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Tesla Motors Inc (NASDAQ:TSLA) faces flak- restructures Model S finance terms – JPM, WFC

Boston, MA 05/06/2013 (wallstreetpr) – The electric car-maker, Tesla Motors Inc (NASDAQ:TSLA) (Closed: $54.55, Up by : 0.81%) which is headed by Elon Musk the billionaire is modifying its Model S lease-based financing plan. The plan had been launched last month and had faced a lot of criticism. In a statement, Tesla’s co-founder and CEO, Musk said that the company appreciated the feedback that numerous customers and journalists have provided and about their financing product that didn’t seem to have been designed right. He said that the criticism had truth to it and that the company will be fixing the issue.

The original plan
The original plan that had been announced by Tesla on April 2 had offered a fixed resale value. It said that customers would spend only $500 per month for purchasing a model S, which will be inclusive of items such as time and fuel-price savings. In reality the monthly payment for the Model S with the 60-kilowatt-hour battery pack was $1,051 while the prices for other versions were higher. In a research report that was carried out by JPMorgan Chase & Co (NYSE:JPM) (Closed: $47.57, Down by 1.06%), the bank said that the cost assumptions had been liberally applied in that original plan. Post that announcement, Tesla shares dropped 7.3 percent

The revamped plan
Tesla said that as part of the revised plan, it will be increasing the Model S resale value guarantee, which will now be the highest for any volume-produced sedan. The loan return terms are also been extended from 63 months to 72 months. Customers will be given the option to re-sell the car to the company after a period of three years. On a conference call Musk said that the longer term will mean that customers will have to pay lower monthly payments which will be in the range of $800 per month on a 72-month loan.

The financers
Wells Fargo & Co (NYSE:WFC) (Closed: $37.74, Up by: 0.88%) and U.S Bancorp had offered the financing deal for Model S. It offers a minimum resale value guarantee after three years. This had initially been pegged to the Mercedes-Benz S-class sedan produced by Diamler. Tesla said that via the new terms customers are guaranteed that the resale value of the car will be above that of the Audi, BMW, Lexus, Mercedes or Jaguar.

Published by Pushpa Naresh

Pushpa Naresh has done MBA (Finance) and an avid market tracker. She is a technical analyst who closely tracks US markets along with other global markets like India. She has been expressing her views about markets and also advises various clients.

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