a report that should provide further grist for the increasingly
vocal Tesla bears, Recodereported
a quarter of reservations for the Tesla Model 3 have been
refunded, citing data compiled by
data firm Second Measure, which analyzed billions of dollars of
anonymous credit- and debit-card purchases.
two notable observations from the report are the i) deposit
refunds soared in recent weeks as Musk announced further Model 3
delays and ii) as of April's end, Tesla has been paying
out refunds faster than new Model 3 deposits have been coming in,
meaning that the deposits the company had collected to date, i.e.
working capital which until recently had served as a source of
cash has turned into a drain on Tesla's declining cash hoard.
years ago Tesla began accepting $1,000 deposits for its new,
lower-priced Model 3 electric car, with the expectation that
customers would likely receive their vehicles in 2018. Hundreds
of thousands of people have reserved one.
perhaps due to extended production delays, many customers have
been asking for their money back.
of the end of April, some
23 percent of all Model 3 deposits in the U.S. had been
refunded, according to new
U.S. data from Second Measure, a company that analyzes billions
of dollars in anonymized credit and debit card purchases.
The Recode report
also provides some context for the company's latest reporting on
its deposit intake. During Q1 2018, Tesla reported customer
deposits of nearly $1 billion. Thanks to the Second Measure data,
we now know that these deposits are mostly for Tesla's other
products, like its planned semi-truck and Tesla roadster. And if
the past is any guide, these products will likely also face delays
- meaning that deposit refunds could amplify the pain from Tesla's
cash burn, which has also been exacerbated
by assembly line problems that have forced factory closures.
While Tesla told Recode that Second Measure's numbers don't
accurately reflect the company's internal metrics, reporter Rani
Molla pointed out that, even if the ominous figures are correct,
there's still a silver lining here: Even if they don't bode well
for cash flows, the refunds are at least taking some pressure off
of Tesla after it delivered only 8,180 Model 3s last quarter.
That's compared with more than 450,000 reservations that remain
unfulfilled. It's also possible that customers could renew their
orders once Musk has resolved the production difficulties.
Tesla's denial, Recode pointed out that Second Measure's data
appeared to be accurate as of last August, when 63,000 orders were
cancelled, it said. That
represents a cancellation rate of 12%. Roughly 60% of total
Model 3 deposits were made back in April 2016. Second
Measure added that roughly 18% of cancellations were made in
April, the largest number of any month so far. Those cancellations
followed Musk's revelation that production would be delayed
between six to nine months amid ongoing problems at the company's
Fremont, Calif. factory.
data also suggest that some customers might instead have decided
to purchase other more expensive Tesla models like the Model S or
also when the largest share of “configuration fees” — a
non-refundable deposit customers put down to customize their
vehicle shortly before they receive it — were spent, meaning
with production ramping up more customers had to decide whether
they actually wanted to pay $35,000 (at the very minimum) for
their Teslas or ask for refunds. As more Tesla Model 3s become
available, we’ll get a better glimpse of what share of
reservations turn into purchases.
of April 2018, 8 percent of Model 3 customers have paid a $2,500
configuration fee. We’d note that paying a configuration fee
could also mean that the customer opted for a more expensive
Tesla model, like the S or X. Indeed, Musk has said that Tesla
is doing its best to “anti-sell” the Model 3 so that people buy
more expensive models.
investor who has been following Tesla's epic production delays
since late last year, when the Wall Street Journal reported that
Tesla had resorted to assembling some Model 3s by hand due to
difficulties with its highly automated production line, should
immediately recognize that this doesn't bode well for Musk, who
last month sent Tesla stock sliding after angrily rebutting
probing questions from an analyst about the company's notorious
Musk famously declared during that outburst, Tesla has "no
interest in satisfying the desires of day traders."
at the very least, Musk is demonstrating a commitment to giving
his customers what they want most: their money back. In other
words, if there is a "deposit" run, it hasn't crippled the