detail of this company since the beginning. I have heard Elon speak a number of times. I can not recall ever hearing or reading of Elon admitting that he made a mistake. The blame has always been placed on someone else. This action was initiated by Elon in the form of two emails from him. It would be very hard for him to not accept responsibility for this fiasco
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Jan 21, 2009
vfx
Discussion about cars often show that the manufactures gamble at losses for the first (and more) year's model to get the ball rolling. The million selling Prius comes to mind.
If this business practice is as common as we have heard then Elon's insistence that he must show profitability on his first year's model is false. Especially if he can show that the cars are now making a profit.
It's kinda sad they have to make a statement like that.
(By the way, in the comments there is a Parker Lee or BettyLee that's taking the opportunity to spread FUD. A Kent sock puppet?)
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Jan 21, 2009
DDB
You're not kidding... That's wonderful PR for you, "let our customers sue us, we're prepared with our mighty contracts to withstand a whole slew of them." I'd still rather represent an owner on this one. And with the numbers Tesla is talking (more than 25 affected), Tesla is actually ripe for a class action lawsuit. Just a heads-up.
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Jan 21, 2009
Tdave
The buy page on the Tesla website for 2009 models STILL says, as it has for at least a year:
What exactly is that supposed to mean if NOT that you lock in the price you will pay? I STILL don't get how they can change the price for people who have already given that deposit.
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Jan 21, 2009
TEG
Guesses:
#1: The reality of the DOE loan situation didn't hit home until more recently. #2: The $7,500 federal credit takes effect now to soften the blow. #3: Customers past a certain date could have a different contract than the older ones.
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Jan 21, 2009
Tdave
It's still unclear (to me) whether the $7500 credit is subject to AMT. If so, then at least this buyer will see none of that $7500.
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Jan 21, 2009
doug
Moderators Note: This thread has been fairly civil so far. I'd like to keep it that way. The conversation is about a real issue that has many people legitimately upset. It is ok to vent, but please do so in a rational manner. Please don't resort to name calling or pulling in random off topic information. Thanks.
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Jan 21, 2009
donauker
It is my understanding that it is not but I don't have a guarantee of that. I had originally looked into this for the 30% solar credit.
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Jan 21, 2009
TEG
In my experience it worked for 30% solar :smile: But not for the old hybrid vehicle credit
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Jan 21, 2009
donauker
It was alot of boring reading and it was back when it was first published but I am fairly certain that the new plugin credit referenced the same not subject to AMT verbiage as the solar or else it was an identical section.
This of course was before it got to the IRS and tax accountants.
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Jan 21, 2009
Laurent
Today's email from Tesla:
In response to our customers many questions with regards to the options price increase, new options, and new announcements, Tesla will host two town hall style meetings at its Los Angeles and Menlo Park Stores. The meeting will be hosted by Elon Musk and other staff members. If you can, please join us at one of the meetings either in person or by telephone.
Monday, January 26 Tesla L.A. Store Tuesday, January 27 Tesla Menlo Park Store
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Jan 21, 2009
Kevin Harney
i would love to be a fly on that wall. :biggrin:
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Jan 21, 2009
Yanquetino
Well... shut my mouth, "doug"! Heaven forbid anyone call a spade a shovel here.
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Jan 21, 2009
Bradleybang
Just looked at my schedule . I will go to Menlo Park meeting.
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Jan 21, 2009
doug
Looks like the story will be in tomorrow's SF Chronicle.
I'd guess most people will wait for the town hall meetings before they make up their minds.
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Jan 21, 2009
Joseph
Town hall meetings are good for a time of PR crisis.
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Jan 21, 2009
graham
They are!
But it is a bit annoying that they only happen when Tesla is in the middle of a PR crisis. They had 2 around a year ago when dealing with the Martin firing thing... but as soon as that crisis passed, they dropped having them. They talked about having more at different times, but it never happened. It seems only useful for them when there is a crisis to defuse - not for really for communication.
