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Tesla Motors (TSLA), the maker of electric cars led by billionaire Elon Musk, declined the most in more than a month after analysts questioned whether a new lease-style financing offer will boost demand for the company's Model S.

Tesla fell 7.3 percent to $41.10 at the close in New York, the biggest one-day drop since Feb. 21, after closing at a record $44.34 on Tuesday. The shares have gained 21 percent this year.

Visitors examine Tesla’s Model S on April 1, 2013 at Tesla’s showroom in Santana Row in San Jose. (Dai Sugano/Staff)
Visitors examine Tesla's Model S on April 1, 2013 at Tesla's showroom in Santana Row in San Jose. (Dai Sugano/Staff) ( Dai Sugano )

The Model S financing deal, offered by Wells Fargo and U.S. Bancorp, provides qualified customers with 10 percent of the purchase price and guarantees a minimum resale value after three years, Palo Alto-based Tesla said Tuesday. The company "liberally employs" assumptions to arrive at its estimate that monthly payments under the offer are as low as $500, JPMorgan Chase & Co. said Wednesda in a report.

"Our early analysis suggests that while the program is likely incrementally positive, it may perhaps not prove a game- changer in terms of demand," Ryan Brinkman, a New York-based analyst for JPMorgan, wrote in an investor note Wednesday.


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The carmaker assumes prospective customers are "living in the states with the most subsidies and qualifying for business tax deduction," among other assumptions, wrote Brinkman, who has a neutral rating on Tesla. The company's monthly payment offer is "substantially closer to that of a conventional loan" than the "teaser" rate given by the company, he said.

Musk, 41, is counting on the Model S to expand the buyer base for electric cars that are still more expensive than those with conventional gasoline engines. Tesla, which has been at the center of debate over the future of the technology, said this week that higher-than-forecast demand for Model S drove its first quarterly profit in this year's first three months.

Musk had teased the financing plan last week in a post on social-media site Twitter, when he said the company would make a "really exciting" announcement.

The program makes the Model S, which has a base price of $69,900 before the federal tax credit, "affordable to a much broader audience than people think is usually the case," Musk said on a conference call yesterday. High-end versions of the car sell for more than $100,000, including a larger battery pack.

"We do not think the new financing arrangement lived up to the hype -- and related stock move -- heading into the announcement," Ben Schuman, a Pacific Crest Securities analyst, wrote today in a report.

While the financing plan is essentially a five-year loan with a 2.95 percent interest rate, after three years customers have the option to resell their car to Tesla, Musk said Tuesday on the call. The loan is for 63 months, rather than a 66-month term initially posted on Tesla's website, said Shanna Hendriks, a company spokeswoman.

The company will buy the car back at a guaranteed residual price pegged to Daimler's Mercedes-Benz S-Class sedan, Musk said. Daimler is a Tesla stockholder.

Tesla's $500 payment estimate was described as "dubiously calculated" by Mashable.com and "bizarre" by Wired.com.

"I'm really sensitive to the idea that we are somehow misrepresenting the true cost of the car," Musk said in the interview. "I really don't think we are."

The timing of the announcement may "hint at a slowdown in new orders or uptick in cancellations," JPMorgan's Brinkman said. Musk declined to discuss those topics during the conference call.

Kelley Blue Book estimates that the residual on a 2013 Mercedes S550 sedan is 47 percent of its $95,905 list price.

Musk, who has a current estimated net worth of $2.9 billion according to the Bloomberg Billionaires Index, said he is "personally standing behind" the residual value offer "even if Tesla is unable to."

"That's what I mean by putting my money where my mouth is," he said, referring to a comment he made March 25 on Twitter while teasing Tuesday's announcement.