DETROIT: Electric carmaker Tesla Motors Inc Chief Executive Elon Musk told employees in an email to follow company policy of not offering discounts on new cars, answering some investors' recent concerns about the practice.
In a Twitter message, Musk said "corrective action" had been taken on discounting of new vehicles, which "seems to be limited to a small number of cases." Musk's email to employees was included Wednesday in a response to comments on a Reddit posting of someone questioning the discount policy. The Tesla boss in the email to employees said, "It is absolutely vital that we adhere to the no negotiation and no discount policy that has been true since we first started taking orders 10 years ago."
Musk said there could be discounts to floor models, vehicles that had been used for testing or were damaged in delivery.
"However, there can never - and I mean never - be a discount on a new car coming out of the factory in pristine condition, where there is no underlying rationale," he said. Musk was responding to a research note by an analyst with Pacific Crest Securities that criticized Tesla for offering discounts to boost third-quarter sales. Tesla has posted an operating loss in 14 consecutive quarters and negative cash flow since early 2014. It is facing a cash crunch at a time when it seeks to purchase its money-losing sister company, SolarCity Corp.
As Tesla seeks to sell more of its Model S sedan and Model X SUV, Musk told employees in the email that the current quarter "is likely to be the best ever in Tesla history."
Most of the automakers in the US market offer discounts on new models, particularly if demand is not robust for a particular model of if there is stiff competition. The average new vehicle discount in September in the US market industrywide is about $3,900, according to J.D. Power, the highest level since the height of the 2008-2009 financial crisis.
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