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Jan 21, 2009
vfx
SweetDaddyD over on the Lotus Talk pages has compiled blogs and comments from all over the web.
And many more who will cancel if this move is not reversed?
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Jan 22, 2009
DDB
That was my first thought when I read her response. You can bet other owners are following this site, but just not posting.
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Jan 22, 2009
donauker
I guess she must be ignoring the Owners Forum. Quite a number of posters there have indicated they are canceling and others said they will be if this is not reversed.
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Jan 22, 2009
Cobos
I obviously don't know the full scope of why Tesla did increase the price, but turning a huge chunk of your potential happy customers and advocates into possible Tesla haters can't be good. Not to mention these people will hit Tesla where it hurts the most, on their reliability as a company.
Mind you, not the product, as the Roadster can usually stand on it's own on it's technical merits. Just look at all the bad press an icon like Top Gear got for attacking the technical aspects of the Roadster. Now imagine that same Top Gear review shown in 2 weeks if this case isn't resolved properly.
The third part is this is supposedly done to show they are viable as a company. But as someone that could potentially invest a few thousand in a Tesla IPO, this scares the *sugar* out of me. Either the margins Tesla got now are so bad that they need to pull a stunt like this with all the obvious down sides for a few measly millions (400 buyers x $6700 = $2.68mill), even risking possible litigation. Or someone in the management is so lost they thought this would be a good idea. In either case I would surely not have faith in any investment in this company.
Actually looking at the sums involved, 2.68 mill this just looks incredibly dumb. They got what 40 mill in the last round of financing, they couldn't have tried to get 43 mill?
I'm definately curious what will be said in the town hall meeting on monday
Cobos
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Jan 22, 2009
dpeilow
I don't think its about whether Elon or anyone else could have thrown in another $3m, but about showing ongoing profitability on a per unit basis. I'm not an economist, but this is my understanding of their explanation.
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Jan 22, 2009
Palpatine
I think that is exactly correct. They need to show that the Roadster business is profitable per unit by some percentage. Even if 50 Roadsters are cancelled, that likely is worth the short term pain to get to profitability. Those people at $92,000 would be replaced by owners at $109,000.
They have previously said that the battery/drivetrain business is already profitable based on the work they were doing since 2007 for Daimler. I am sure Daimler paid Tesla some amount of money for the R&D of dong their feasibility study.
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Jan 22, 2009
Cobos
But that is my point! The first cars will never be profitable for any company. If they can show that all 2009 models are profitable then they show that they are profitable. Doing the first 1-3 years of production at a slight loss or barely braking even is pretty normal for a new company or new product line, just look at the Prius.
And if this goes down as I'm fearing this is NOT a short term pain. Loosing 50 sales is not really a big deal, turning a huge chunk of their fanatics into someone that actively speaks up against them IS. Look at me, I really want the Model S, because I want to support Tesla as a company (or I did anyway). For me that support is worth paying $10 000 - $15 000 more than I feel is sensible for a car. I'm pretty sure that money is going to be a dealbreaker for me buying a Model S in contrast to something more sensible like a Volt.
Really crappy PR is really expensive to repair. Currently Tesla is spending about nothing on PR. If they need a few tens of millions just to drown out all the negative PR and reach the zero point, this can easily get very costly....
Cobos
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Jan 22, 2009
Palpatine
Cobos, I understand what you are saying.
I made this argument to Tesla via email.
Think of all the deposit money as an interest free loan to Tesla Motors. Let's estimate that the deposit for the sedan is about $25,000.
Before this recent crisis, I think Tesla Motors might have been able to get 3,000 pre-orders with deposits. With the total cost of the Sedan at around $57,000 that makes it much more affordable to a wider customer base.
3,000 deposits X $25,000 = $75 million
Let's say that Tesla Motors has to pay about 10% on money.
That $75 million in the bank as an interest free loan is worth about $7.5 million per year to Tesla Motors. The Sedan is esimated for 2011 (which really means 2012 with delays), so Tesla could have saved at least over $22 million in interest with those deposits.
