Musk Adds Model S Referral Program as First Tesla Incentive

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Is Musk's Model S Referral Program a Warning Sign?

Elon Musk is looking to boost Tesla sales with a little help from his friends.

Tesla Motors Inc. will provide discounts when an owner recommends a Model S to a new buyer. It’s the first incentive program for the company, which eschews traditional advertising and dealer networks.

Anyone who orders a new Model S before Oct. 31 using the referral link of a current owner will get $1,000 off the purchase price, the company said in a statement. In return, the current owner will get a $1,000 discount that can be applied to a new car, service center visit or accessories.

“We’re trying to figure out if we can reduce the cost of selling the car and pass it on to customers,” Musk said Wednesday during a conference call with journalists. “It’s an experiment with a finite time. It’s worth trying out.”

One aim of the program is to identify communities of passionate owners and word-of-mouth support for the brand to help Tesla determine where to add retail locations, he said.

Owners who make five referral orders will receive an invitation for them and a guest to attend the April 2016 grand opening party for the Gigafactory, Tesla’s massive battery plant being built near Reno, Nevada, the company said.

“This is a low-cost way to try to continue to grow sales,” said Ben Kallo, an analyst with Robert W. Baird & Co., who has the equivalent of a buy rating on Tesla.

Brand Fans

Tesla forecasts deliveries rising 64 percent this year to 55,000 vehicles including the Model X, a sport utility vehicle, set to go on sale this quarter. The Palo Alto, California-based company announced that it delivered 11,507 cars in the second quarter July 2, up from 10,030 in the first quarter, which means that it has sold roughly 40 percent of the full-year target.

Tesla shares declined 0.4 percent to close Wednesday at $263.82. The stock rose 19 percent this year.

Tesla’s customers -- many of them loyalists who spend hours chatting about the company online and organize a yearly users conference -- are among the fiercest advocates of the brand.

“We have quite a bit of word-of-mouth sales,” said Musk. “We want to see if it’s possible to amplify word-of-mouth sales.”

SUV Prizes

Owners who make 10 referral orders will get the right to purchase a Founder Series Model X, which is not otherwise available at any price, for the cost of a base Model X, an approximately $25,000 difference, the company said.

The first owner in each region -- North America, Europe, and Asia-Pacific -- to make 10 referral orders will get a fully loaded Model X for free.

Tesla recently announced upgrades to the Model S, including a “Ludicrous Mode” option that goes from zero to 60 miles (97 kilometers) per hour in 2.8 seconds and a 90 kilowatt-hour battery that provides more range. The company also introduced a new base model with rear-wheel drive for $70,000, about $5,000 less than the all-wheel-drive version.

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