Here’s how Tesla plans to boost Model S sales this summer
Customers that have purchased one of Tesla’s electric cars are inadvertently the company’s best sales people. On Wednesday, the electric carmaker announced a new temporary program to try to boost word-of-mouth sales this summer by incentivizing those loyal customers.
Tesla (TSLA) plans to soon send out an email to its customers that describes a new “referral” program (Update: more info here). In the program, current customers get a referral code that they can send to friends and family that will enable a new customer to get $1,000 off the price of a new Model S car. In return the loyal customer will get a $1,000 credit which can be used for accessories, services, or a new car.
Tesla CEO Elon Musk described the program as “experimental.” It’s only offered for Model S cars purchased by October 31. But Musk said if the program is successful, the company could offer it in a more permanent way. “I’m not entirely certain it will work or not,” he said.
In a media call, Musk said that one of the main reasons to offer the program was to see if it could deliver an overall improvement in Tesla’s cost of sales and help the company determine how many stores to open in the future.
Selling a car through one of Tesla’s stores costs $2,000. If Tesla can sell more cars through word-of-mouth—which so far has been free to the automaker—then it will likely open fewer stores in the future. Musk said the strategy worked for PayPal (PYPL), the online payment company that Musk famously co-founded.
With the launch of the Model S, Tesla amassed some of the most loyal customers in the automotive and technology worlds. Their devotion is akin to Apple’s so-called fanboys, though there are far fewer of them. For example, earlier this month loyal Tesla customers held a conference in Santa Clara, Calif. to bond over—you guessed it—all things Tesla.
Customers responsible for five complete referrals will get invited to the grand opening of Tesla’s Gigafactory, the massive battery factory it’s building outside of Reno. Customers who make 10 referrals will be offered the opportunity to purchase one of Tesla’s exclusive “Founder Series” of Model X, its upcoming crossover sport-utility vehicle. Tesla says the first customer to make 10 referrals in North America, Europe and Asia will get a Model X for free.
The referral program also gives Tesla another way to have a “guerrilla battle” with the car dealer associations, Musk said. Unlike most automakers, Tesla sells its cars through its own stores, rather than a dealership. But the dealership groups have blocked these direct sales in a number of states. If Tesla can sell more cars through its existing customers, it will be able to see growth in states where direct sales are barred.
Tesla is likely to seek ways to lower its cost per sale for the Model S. The company has been spending heavily and raising hundreds of millions of dollars to fund new stores but also the Gigafactory, its electric car charging network, and the development of its upcoming Model X and Model 3, which has proved costly.
Tesla is also expected to launch its Model X toward the end of the third quarter of this year. Tesla needs that car to launch on time to help the company meet its plan to ship 55,000 cars this year. If Tesla misses that Model X launch, sales of extra Model S cars this summer could help ease that pain.
As of the beginning of July, Tesla had shipped 21,537 of its Model S vehicles this year, which is less than half of its annual goal. The company will hold its second quarter earnings next Wednesday.
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Updated: An early version of the customer letter sent to Fortune by Tesla stated a September 30 end date for the program, but Tesla is actually running the program until October 31.