How many preorders will Tesla Motors get now for the sedan model? I have no idea, but I am sure the number is lower than it was about a week ago.
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Jan 22, 2009
Palpatine
I persoanlly think this "crisis" will all blow over with the unveiling of the sedan model.
If that car is really amazing, that is what we will all be talking about next month.
Tesla will be delivering Roadster #200 and the Sedan will be revealed and available for pre-order.
Just my opinion.
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Jan 22, 2009
vfx
No way James. There will always be the cloud overhead of this price increase. Tesla now have a reputation for raising thier price on customers who put down a third to half of the car's price. And they also did it after the customers were forced to lock in price and accessories.
No one would consider a down payment on Tesla's next car without seriously considering that they will be bent over after tying up $25,000 for two years.
Add to that the "company fail" possibility, the bad juju that will will fester over the internet and mainstream press, the next two bonehead moves (they average about one every 6 months) and the possible problems the Roadsters might have after 2 years.
A new car company with a terrible track record with customers will keep them away in droves.
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Jan 22, 2009
Palpatine
I don't know about that. Originally I was thinking that this is a stupid move on the part of Tesla and it will hurt them. It might cost them 50 to 100 refunds. But the more I think about this topic, the move I understand why it likely was a necessary risk for Tesla Motors to take.
If 100 customers demand refunds, it actually just moves more units into the $109,000 category sooner, which is likely fine with Tesla Motors. Their current backlog runs through the end of 2009 and they have not even really done much in Europe or Asia.
By the end of 2009 this recession should be ending and all of this stimulus and low interest rates will be having an impact on the global economy. And once people don't have to wait 12 months for a Roadster, there is an entirely different market of people who will come off of the fence.
I am a Tesla customer and I am impacted by the price increase. But I still love this car. I am enough of a realist to understand the reasons for the price increase. Yes it is bad customer service and poor form. But a few thousand $$$ extra is not going to kill me.
Let's say that 100 people cancel their order. The other 1,000 take their Roadster. This will all be forgetten once we have our Roadsters and have that much fun on a daily basis driving around in the coolest electric car on the planet. Time has a way of healing this crap. The amount of enjoyment I will get from having the Roadster will outweigh the frustration I feel now from the delays.
Elon Musk is NOT an idiot. I am sure he realizes the danger of doing this. It likely really was necessary for reasons that we are not fully aware of.
I'm with vfx on this one. I'd forget about even a deposit on the Model S, because I don't want to pay $92,000 for a car that is supposed to be in the ball park of $55-60K. Cobos (maybe) and I may shell out some deposit money for a Volt because GM understands bad PR when Tesla has shown what it can do to it's core customers (early adopters willing to risk it all). No chance I'd put any money down without driving away in a Model S. Okay, start GM bashing--but perhaps they were smarter to wait to take deposits if they do?
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Jan 22, 2009
flabby
James, I think you last sentence sums things up well. What's to keep Tesla from doing this same thing in the future to the $109,000 owners, or the $125,000 owners, or the future sedan owners. Yes, perhaps they needed to show profitability on their current cars to get the loan, but why weren't the current locked in owners included in on that decision? Why did musk's explanation/repair email come after everyone lost their cool, not before. This may blow over, but unless tesla fixes this, I doubt it will be for a very long time. And to add to the situation, unless there is a fix to the problem, I don't see how litigation can be avoided.
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Jan 22, 2009
graham
This might work out well for Tesla.
1) They get rid of the 400 or so customers of which they are selling the car for less than they would like. (they may or may not decide to refund their deposit).
2) They immediately get to the 2009s who are paying them more, and because they started out at a higher price, are less unhappy.
3) They use this window of time while they are working through the 2009 backlog to secure 400m from the Govt because they are currently profitable.
4) They live off of those loans until they can produce the Model S, or have ready-to-buy Roadsters in the showroom.
