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Tesla Motors announced on Sunday that it had canceled plans to produce a 40 kilowatt-hour version of its Model S – the version that was to be the most affordable, starting at $59,900, of the company’s all-electric sedan offerings, with the smallest battery and the least amount of driving range. The automaker cited lack of demand as the reason for not putting the 40 kilowatt-hour version into production.
Only 4 percent of customers chose the base 40 kilowatt-hour version of the Model S, Tesla said. Nearly all orders were either for the 60 kilowatt-hour battery pack (starting at $69,900), rated by the Environmental Protection Agency to provide 208 miles of driving range, or the 85 kilowatt-hour version (starting at $79,900), rated by the E.P.A. at 265 miles of range. (Some buyers will qualify for a $7,500 federal tax break.)
The 40 kilowatt-hour variant was never rated by the Environmental Protection Agency for range; Tesla’s unofficial estimate was 160 miles of range. Tesla declined to provide a full breakdown of buying patterns for all the battery pack sizes.
“Customers are voting with their wallet that they want a car that gives them the freedom to travel long distances when needed,” the company said in a statement.
Tesla also updated its financial forecast by saying that it now expected “full profitability” in the first quarter.
Automakers offering electric cars are struggling to find the sweet spot of providing acceptable driving range at an affordable price. The most popular all-electric car, the Nissan Leaf, which, depending on trim level, sells from $29,650 to $35,690, offers about 80 miles of real-world range. Increasing driving range to 100 miles or more would require a bigger and more expensive battery pack, potentially raising the price beyond Nissan’s target market.
The Tesla Model S, as a luxury-class entry, attracts upscale buyers who are apparently less willing to forgo about 60 to 70 miles of extra driving range for the $10,000 cost difference between the battery pack sizes.
Tesla’s next vehicle, the Model X crossover that is scheduled for production in 2014, will be offered with only the 60 and 85 kilowatt-hour packs.
On Feb. 20, during Tesla’s fourth-quarter earnings call, the company announced that it had about 15,000 reservations; given the 4 percent take-rate on the 40-kilowatt-hour pack, that equates to about 600 reservations. Customers who had ordered the most affordable version of the Model S will now receive a Model S with a 60-kilowatt-hour pack, but with its range “software-limited” to 40 kilowatt-hours.
Alternatively, buyers can upgrade at the time of purchase to the more expensive longer-range 60 level. “If any customer orders and takes delivery of their 40-kilowatt-hour Model S, and then decides they want to upgrade to the 60 kilowatt-hour range, it will cost $11,000,” said Shanna Hendriks, a Tesla spokeswoman.
Future owners of the vehicle could also pay the $11,000 fee later to modify the software, allowing the full capability of the larger pack to be used.
Despite having its range limited to two-thirds capacity, the lower-cost Model S units will still provide better acceleration with the bigger 60 kilowatt-hour pack: 5.9 seconds from 0 to 60 m.p.h., rather than 6.5 seconds from the 40 level, according to Tesla’s Web site. Top speed with the bigger pack is also increased, to 120 m.p.h., from 110 m.p.h.