Musk Urges Tesla to Adhere to ‘No Discount Policy’ for Sales

  • Pacific Crest analyst warned of aggressive Model S discounting
  • Musk publishes Tesla e-mail to staff in response on Twitter

Tesla Doubles Down With the Model 3

Elon Musk, responding to concerns that Tesla Motors Inc. was straying from a long-held policy against discounting its cars, urged in an e-mail to employees that they adhere to a sales approach he called “fundamental to our integrity.”

The Tesla chief executive officer published his e-mail to company employees on Twitter in response Wednesday to a thread on Reddit, where a user questioned a sales discount offer.

Musk has been pushing for increased production and deliveries, telling employees in an Aug. 29 e-mail obtained by Bloomberg that achieving a positive third quarter is critical and “requires building and delivering every car we possibly can.” The electric car company is taking more aggressive measures to keep sales of the Model S and Model X strong while it prepares to deliver the smaller, less-expensive Model 3 late next year.

Tesla introduced a 60-kilowatt-hour Model S in June that starts at $66,000 before federal or state incentives. In August, the automaker added a 100-kwh battery option with additional range. The Palo Alto, California-based company also announced a two-year lease on orders placed by Sept. 12. With the third quarter about to close Sept. 30, Brad Erickson, an analyst at Pacific Crest Securities, wrote a research note that questioned demand.

“We detected aggressive Model S discounting at U.S. sales centers intended to maximize Q3 deliveries,” Erickson wrote Wednesday in a research note to clients. “We found Tesla has been employing a deeper discounting formula to drive sales of inventory models, with all offers expiring this Friday, the last day of the quarter.”

A Tesla customer, writing on Reddit, suggested he had been offered a discount as well. Musk responded on Twitter by saying he would check out the claim and posted later that corrective action was taken.

The CEO then published his e-mail to employees. While it is fine to discount floor models or cars that were used in test drives or damaged before delivery, Musk said, there can never “be a discount on a new car coming out of the factory in pristine condition, when there is no underlying rationale.”

“I’m sorry for the draconian language, as I am super grateful for your hard work, but there is nothing that matters more than our integrity as a company,” Musk wrote. “Customers need to know with absolute certainty that they can always trust Tesla to do the right thing.”

Erickson, who rates Tesla shares the equivalent of neutral, estimated third-quarter deliveries at 22,000. Tesla delivered 29,202 vehicles in the first half of the year and has said it will deliver 50,000 in the second half.

Musk, in his e-mail, also congratulated employees on an excellent quarter and said it’s “likely to be the best ever in Tesla history.”

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