If that works for them, great. Bad PR on this may dry up a lot of potential new orders for the Roadster... so worst case scenario is they will have to just live on Govt loans until they have products people can buy from the show room instead of trusting that the price / features / performance will not change on them between purchase and delivery. They no longer need happy customers or advocates if the government will float them for long enough for the scandal to blow over.
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Jan 22, 2009
Tdave
I have an answer to this direct from Tesla. The $5k initial deposit from us 2009 owners that locked in price did indeed lock in price, but only the base price, not the options. This is the reason they didn't actually raise base prices, but did all the price adjustments on the options.
Getting rid of the early customers who preordered at a low price might actually be good for the company. But a lawsuit by those customers almost surely won't be.
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Jan 22, 2009
TEG
The problem, as has been stated, with that logic is that some standard items were turned into optional items. You thought the now optional wheels were coming with your locked in price. You thought you would be getting that SolarPlus Windshield, the HPC and the Homelink too. With this logic they can turn anything into an option at will and change what you actually get. It may be more about expectations than legality, but still I can see why this ended up upsetting many. Unfortunately this also turned into an opportunity for the Tesla naysayers to pop back out of the 'woodwork' and start taking potshots again.
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Jan 22, 2009
Tdave
TEG, you're exactly right. I didn't say I agree with the reasoning and logic of the statement. I was simply reporting more info that came from a Tesla representative. It's more info to fill in the puzzle. I remain most puzzled by the company's audacity and arrogance.
I will add this, though. After my phone call with the company, I will certainly hold final judgment until after the town meeting. There was a hint that Tesla will bring some sort of compromise to the table at the town meeting. I'll believe it when I hear it.
Another article on this. Notice all the naysayers popping up. Besides from addressing this issue with the customers, Tesla also has to deal with a lot of negative press now.
Hopefully they can work something out with the customers which doesn't ruin the reputation of Tesla and can still provide revenue for Tesla.
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Jan 22, 2009
DDB
What do you want to bet it's the right to put down the first deposits on Model S (with price subject to increase without notice or rationale). How anyone here can think it's actually a good thing to lose 400-odd customers is wrong in my opinion, regardless of how it may appear to speed up delivery and profitability. Alienating a customer is not a solid business model for a fledgling company.
And those government loans may very-well be tied to profitability--but on the backs of consumers should be a red flag to government that this isn't a loan that will be paid back.
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Jan 22, 2009
Palpatine
I agree. Elon Musk is a young guy at the age of 37. He doesn't want to be labeled as the next Delorean who flamed out building a sports car. Tesla Motors is trying to build a long term successful company.
Low interest government loans can help a lot. Also, Tesla has a lot of deals already with the state of California and the city of San Jose. So if anyone can make an electric Sedan feasible, it is Tesla Motors.
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Jan 22, 2009
DDB
TEG, you misconstrued what I wrote. EM would be at risk of fraud and other charges white collar crimes if the intent were to embezzle 400 m; let's be clear I didn't say that. But let's also be straight here--he doesn't give a rat's ass about the customers that canceled their orders within the last week, especially if the real motivation was a low interest loan. How the Big 3 were criticized for excactly what Tesla appears to be doing now, and by that I mean whatever it takes to secure the funds. And Tesla doesn't have a tenth of the issues with that the Big 3 have (e.g., the UAW, health care, pensions, bigger credit woes and the list goes on). I tend to go scortched earth when the little guy gets drilled and that's what I'm seeing with these price increases.
I vaguely remember that Tesla was supposed to be different; open. I'm a realist and know a business has to stay profitable to stay a going concern; wonder what Martin thinks?
What did I misconstrue? It sounded like you were suggesting that they want a loan they don't plan to pay back...
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Jan 22, 2009
Yanquetino
No harm in asking, right?
I sure hope that one of you who attends the Town Hall meetings will have the cojones to ask the CEOooh point blank just how much his failed lawsuit against Fisker cost the company. I suspect that the customers whose locked-in prices he has arbitrarily unlocked would really like to know the answer.
