Tesla Model S: Is It A Good Deal?

Tesla has finally released firm pricing information. Here’s a little exercise I just went through to see how the Model S compares to a traditional luxury performance sedan.

I’m comparing Tesla’s Model S prices to the 2010 Jaguar XF Supercharged I bought new in January 2010, shortly after putting down my deposit on the Model S. The Jaguar is a 470 hp, 0-60 in 4.9 sec. luxury car. Assume I paid the “list price,” just as we will be required to do with the Tesla. List was $68,000. I didn’t opt for a single add-on option. Included in the Supercharged package:

• Leather throughout, including dash; 16-way driver’s seat
• Heated and ventilated seats; heated steering wheel
• Auto-dimming mirrors all around
• Keyless (proximity) entry; homelink
• Xenon HID headlamps, self-leveling
• Adaptive & selectable stability control & traction control
• Power sunroof
• 20″ wheels, long-wear performance tires
• Bowers & Wilkins premium sound system: 14 speakers, 7.1, satellite & HD radio, iPod control + USB
• Navigation
• Backup camera
• Metallic paint

Again, that’s all for $68k list.

Looking only at the 300-mile-range Tesla Model S options (and excluding the clearly-overpriced Signature model), to achieve similar performance and trim level with the Model S, I’m looking at adding: $750 for metallic paint; $1500 for a (non-opening) glass roof; $3500 for 21″ wheels (included with the Performance model); $1500 leather (included with the Performance model); $3750 “Tech” package that includes navigation, backup camera, HID headlamps and other options included in the XF list above); $950 for an (as yet un-named) premium sound system; and $1500 for active suspension (included with the Performance model). Tesla’s listed pricing with these options:

• $83,350 for a standard 300-mile Model S with inferior acceleration (slower by .7 seconds compared to the XF Supercharged’s 4.9 0-60)
• $86,850 for a 300-mile Performance model with superior acceleration (faster by .5 seconds)

(A couple of notes about these prices as a starting point: These ignore the time-value of the $7500 IRS tax credit that Tesla uses to artificially “lower” the price. I’m also very suspicious of the sound system, given the fact that no premium brand is identified. The sound system could be a deal-breaker for me if it’s the kind of junk that companies like Infinity and Boston have allowed their brands to be slapped on in recent years.)

I understand that one element of the cost of auto ownership – gas costs – needs to be considered. The XF Supercharged averages right around 20 mpg in my real-life use. My daily round-trip commute, typically right around 75 miles, costs me roughly $12 to $15/day depending on gas prices. If I assume 250 such days per year, and assume the highest gas prices, I’m paying $3750 for gas per year. The Model S 300-mile battery is warranted for 8 years, but I’m not going to drive any car for 8 years. Five would even be a stretch, but let’s use that: At the highest gas prices, over five years I’d save $18750 in gas. (Again: The Model S uses no gas.)

If I ignore the time-value of money again (I’ll be pre-paying for this gas savings, which will only be realized over time), and “credit” the gas savings, then I get:

• $64,600 for a standard 300-mile Model S
• $68,100 for a Performance Model S

Of course, this assumes electricity is free. It isn’t, and I’ll be paying increased electrical costs that need to be accounted for. Tesla says to assume 300 Wh per mile. For my daily 75-mile RT commute, that’s 22.5 Kwh per day. 250 days a year, that’s 5625 Kwh/year. For five years, that’s 28125 Kwh. According to my energy bills, I’m paying just a fraction under 10 cents per Kwh (with no variable rates depending on time of day). Assuming electricity prices hold steady (which may be a faulty assumption, especially as EV use increases), that’s about $2800. If I account for that cost, I get:

• $67,400 for a standard 300-mile Model S
• $70,900 for a Performance model

My conclusions: Taking into account some rough estimates that give Tesla the benefit of the doubt (stable electricity costs; using their assumed 300Wh/mile number, which could be way off if one likes to have fun with speed and acceleration), the “adjusted” cost of the Model S is at least in the ballpark of what I paid for a similar luxury performance sedan less than two years ago. What hurts is the up-front, out-of-pocket expenditure for savings that will only be realized over time – including the tax credit:

• $90,850 for a 300-mile Model S comparable to my Jag but with slightly slower acceleration
• $94,350 for a 300-mile Permance model comparable to my Jag but with slightly faster acceleration

Assuming I go ahead with my Model S purchase, I’ll most likely go with the non-Performance 300 mile version, and skip the the glass roof and performance wheels. That saves me $5k off the standard price above, so my out-of pocket would be $85850, and “adjusted” cost (subtracting the $7500 credit and $15,900 net fuel savings) would be $62,400.

While I was at first put-off by all of Tesla’s up-charges for things that I believe should be “standard” on a luxury car, my assessment is that the Model S is a good deal, if you believe in the fuel savings. (And why shouldn’t you? You’ll never put gas in it.)
By buying a Model S, you’re not necessarily paying a premium just for the “feel-good value” of having an EV, or of being the first one on your block to have such a cool car – though of course those things are included as well.

(This exercise makes no effort to account for maintenance costs. Annual maintenance (all that has been required so far – so save the “reliability” cracks, Jag-haters!) has been well under $1k per year. That’s an unknown for the Model S, but I assume it will be comparable.)