Its guaranteed buyback program has come to an end.
Tesla Motors Inc has disclosed that it has ended its program that guaranteed the resale value of its cars. This move comes in the wake of Tesla lowering the price of its Model X electric vehicle.
The impact of this decision is that it frees up the cash that Tesla had set aside to buyback Model S cars after three years of sale with a minimum buyback price of at least 50% of its base purchase price.
Tesla took this decision having warned a month earlier that it is set to miss its vehicle delivery target for a second consecutive quarter.
It is now facing other challenges, including a regulatory investigation of its Autopilot technology which supposedly led to a car crash thus drawing more scrutiny. Its proposed merger with SolarCity Corp has also drawn scrutiny of its financial position.
Tesla has now disclosed that within a year it could pay a maximum of $192.4 million to cover the guaranteed buyback of 4,209 vehicles, which amounts to a liability of $45,711 per car. This figure could undergo a change since Tesla could offset the payouts by reselling repurchased vehicles.
As of March 31, Tesla has valued a total liability created by this guarantee program to $1.58 billion, as per its latest quarterly filings with the Securities and Exchange Commission. This figure is up by 20% from its 2015 equivalent.
A spokesperson from Tesla said the program was discontinued to “keep interest rates as low as possible and offer a compelling lease and loan program to customers.”
As a result, Tesla is now practising that many auto manufacturers are doing – allow market forces to set trade-in values.
On the upside, Tesla has announced a newer version of the Model X crossover – the 60D, which will having a starting price of $74,000. Model X 75D is costlier by around $9,000. The 60D houses a 60kWh battery. It has less torque and a shorter range than the 75D.
A cut in the Model X’s price follows a similar cut for the Model S as well, which now costs $66,000.
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