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Tesla ditches Model S with smallest battery, bumps up guidance

Tesla Motors is cancelling its basic Model S car with the smallest battery pack due to lack of demand. Only 4 percent of Tesla customers wanted to version of the Model S with a 160 mile range. Turns out the early customers care about range.

Electric car maker Tesla Motors announced on Sunday night that it has decided to cancel production of the base version of its Model S electric car that has the smallest battery pack, at 40 kWh (or 160 mile range). Tesla says only 4 percent of customers had ordered that version.

Tesla will continue to sell the Model S with 60 kWh (230 miles) and 85 kWh (300 miles) battery packs. Customers that already purchased the base Model S will get a 60 kWh version, but with software that will maintain the battery level to its 160 miles range.

Tesla Model S

The decision means that Tesla’s least expensive Model S will start at $62,400, instead of in the $50,000 range. Perhaps the move could also help boost Tesla’s margins on the Model S, which was around 8 percent at the end of 2012, and which Tesla is hoping will be closer to 25 percent later this year.

Clearly Tesla’s early customers, at this stage, care more about having a larger range for the car than shaving off $10,000 from the car. Perhaps that could change for Tesla’s third electric car, which is supposed to be a more low cost mainstream car.


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