Free, fast charging will soon be a thing of the past for Tesla Motors (NASDAQ:TSLA) customers.
For several years, Tesla has included free access to its growing network of Supercharger stations with every car it has sold. In just 30 minutes, the Superchargers can provide enough juice to travel 170 miles. The growing availability of Superchargers across the U.S. -- and many other countries -- has made this perk a big selling point for Tesla's Model S and Model X vehicles.
However, with Tesla planning to dramatically increase production in the coming years, offering free Supercharging to every customer was clearly unsustainable. As a result, cars ordered after Jan. 1, 2017, or delivered after April 1, 2017, will come with a limited yearly free charging allowance.
Tesla's Superchargers are getting crowded
There aren't that many Teslas on the road today, but some Supercharger stations can still get very busy. Last year, Tesla CEO Elon Musk noted that some people were abusing the system -- using it to charge for free near their homes, rather than for the long-distance trips the Supercharger network is meant to enable.
Some people have legitimate reasons for using a Supercharger near home. For example, many city-dwellers aren't able to plug in their vehicles at home. However, it was fairly predictable that some Tesla owners would turn to free Supercharging just to save a few dollars here and there -- and indeed, some people did predict it.
Tesla ownership could skyrocket soon
The congestion is likely to get worse. Tesla has built about 160,000 vehicles so far, but it plans to quickly ramp up output after introducing the Model 3, which is scheduled to become available in late 2017.
Tesla's goal is to build a stunning 500,000 vehicles a year by 2018 and 1 million a year by 2020, up from fewer than 80,000 in 2016. If Tesla achieves these ambitious goals, there could be 2.5 million or more Teslas on the road by the end of 2020. Even if Tesla falls short -- which is much more likely -- it could easily have built 1.5 million vehicles by then.
Clearly, growing the Tesla owner base tenfold in the span of a few years will put pressure on the global Supercharger infrastructure. The only way to make sure that Superchargers are available with little or no wait for the people who need them most is to ensure that owners become more judicious in their Supercharger use (on average).
Supercharging? There's a charge for that!
Going forward, each vehicle Tesla sells will come with 400 kWh of free Supercharging credits annually, enough to drive about 1,000 miles. Beyond that, owners will have to pay a small fee each time they use a Supercharger. It will cost less than a tank of gas, according to the company.
Tesla had already announced months ago that the new Model 3 -- which will account for the vast majority of Teslas on the road within a few years -- won't come with Supercharging included. At the time, Musk stated that it wasn't possible to include free charging while maintaining the low $35,000 base price that Tesla had promised.
Tesla's decision to do away with unlimited Supercharging probably won't have much impact on demand for its vehicles. The cost of Supercharging will remain minuscule relative to the cost of buying a car. Furthermore, most Tesla customers don't need to use Superchargers enough that a pay-per-use model will be aggravating.
Will this be enough?
A bigger risk for Tesla is that implementing a nominal fee for Supercharging beyond a certain point won't fix the overcrowding problem.
The Model 3 will have less range than nearly all Tesla vehicles currently in use. At the margin, that will lead to more strain on the Supercharger network, even with a fee-per-use model.
For example, driving from New York to Boston or Washington, D.C., will probably be just outside the range of a base-level Model 3. That means a round-trip would require two or more Supercharger stops. By contrast, most Model S and Model X vehicles could at least make the one-way trip without stopping.
The combination of rapidly expanding the global Tesla vehicle fleet and rolling out models with less range will drive massive growth in "legitimate" Supercharger use. Even if Tesla cracks down on abusers -- and it has a limited ability to do so, given that current Tesla owners will still be entitled to free Supercharging -- demand growth could outpace Tesla's ability to build new Superchargers.
If Tesla owners routinely face long waits at popular Supercharger stations during peak times, the company could eventually squander the goodwill of its customers. Putting limits on free charging was a necessary move as Tesla tries to go mainstream, but it's only a partial solution to the problem of overcrowding at Supercharger stations.