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Tesla to map out service, charging strategy this month

Tesla Motors CEO Elon Musk speaks during the Model S Beta Event held at the Tesla factory in Fremont, California in this October 1, 2011, fi
Tesla Motors CEO Elon Musk speaks during the Model S Beta Event held at the Tesla factory in Fremont, California in this October 1, 2011, fi

By Deepa Seetharaman

DETROIT (Reuters) - Tesla Motors Inc will unveil details about its revamped dealer service and expanded network of fast-charging stations this month in a series of moves the 10-year-old company plans to boost its sales.

The maker of the Model S electric sedan will discuss its effort to improve on its service next week, Chief Executive Elon Musk told Reuters in an interview.

"I'm an engineer, so service is not something that I naturally do," Musk said late on Tuesday. "But it's the right thing for the company and I think we have the opportunity to re-engineer service."

Earlier this week, Tesla reported it had its first profitable quarter this past first quarter. It also announced that it was partnering with Wells Fargo and U.S. Bank to offer financing to make its pricey electric sedan accessible to more people.

The Model S, Tesla's second model after the Roadster, is Tesla's effort to reach a broader group of buyers. The car starts around $70,000 before a $7,500 tax credit.

The financing option combined with the U.S. tax credit is tackling one the main reasons that U.S. sales of electric cars have fallen short of some predictions. In addition to high prices, range anxiety and a poor charging infrastructure in the United States have also blunted their popularity.

Musk had been teasing the financing announcement for a week using the social media site Twitter. "Am going to put my money where my mouth is in v major way," he tweeted on March 25.

His online messages pushed Tesla shares up about 18 percent. But on Wednesday, shares plunged as much as 9.3 percent to $40.21 on the Nasdaq.

"Although Tesla characterized the financing program as 'revolutionary,' it is similar to a car loan with a buyback option," Jefferies analyst Elaine Kwei said in a research note on Wednesday.

RESALE VALUE GUARANTEED

Next week's service news will be followed by another on Tesla's Supercharger network of quick-charging stations. Musk added that another announcement would follow later this month.

Tesla has been working on a third-generation vehicle that would cost around $30,000 to $35,000. The car will be smaller than the Model S and roughly the size of BMW's 3-series sedan.

"When is the next cap raise?" Morgan Stanley analyst Adam Jonas said. "The time may be very favorable to bolster liquidity ahead of a heavy investment phase for Gen 3."

Musk, worth an estimated $2.7 billion, said he would personally guarantee the resale value of the Model S. The move is intended to give peace of mind to customers who may be skittish about the future of an electric car company.

But Tesla also drew criticism for estimating that payments could be as low as $500 a month, if the customer takes a business tax deduction and values time saved filling up at a gas station at $100 per hour.

Excluding those factors, the payments would be around $1,200 a month, which is "reasonable for a first-of-its-type EV," Jonas said in a research note.

"Dropping $80,000 in cash for a car is a commitment very few can afford," Jonas said. "Spending $1,000 per month, while still a privilege, is far more within reach."

This week, Tesla dropped its base Model S after just 4 percent of customers ordered the car, which was equipped with a 40 kWh battery pack.

Musk said Tesla would honor those orders, but expects the "vast majority" will take advantage of Tesla's ability to later boost the capacity of those batteries to 60 kWh.

Customers would have to pay the $10,000 price difference between those two models plus an additional fee of around $1,000 for the work required to convert the vehicle.

"The 40 kwh car was just not a good product," Musk said. "It was underpowered and it was the kind of car that would give someone range anxiety. It was like a hobbled horse."

While sales of advanced vehicles are growing, they have fallen far short of some estimates, notably U.S. President Barack Obama's goal to get one million plug-in hybrids, extended-range electric cars and pure electric vehicles on U.S. roads by 2015.

Many analysts see that goal as overly optimistic and the administration also has backed away from that timeline earlier this year.

"Obama is right about the million, but the year is probably a little further out," Musk told Reuters. "It's maybe 2018 or 2017. I think he's off by about two or three years."

(Reporting by Deepa Seetharaman; Editing by Leslie Gevirtz)

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