Oh, my...! I would like to know what those customers think of that figure! Of course, I am no corporate accountant, but it seems to me that $1.14 million = a helluva lot of options!
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Jan 22, 2009
vfx
DDB,
While my lawyering is limited to a TV and movie education, I was wondering when owners decide to sue for breach of contract (or if) won't a judge take into consideration, "precedence"? That is,200 owners got cars with HPCs, window tint, wheels, etc, does that not make those parts standard by definition?
I'm just a little careful about accusing Tesla management about taking the $400 m. and paying execs bonuses and pocketing it. If the Company does not survive, I agree, bankruptcy is the only option even with bridge or low interest loans. But my point is the early adopters got used for Tesla to achieve a certain status requiring it show profitability at any cost. But I do not think EM is going to defraud the Feds nor do I think he ever had any intent to. EM may be a lot of things, but I doubt he is a criminal.
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Jan 23, 2009
DDB
I'd call that evidence, for sure. It shows a pattern and practice of providing the product as promised to one group to the exclusion of another. Simply because Tesla underestimated costs does not alleviate their obligation to perform as promised. I was just glancing at some consumer statutes in CA, and it's similar to Ohio's. The Motor Vehicle Act looks applicable which is below. It'd take some research to guess whether Tesla's letter to buyers would provide the requisite notice. I'd bet not, as the product had been delivered as promised to prior customers as VFX pointed out.
CA Civil Sec. 2981.5 sates:
(a) Prior to the execution of a conditional sale contract, the seller shall provide to a buyer, and obtain the buyer's signature on, a written disclosure that sets forth the following information:
(1)(A) A description and the price of each item sold if the contract includes a charge for the item.
(B) Subparagraph (A) applies to each item in the following categories:
(i) A service contract.
(vi) A vehicle contract cancellation option agreement. --------------- The legal theories aside, I hope it doesn't lead to more lawsuits. Tesla does not need anymore bad PR or judgments against it.
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Jan 23, 2009
bill
Survival Loans
<None of these companies are going to be in business to sell these cars if they do not get their Section 136 Dept. of Energy Loans within a week or so.>
I think dpeilow hit the nail square on. They need the money to survive. Auto sales are flat everywhere. Tesla appears to be in good shape because of a large backlog, however, orders aren't pouring in, and later this year they will be close to an empty plant.
If they haven't funded the model S by then and have operating capital to tide them over, I doubt they will survive. Elon has options, but they all appear bad right now. I admire his bold approach to try to fix the problem. Too bad his PR skills don't match. Look for a compromise solution at the town hall.
For a few months now, I have felt that if Tesla can get into 2010 in good shape, they will be a viable company. It's turning into a real struggle though. I do plan to buy a roadster, but until this plays out, I'm waiting and watching.
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Jan 23, 2009
Yanquetino
Audit, anyone?
In his e-mail explanation, the CEOooh asserts these figures:
And just two months ago in a "Science & Tech" article for MailOnline, reporter Ben Oliver wrote:
Yes, nebulous phrases like "closer to," "well north of," "only slightly," and "at least" allow some "wiggle room" here, but nonetheless the discrepencies among those various top figures are too large to simply shrug off. The difference between $140,000 and $80,000 is not pocket change! And which Roadsters are we really talking about? The "first 50 cars" or "after the Signature 100 series"? Did those reporters just jot down the wrong information on their notepads when conducting their interviews of the key players?
I hope that someone who attends the Town Hall meetings will quote those various figures and ask point blank which one is truly accurate.
I'm sure that the customers who are now expected to help finance the claimed deficit with their unlocked prices would like to know. Indeed, they should ask to see a copy of the actual audit.
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Jan 23, 2009
TEG
There are a lot of ways to calculate a cost number. Is it based on just raw materials? Does it include all the shipping, assembly, advertising budget, warehouse costs to stage parts, costs to fix defects, salaries of all those involved, etc? There are so many other ongoing expenses related to regulation, litigation, testing, certification, etc, etc that may or may not be considered part of the cost.
