May 4 (Bloomberg) -- Tesla Motors Inc., the maker of electric cars led by billionaire Elon Musk, is adjusting a lease-style financing plan for its Model S sedan to address criticisms made when it was unveiled last month.
“We appreciate the feedback from a number of journalists and customers that the first version of our financing product wasn’t quite right,” Musk, Tesla’s co-founder and chief executive officer, said in a statement issued yesterday. “They were right, so we are fixing it.”
Under the revised plan, Tesla said it’s raising the resale value guarantee for the Model S to be the highest of any premium sedan “made in volume.” Loan terms are being lengthened to 72 months from 63 months, with the option to sell the car back after three years. The longer term will result in lower monthly payments, including about $800 a month on a 72-month loan, Musk said on a conference call yesterday.
Tesla’s original April 2 announcement of the plan promised a fixed resale value and said customers could spend as little as $500 a month to buy a Model S when items such as savings on fuel prices and time were included. The actual monthly payment was $1,051 for the Model S with a 60-kilowatt-hour battery pack, with higher prices for other versions, the company’s website said at that time.
Shares of the Palo Alto, California-based company slid 7.3 percent the following day. Tesla “liberally employs” cost assumptions in that plan, JPMorgan Chase & Co. said in an April 3 research report.
The Model S financing deal, offered by Wells Fargo & Co. and U.S. Bancorp, guarantees a minimum resale value after three years, initially pegged to that of Daimler AG’s Mercedes-Benz S-Class sedan. Tesla said yesterday the new terms offer a guarantee that the “resale value will be higher than that of BMW, Audi, Mercedes, Lexus or Jaguar.”
Tesla rose 0.8 percent to $54.55 at the close yesterday in New York. The shares have soared 61 percent this year outpacing the 13 percent rise in the Russell 1000 Index. The company is to report first-quarter results on May 8.
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