Elon Musk Has a Plan to Make Tesla Profitable by Raising Prices and Making It Harder to Change Your Mind - Inc.

Tesla has a problem, and it isn't the cars. In fact, Tesla makes amazing cars that their owners love. Seriously, it makes not only the fastest production sedan you can buy (the Model S), but the Model 3 is one of the best selling vehicles on the road right now. And, driving an electric car happens to make you feel better about not burning all that carbon. 

Then, there's Tesla's extraordinarily loyal--and vocal--fan base. They are a devoted group that not only buy the company's products but also serve as electric vehicle evangelists, helping educate the public on the virtue of leaving gasoline-burning vehicles behind. 

Still, Telsa has a problem--it makes amazing cars, but it doesn't make any money.

In fact, in the second quarter of 2019 (Tesla won't announce its most recent quarterly earnings until October 23), the company lost a larger-than-expected $408 million on $6.47 billion of revenue. Converting the world to electric vehicles is a noble cause, but as a business, it's hard to change the world if you don't make any money.

That explains why the company is quietly taking steps to make the process of buying a Tesla just a little bit harder and a little more expensive.

First, the company raised the entry-level price of its most affordable version, the Model 3, by almost $1,000. In fairness, it also increased the range--by 10 miles--though that's hardly a significant enough difference to justify the cost increase. 

Tesla also made a few other important changes to the buying process, which were updated on the company's website:

Once you have returned your vehicle, the return process is final and may not be canceled. At this time, we are not able to facilitate vehicle exchanges. If you decide to order another vehicle, you may not order the same trim for a period of 12 months but may order another vehicle in a different trim at any time. However, if you are found to have abused this policy or have acted in bad faith, you will be prohibited from purchasing any vehicle for a period of 12 months.

Additionally, CNBC reported that Tesla is no longer accepting $1,000 refundable deposits on new orders, but will instead charge a $100 non-refundable order fee. The net result of those changes may not seem like much, but make no mistake, Tesla has set its sights on its customers--especially those who might change their mind.

In the past, Tesla had made it as easy as possible to order its vehicles. In fact, you could order one in about 90 seconds on the company's website, place a deposit, and secure financing or pay the balance in cash before it was delivered. If you changed your mind, no problem--just cancel your order and get your deposit back. 

If the car showed up and you decided it wasn't what you wanted, you could return it for up to seven days. Considering the company doesn't sell through dealerships, these policies helped customers who didn't live close to a Tesla showroom feel more comfortable purchasing an electric vehicle by eliminating some of the risks. If you don't like it, just return it. 

You could look at these changes in one of two ways. The first is that Tesla feels it's doing so well it doesn't need to provide those assurances to new customers. Said another way, Tesla might have just decided that there is enough demand for its cars, that it can afford to make it just a little harder to change your mind about buying one. It may recognize that it no longer needs to reduce the friction involved in buying a car online that you've never seen in person, by giving customers the opportunity to back-out either before, or after, they get one.

Or, Tesla just needs the cash. 

I believe it's most likely a combination of the two. Tesla recognizes that there's plenty of demand for its cars, but it's having a hard time making money off that demand. It's hard to predict exactly how much of an increase in revenue Tesla might see from these changes, but the company has to find some creative ways to generate cash. 

Changing the world is expensive, and for Tesla, so far it hasn't been very profitable.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.

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