To much fanfare on Tuesday, Tesla Motors Inc (NASDAQ:TSLA) CEO Elon Musk announced what the company is calling a “revolutionary automotive financing product” that would allow an individual to buy a Tesla Motors Inc (NASDAQ:TSLA) Model S for only $500 a month with no money down.
The reaction from the markets and media was like the sound of air rushing out of a balloon.
Talking heads and analysts spent much of Tuesday night poking holes in the Tesla Motors Inc (NASDAQ:TSLA) press release, questioning the company’s assumptions in the $500 calculation, with some even going so far as to question the company’s viability going forward. By lunchtime on Wednesday the stock was down over 8% to around $40.50.
But don’t be small-F fooled: This reaction is nothing more than a buying opportunity.
I’m disappointed, too
To be fair, the disappointment is justified. The program is hardly revolutionary–it’s essentially just a workaround to obtain the benefits of a lease without burdening banks with the risk of leasing a car with an unknown residual value.
The prospective Model S owner will still have a $1,000+ check to cut to either Wells Fargo & Co (NYSE:WFC) or US Bank each month for the next 66 months. To get arrive at $500 per month, Tesla Motors Inc (NASDAQ:TSLA) then subtracts potential cost savings from the actual loan payment. Potential cost savings, per Tesla Motors Inc (NASDAQ:TSLA), include fuel savings and tax credits, but also more dubious savings like the value of time saved by riding in the carpool lane or writing off the car as a business expense.
(By the way, how many IRS agents do you think were sharpening their pencils Wednesday morning at the thought of auditing tax returns with a Tesla Motors Inc (NASDAQ:TSLA) showing on the depreciation schedules?)
A Model S doesn’t really cost $500 a month? Who cares?
Before you sink too low in your chair in disappointment that you still can’t afford that upgraded Model S, remember these two things:
1. You can still afford to buy shares
The stock may be down big in the aftermath of the financing announcement, but its still up nearly 15% year to date. Its up over 40% since Dec. 31, 2011. I’m still a Tesla bull, even after such a strong run.
The company just announced its first-ever profit; gross margins are improving and heading toward 25%; the Model S is getting incredible press coverage (any press is good press); and the company is, by all financial measures, successfully transitioning from R&D mode into manufacturing mode.
2. There is always next year
Tesla’s upside as a company is only partially fueled by the Model S. Yes, the design is beautiful, and the technology under the hood is best in breed. But even with special financing, this car was never meant for the masses.