Tesla Taps into Booming Demand with a Grand Lease Securitization Plan

Tesla to start securitization through vehicle leases

Tesla

As the Big 3 went on strike, costing Ford, GM and Chrysler billions, Tesla is making big money moves in order to spend more. Tesla has started its grandest lease securitization project to date, which is set to redefine its financing strategy. The company is initiating the securitization of a staggering $1.8 billion worth of its electric vehicle leases, paving a path for a sophisticated financial instrument that can potentially foster the company's growth. This massive cash grab may be needed if rumors of the new production advancements are true.

What Does it Mean?

Tesla has started a process called "securitization." This is a financial strategy where they bundle together many car leases and sell them as bonds to investors. Tesla is packaging $1.8 billion worth of car leases in this case. This strategy allows them to get a large sum of money now instead of waiting for the lease payments to trickle in month by month. This is the same as getting a full year of pay; all you did was promise to do your job for the next year.

Tesla is doing this now because it wants to have more money on hand to create more leasing opportunities for potential Tesla drivers. When they sell these bonds, they will get a large amount of money that they can use to offer more leases to customers, essentially expanding their business, Giga Mexico is coming, and potentially boosting their profits.

By turning leases into bonds, Tesla effectively leverages its existing assets to garner immediate liquidity. This strategy entails the creation of financial instruments backed by the value derived from Tesla’s leases, which are then marketed to investors, offering them a structured debt investment with different tranches of risk and returns. The issuance is segregated into various classes, with ratings spanning from Triple-A to Double-A, targeting a diverse risk appetite of the investors, ranging from conservative to moderate. This is a big money move, considering their Master of Coin has stepped down.

An Established Strategy with a Fresh Magnitude

As the financial specialists monitor the dynamics, there is a consensus on the resilience showcased by U.S. consumers in the wake of the Federal Reserve’s aggressive interest rate hikes. Elon Musk has loudly spoken out about the rate hikes and urged the Fed to reverse the massive increases. Now, Tesla can use the hikes to its advantage as more buyers may be looking for a short-term lease instead of a long-term one, which would lock them into a higher rate for a longer period.

This financial maneuver is not new in Tesla's playbook; however, this issuance marks the largest since the inception of such undertakings in 2014. The issuance of these asset-backed securities is designed to drum up about $1 billion, transforming the vehicle leases into a liquid asset that can foster Tesla's business acumen in navigating the corporate finance landscape.

The proceeds from this strategic financial endeavor can potentially fuel Tesla's ambitious expansion plans, serving as an alternative reservoir of funds apart from the conventional corporate bond market. This comes at a pivotal time when Tesla’s share has seen a remarkable uptick, soaring by 124.1% year-to-date.

Tesla plans to create different groups or "classes" of bonds to sell, with some being safer investments and others offering the potential for higher returns. This strategy is designed to attract a wide variety of investors, including those who prefer to play it safe and others willing to take on a bit more risk for a higher reward.

This strategy seems to be well-received as Tesla's share prices have gone up, indicating that investors have confidence in Tesla's plans. Moreover, people are still very much interested in leasing Tesla cars despite the general rise in interest rates.

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Tesla and Uber Partner for Another Discount Off New Vehicles

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Tesla and Uber are partnering to offer a new discount for Uber drivers. The offer is similar to one that was offered earlier in the year. Uber and Tesla previously offered a $2,000 USD purchase incentive under a special Uber referral code. That offer ended in March, and Tesla is now offering a new, similar offer.

Both the previous incentive as well as this new offer are only available in the United States.

Offer Conditions

The new offer is simple: If you’re an Uber Driver, you’ll be able to get $1,000 in Tesla credits upon taking delivery and another $1,000 in Uber Cash after completing 100 rideshare trips. You’ll need to purchase either a new Model 3 or Model Y—any variant, including the Performance versions, is acceptable. The program is not available for used or demo vehicles.

For anyone interested in trying out being an Uber driver, this is also a nice way to get $2,000 off a new Tesla. While the discount is no longer a purchase incentive, you can use the $1,000 in Tesla credits towards accessories, service, Supercharging, swag, or another vehicle. The Uber Cash, on the other hand, will be paid out alongside your 100th trip.

The offer is combinable with the Military Purchase Program, but you can’t use the Tesla referral program to get $500 off. If you’ve already got referral credits, though, you can use them toward the purchase of the vehicle.

Finally, you’ll need to take delivery before the end of the year (December 31st) and complete your 100th trip before February 15, 2025.

How to Use It

To take advantage of the offer, go to Tesla’s Uber page and log in via Uber. Both companies will verify that you’re eligible for the discount. You’ll also have to be in good standing as an Uber driver - if you’re not, no discount.

It's interesting to see Tesla and Uber partner so closely, given that Tesla’s Robotaxi service will become a direct competitor to Uber. Tesla also recently launched the Trip Navigation and Battery Awareness feature for Uber drivers.

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Tesla Updates Cybertruck Range Extender Timeline and Specs

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Tesla has released updated specifications and a revised timeline for the Cybertruck’s Range Extender. Originally launched alongside the Cybertruck last year, the Range Extender offered a significant boost in range along with a notable price tag—requiring a $2,000 reservation deposit and an estimated price of $16,000.

Updated Specs

Tesla has updated the Ranger Extender's range, now increasing the vehicle’s range from 340 miles to 445 miles on the Dual Motor variant and from 320 miles to 440 miles on the Cyberbeast.

The updated specifications reduce the vehicle’s total range with the Range Extender by about 6% compared to the original specs, while the Range Extender itself sees a 20% reduction in range. This is a substantial reduction, and Tesla has yet to explain the change. It’s likely that they’ve started testing Cybertrucks with Range Extenders under EPA test conditions, which may have adjusted the initial range estimates.

Delayed Timeline

The Range Extender was originally supposed to be available for those who pre-ordered sometime in early-2025. That timeline has now been pushed back to mid-2025. However, given Tesla’s lackluster attempts at maintaining timelines, we could fully expect this timeline to continue to slip closer to 2026, but we remain hopeful that it’ll arrive on time.

Tesla has been working towards perfecting its dry-cathode process, which could also be a likely cause of the delays. Tesla may want to ship the Range Extenders as dry-cathode—it's a small batch product and one that’s easier to replace or repair than an entire truck.

Overall, the Range Extender itself is an interesting item. While it does provide a small range increase—one that’s necessary for towing—it has its fair share of demerits. It takes up a considerable amount of bed space and must be installed and uninstalled by Tesla Service. Additionally, the weight in the bed will result in a change in the center of gravity.

We’re interested to see what Tesla does with the Range Extender - we’ve only seen a few pictures of engineering samples on Tesla’s site, but it could come with considerable changes when it launches.

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