The cost of the battery pack has danced around as well. At first it was supposed to cost around $20K (with or without markup?), and it was supposed to drop over time, estimated around $16K now, but then we hear it is really more like $30K, but $12K guarantees (assuming they are around to oblige) that you get a replacement in 7 years.
The fact is we (random people out here on the internet) don't really know. We can take their word for it that they need to raise prices to satisfy the DOE. How does the DOE know? Are they auditing all the costs to calculate their own profitability index?
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Jan 24, 2009
WiredChuck
Hello everyone -
My name is Chuck Squatriglia; I'm a staff writer at Wired.com and I wrote the piece that was linked to earlier in this thread. (Link here, too: Tesla Raises Prices To 'Guarantee Viability' | Autopia from Wired.com ) I have been writing about Tesla Motors since joining Wired a little over a year ago (before that I was a staff writer at the San Francisco Chronicle for eight years), and have been following the latest developments with interest. This forum, and this thread in particular, have been very informative.
I had hoped to attend the town hall meeting in Menlo Park on Tuesday, but Tesla spokeswoman Rachel Konrad has told me the meeting is not open to the media. I had hoped to hear Elon Musk's side of this story directly from him - so far all communication has been through Rachel - as I feel it is important to present his side. I am not interested in "burning" Tesla; I'm only interested in presenting as full a story of what's happening as possible. If anyone at TMC attends the meetings in LA and/or Menlo Park and would like to offer me their thoughts and perspectives on the meeting (or anything else happening at Tesla), I can be reached at [email�protected]
There's no call in for the Monday LA town hall meeting. That one will only be in person, with no recording. Anyone here going to attend on Monday and can report back here Monday night?
I'll be calling in for the Tuesday meeting. Tesla says they'll record Tuesday's meeting and post it on the website afterwards at some point.
By the way, are there recordings of previous town hall meetings available somewhere to listen to?
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Jan 25, 2009
TEG
There were, but they seem to have been removed now.
I would however remind people to be aware of any Ts&Cs or NDAs they might have signed up to.
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Jan 25, 2009
Tdave
Can you elaborate? Do normal owners waiting for their cars have restrictions on what they can say?
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Jan 25, 2009
vfx
Over at ABG comments section Paul Korg put together an nice list of old sites that document the bonehead moves Tesla has pulled in their short history.
Go ahead and throw out house, the bathroom, the tub, and the bathwater. Just keep the baby.
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Jan 26, 2009
dpeilow
I've personally never seen the paperwork, but I seem to recall mention of some restrictions. Maybe I'm dreaming or maybe it only applied to earlier (sig 100) customers - perhaps someone can confirm? (Just saying it would be a good idea to check.)
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Jan 26, 2009
graham
I will have to go back and review my paperwork. I certainly had to sign an NDA when I first went to see the Roadster - but that was at the factory a long time before they had public showrooms. I cannot recall if any of that applies any more, or they had additional restrictions in my Roadster paperwork.
I recall rumors that Martin and other early buyers had to sign some sort of paperwork limiting what he could say - but that was upon delivery, and probably does not apply to current deliveries.
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Jan 27, 2009
WiredChuck
I would not, of course, want anyone to violate any NDAs or other agreements they might have with Tesla Motors, and as I mentioned earlier, I am not interested in "burning" Tesla (or anyone else, for that matter), or engaging in "gotcha" journalism. I'm only interested in presenting as full a picture as possible of what's happening.
Given that the original price was pretty much a swap of the dollar to a pound sign, I'm happy about that. I think there was a healthier margin on that price to start with.
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Jan 28, 2009
Cobos
Yes the same goes for the Euro prices... In some ways this change is "good" for the European Roadsters. It does mean the price difference between the Euro and US version of the Roadster is getting smaller.
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