Tesla to Maintain High Lease Payments, Keeps Focus on Software Upgrades

Tesla Motors Inc. will not lower monthly lease payments to drive consumer demand because the automaker does not want to have “unrealistic” residual values, Chief Executive Elon Musk said during Tesla’s first-quarter earnings call yesterday.

“Actually, I think one of the traps that the auto industry has got into in the past is having unrealistic residuals,” Musk said. “And then finding that they’re upside down, particularly when the recession came along. We want to be very cautious about falling into that trap. So, yeah, we don’t want to do that.”

But Tesla cars have what cars in the past have not had, Musk said, as a reason for not offering lower monthly lease payment. In a way, he is rejecting the age-old understanding that a car depreciates significantly the moment it is driven off the lot.

“What no other car has is that the software keeps getting better,” he said. “So functionality — we keep adding more and more functionality to the car even though the hardware has stayed the same. If you bought the Model S four years ago, it’s way better than when you bought it, and that really makes a difference for residuals,” he said, referring to a Tesla vehicles’ abilities to be technologically upgraded over time through Autopilot.

Separately, Model 3 production is on time, and Tesla is confident of meeting its goal of having one million Tesla vehicles on the road by 2020 — especially with the Model Y vehicle appearing in 2020 or late 2019, Musk said.

To learn more about the evolution of transportation, join us at the second annual Auto Finance Innovation 2017 conference, May 17-18 at the Hilton Bayfront in San Diego. Visit www.autofinanceinnovation.com to register or learn more. To request a media pass, contact Skylar Taylor at staylor@royalmedia.com.

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