Tesla Motors' (NASDAQ:TSLA) resale value guarantee, which initially was only available in the U.S., is now available in all 11 European markets where Tesla sells Model S, the company announced this week.
"We recognize that many European drivers prefer to lease their automobiles, personally or through their company," Tesla said in a blog post on Wednesday. Tesla's resale value guarantee combines the benefits of both leasing and ownership. By doing this, the company aims to give its customers in its hottest growth market for its Model S absolute peace of mind.
About Tesla's resale value guarantee
What exactly is Tesla's resale value guarantee? "The Tesla Resale Value Guarantee, when combined with a loan or a financial lease from select partners, combines the security and comfort of ownership with all the advantages of a traditional lease," Tesla explained in the post.
Tesla accomplishes this by guaranteeing the resale value of the Model S three years from now to be "among the highest of any premium sedan made in volume." In other words, individuals or companies that purchase a Model S under the resale value guarantee program are allowed to trade in the vehicle at a guaranteed residual value after the third year of ownership, but owners are also welcome to keep the vehicle without making any sort of transaction.
In the press release explaining the U.S. version of the guarantee in 2013, Tesla said the program guarantees "the resale value will be higher than that of BMW, Audi, Mercedes, Lexus or Jaguar." The program will not attempt to match any limited models made in low volume.
The funds for the guaranteed value of Model S under the program are backed by both Tesla and billionaire Tesla CEO Elon Musk.
Tesla contends that the rave reviews for Model S from auto magazines and rating agencies like Consumer Reports prove that the market value for Model S will be high enough to support this residual value, preventing Tesla from being forced to buy back vehicles above market value.
Why the resale value guarantee makes sense in Europe
Given the recent growth in Model S sales in Europe, the market is arguably Tesla's most important in achieving its growth targets for 2015. So it makes sense that Tesla is aggressively expanding this financing program to Europe. In 2014, Model S sales in Europe were about 9,500, at 30% of sales, and double European Model S deliveries in 2013.
Meanwhile, U.S. deliveries from 2013 to 2014 were flat, and Tesla said it would not need any sales in China in order to meet its aggressive guidance for Model S sales to grow 50% globally in 2015. It's likely, therefore, that Tesla is counting on more growth in Europe in order to meet its aggressive growth targets.
Given the popularity of leasing in Europe, Tesla is likely hoping the availability of its Resale Value Guarantee in the market will be a catalyst in its planned sales growth in the region.