Tesla is tapping the power of its owners to sell more cars and reduce its costs.
In a conference call with journalists on Wednesday, Tesla CEO Elon Musk announced what the company is calling a "Tesla referral program."
The program will pay current Tesla owners $1,000 in Tesla credits to convince family and friends to buy a new Tesla. (There will be no cash payments involved.)
You need to be a current Tesla owner to participate in the referral program — an owner of a Model S or Roadster vehicle.
New buyers will also receive a $1,000 discount on their new Tesla.
Tesla is informing current owners of the program via an email from Musk himself. The email explains that Teslas are sold in two main ways: through word of mouth and at Tesla stores.
At stores, it costs Tesla approximately $2,000 to sell a car. As a part of strategic planing to determine how many new stores to open, it occurred to Musk and Tesla's leadership that it might make sense to borrow a page from the tech industry and Musk's experiences at PayPal.
"We don’t know if this will have a meaningful impact on the cost of sales," Musk said. "If not it will be an interesting experiment and we’ll leave it there."
Tesla isn't permitted to use its direct-sales model throughout the US, bypassing the dealer franchise system. The company has been fighting a state-by-state battle to change or adjust law, but has thus far met with limited success. In response to a question from Business Insider, he said that the referral program "is a way for us to sort have a guerrilla battle with some of the car dealer associations."
He added, "Tesla reps are not allowed to sell in certain states — we are held back by some legislation."
He noted that this isn't the main reason to establish the program, which will run from now until October, 31.
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Participation in the refereral program comes with some interesting extras. If you make five referrals, you'll get to visit the Tesla Gigafactory in Nevada, now under construction. If you refer ten people, you get the right to buy a limited edition Founder Series of Tesla's forthcoming SUV, the Model X (these aren't sold to the general public). And if you're the first one to refer ten new buyers, you get the estimated $50-60,000 Model X for free!
Founder Series Model X vehicles will get special badging, can be customized in various ways, and will be personally inspected by Musk as they roll off the assembly line in Fremont, CA. Tesla has created limited-run Founder Series before. For the Model S, it was only 50 cars.
The announcement of the refereral progam comes just two weeks after Tesla revealed upgrades to to the Model S, featuring "Ludicrous Mode," which improves the high-performance Model S's 0-60mph acceleration time to 2.8 second, from 3.1, according to the company.
Tesla has a stated goal of selling 55,000 vehicles in 2015. Through the first half of the year, it had not yet gotten halfway to that goal. However, Tesla has said in the past that demand for its cars isn't an issue. Rather, the compamy is currently constrained on the production side.
Here's the email that Elon will be sending out to all Tesla customers:
Subject: Trying something new (plus party at the Gigafactory and a Founder Series Model X)
Word of mouth has always been a major part of how Tesla sales have grown. When I meet Tesla owners, one of the first things they often tell me is how they have convinced many others to buy the car.
As you may already know, Tesla does not advertise or pay for endorsements or product placement. Maybe by doing so we could sell more cars, but I don’t like the idea of trying to trick people into buying a product by false association. If you see somebody famous driving a Model S, it is because they genuinely like the car. If you see it in a movie or TV show, it is because the people associated with that production genuinely like the car.
Besides word of mouth, another way that our cars are sold is through stores. These will always be important to allow people to check out new models and ask our product specialists detailed questions. However, stores are quite expensive to set up and operate. In reviewing the Tesla cost of sales, we found that it is approximately $2,000 to sell a car through our stores, higher in some regions and lower in others.
Both ways of reaching potential customers are important, but, if we can amplify word of mouth, then we don’t need to open as many new stores in the future. So, we are going to try an experiment. This is similar to the customer growth program that I worked on at PayPal/X.com back in ’99. What worked for PayPal may not work for Tesla, but it is worth trying, as the net result would be lowering our costs by $2,000, allowing us to give that money to our customers.
From now through October 31st, if someone buys a new Model S through your link (XX include link XX), they will get $1,000 off the purchase price and you will get a $1,000 credit in your Tesla account, which can be applied to a future car purchase, service charge or accessories. To put some limits on the experiment, each Tesla owner can grant a maximum of ten $1,000 discounts.
Just for fun, there will also be some things that money can't buy. If five of your friends order a Model S, you and a guest will receive an invitation to tour the Gigafactory in Nevada – the world’s biggest factory by footprint – and attend the grand opening party. This will be awesome. At ten orders, you get the right to purchase a Founder Series Model X, which is not available to the public, with all options free (value of about $25,000). The first person to reach ten will get the entire car for free.
