Why Tesla Motors Inc (TSLA) Ended the Free Supercharger Ride

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Tesla Motors Inc (NASDAQ:TSLA) makes cars that appeal to people for a number of reasons. They’re the cutting edge of high tech, they’re sporty, they’re luxurious and they have green cred in spades.

Why Tesla Motors Inc (TSLA) Ended the Free Supercharger Ride
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Source: Tesla

But some Tesla buyers are attracted by the prospect of unlimited free fuel. By using TSLA’s growing Supercharger network instead of charging at home, they would never have to pay for the electricity to power their ride.

All that changes on Jan. 1, when buyers of new Teslas will be cut off from unlimited free Supercharger access and will have to start paying.

Tesla Supercharger Program Announcement

A blog post to the company’s website outlined the coming change to its Supercharger program:

“For Teslas ordered after January 1, 2017, 400 kWh of free Supercharging credits (roughly 1,000 miles) will be included annually so that all owners can continue to enjoy free Supercharging during travel. Beyond that, there will be a small fee to Supercharge which will be charged incrementally and cost less than the price of filling up a comparable gas car. All cars will continue to come standard with the onboard hardware required for Supercharging.”

Up until now, Tesla owners have had unlimited free access to the company’s Superchargers. Starting January, that ends for new TSLA buyers — those who already own one of the electric cars will have their unlimited free access grandfathered in.

If you put down a deposit on a Model 3, that doesn’t count as a purchase. If you take delivery of a new car after April 1, 2017 (get ready for the April Fools jokes), you’re on the 400 kWh plan and the Model 3 is currently scheduled to begin production in mid-2017.

Why End the Free Ride?

As pointed out by Wired’s Jack Stewart, putting an end to the free unlimited Supercharger access is a sign of maturity, and will help the company to grow.

The Supercharger network has been put in place to allow Tesla drivers to cover long distances without worry about their battery dying en route. There are currently 4,600 Superchargers in place, strategically located to encourage travel between metropolitan areas. Those stations cost money to build, however, and they cost money to run.

That ongoing power cost is being exacerbated by a subset of Tesla owners who skip charging at home (where they’d have to pay for the electricity) to instead drive to a Supercharger where they pay nothing.

Using the Supercharger stations as their primary charging point also means long distance drivers — the ones Tesla designed the network for — sometimes have to sit and wait for the daily users to recharge.

That wait can discourage potential Tesla customers.

The new 400 kWh plan gives Tesla owners about 1,000 miles of free travel. This supports the goal of providing a top-up when they need it to travel distances, instead of using the network to avoid ever paying to charge their electric car.

TSLA insists that it isn’t imposing charging fees at its charging stations as a profit generator. Instead, it says it will charge competitive rates based on local electrical prices and will use the revenue to “greatly expand” its Supercharger network.

Surely, there are potential mixed outcomes from this program change. Building out the long-distance charging network and recovering at least some of the electricity cost is good for the bottom line, but potential Tesla buyers may have been planning their purchase based on never paying a cent to power their cars. Those potential buyers may now pass on buying a TSLA vehicle.

In the long term, unlimited free electricity isn’t a sustainable business model, while making the recharging network a more compelling long-distance travel option is only going to boost mass appeal in TSLA vehicles.

Losing a few potential buyers is worth it. TSLA stock got a 2% bump in the morning following the announcement, so it seems as though investors approve.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

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Brad Moon has been writing for InvestorPlace.com since 2012. He also writes about stocks for Kiplinger and has been a senior contributor focusing on consumer technology for Forbes since 2015.


Article printed from InvestorPlace Media, https://investorplace.com/2016/11/tesla-motors-inc-tsla-stock-supercharger/.

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