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Tesla Model 3 Supercharging Will Have Both Pay-Per-Use and Lifetime Options

By Evan Niu, CFA - Jun 1, 2016 at 3:33PM

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The electric-car maker's mainstream model won't come with free Supercharging after all.

Model 3. Image source: Tesla.

It was always meant to be.

Ahead of Tesla's (TSLA 1.68%) Model 3 unveiling in March, I wondered whether or not the electric-car maker would include Supercharger access as a standard feature on the mainstream model. The most obvious answer was that Tesla would charge extra for Supercharging for a variety of reasons. Not only is the Model 3 priced lower, so the cost isn't embedded into the price of the car like it is with Model S and Model X, but there are significant congestion implications if Tesla were to include Supercharging on all Model 3s at no extra cost. Plus, charging Model 3 buyers extra would help fund the capital investments associated with the ongoing Supercharger network expansion.

It wasn't clear at the initial unveiling whether or not it would be included, though. CEO Elon Musk vaguely said that Supercharging would be "standard," but what he really meant was that the hardware would be standard. It wasn't clear initially whether the feature would be enabled by default, and Tesla clarified shortly thereafter that the company hadn't yet decided whether or not it would be free.

The general expectation within the Tesla community in recent months has been that Model 3 Supercharging will come at an additional cost. However, there's been speculation as to if Tesla would only implement a one-time lifetime purchase or some other type of pay-per-use model. It looks like Musk has decided that Tesla will offer both.

That's what he said

At Tesla's annual shareholder meeting yesterday, Musk clarified the Model 3 Supercharging situation a bit further. As a service, Supercharging was designed to be extremely "straightforward and easy" in its current implementation. Owners can just pull up to a Supercharger, plug in, and walk away without having to worry about billing or other types of authorization.

Here's how Musk answered a shareholder question about Model 3 Supercharging:

The obvious thing to do is decouple that from the cost of the Model 3. So it will still be very cheap, and far cheaper than gasoline, to drive long-distance with the Model 3, but it will not be free long-distance for life unless you purchase that package. I wish we could [make Model 3 Supercharging free], but in order to achieve the economics, it has to be something like that.

What Tesla's motivation is, is to make electric transport as affordable as possible. That is what informs all of our actions. It's not because we want to make things more expensive, it is because we can't figure out how to make it less expensive. That's all.

His comments suggest that Tesla will offer both a pay-per-use model as well as a lifetime access model. This makes sense on a number of levels.

For starters, the lifetime access option available on early Model S vehicles (before Supercharging became standard throughout the lineup) was rather pricey. Supercharging was available for $2,000 at the time of purchase, or $2,500 after the purchase.

Whether or not lifetime access is worth it depends entirely upon a customer's expected usage of the network. The cost might be hard to justify for a local commuter that rarely takes long-distance road trips, but a true road warrior would eventually recoup the cost in gas savings for those cross-country treks. These days, there's not much of a decision for Model S or Model X buyers, since it's a standard feature that's included in the price of the car.

But at what cost?

Offering a pay-per-use model dramatically increases the flexibility for Model 3 owners, since they will be able to only pay for what they need at the time without having to buy an expensive lifetime access option unless they want to. It shouldn't be too hard for Tesla to implement some type of seamless billing system, either, since its Supercharger network is able to monitor and track usage, and customers already have My Tesla accounts set up.

Now that we know the overall models that Tesla will use, we just need to know more specifics about pricing.

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