Tesla Offers $1,000 Discount to New Customers

Elon Musk - P - 2013

In one of its first conventional marketing moves, Tesla will grant $1,000 discounts to new customers referred by current Model S owners.

Tesla Motors CEO Elon Musk has long rejected traditional automotive marketing tropes: The company doesn't advertise, sells its cars directly to consumers instead of through a network of dealers and promotes its new models at rock concert-like events at its Hawthorne, Calif. factory instead of at trade shows. 

On Monday, Musk broke form by announcing a conventional, if generous, incentive program: For every customer a current Tesla owner refers via an online link, the new Tesla buyer gets a $1,000 discount on a new Model S. The current owner gets a $1,000 credit towards the purchase of a future Tesla, accessories or service. The first owner to refer 10 customers in a specific region is rewarded with a gratis Model X, Tesla's crossover SUV, which goes on sale this fall at an estimated $70,000.

The incentive comes as Tesla is moving more aggressively to broaden its customer base by selling pre-owned Model S cars on its website and is part of its business plan to sell directly to consumers — dealer-franchise laws prohibit the practice in all but a handful of states, among them California, New York and New Jersey.

According to an analysis by Edmunds.com that examined registration data of the more than 1,600 pre-owned Model S sedans sold in the U.S., 36 percent of the buyers earned less than $100,000 a year versus 25 percent for buyers of a new Model S. The buyers were also younger: 10 percent of used Model S buyers were aged 18-34, versus 6 percent for new car buyers.

Reaching Millennials — whose attitudes about car buying are being formed amid the rise of ride-sharing services such as Uber — is seen as crucial for all automakers but particularly for Tesla, which must appeal to a broader demographic if it is to reach Musk's stated goal of selling 500,000 cars annually by 2020. 

The Tesla Model 3, a $40,000 sedan due in 2017, is the company's bid to build a mass-market car.