Tesla Sees a Growing Number of Refunds for the Model 3
【Summary】According to a new report by Second Measure, a California data analytics firm, as of April 2018, only about 8 percent of U.S. Model 3 depositors have configured their Model 3 for production, while nearly a quarter of these deposits have been refunded.
With same day delivery from Amazon and on-demand transportation services such as Uber, people are getting used to not having waiting too long for goods or services to be delivered. The same holds true when buying a new car. Suppose a car dealer told you you couldn't pick up your new car until next year, you would probably go out and buy something else instead.
This prolonged wait is what Tesla Model 3 reservation holds are experiencing, but the Tesla Model 3 is not your typical car, and many people are willing to wait 18 months or more for the electric sedan. Since Tesla began accepting deposits for the car in March 2016, by Q2 2017, over 430,000 people put down a deposit for one, according to Tesla. Now it seems that some of these people are losing their patience with the electric automaker.
According to a new report by Second Measure, a data analytics firm, as of April 2018, only about 8 percent of U.S. Model 3 depositors have configured their Model 3 for production, while nearly a quarter of these deposits have been refunded. The remaining two-thirds are in limbo, meaning customer are in the Model 3 queue or waiting for a refund to be processed.
Tesla started building the Model 3 in July 2017. However, the Model 3 launch was plagued with production missteps and delays. Those holding out for the base model have just been told they'll need to keep waiting. The base Model 3 starts at $35,000. Refunded deposits are on the rise, and the latest news could push additional reservation holders to request their money back.
The current Model 3 wait time published on the Tesla website
Tesla's reservation policy is relatively lenient. Model 3 deposits are fully refundable up until the customer configures a car by selecting features and paying an additional fee of $2,500. After configuration, vehicles are typically delivered in just a few weeks.
Deposits started off strong—61 percent of all Model 3 reservations occured in the first month. In August 2017, Tesla disclosed the gross and net Model 3 reservations, revealing a refund rate of 12 percent. Second Measure's analysis is close to Tesla's reported figures, also finding that 12 percent of deposits had been refunded at that time.
Although Tesla has not said much about its current rate of refunds. Investors are surely interested. More than a third of Tesla's cash holdings were customer deposits, which includes reservations for the Model S and Model X SUV, in addition to the Model 3, Second Measure reported.
Tesla is presently paying out refunds faster than new Model 3 deposits are coming in and, so far in 2018, it has issued twice as many $1,000 refunds as it has received $1,000 deposits.
Meanwhile, Tesla's new reservations have remained level in recent months. With Model 3 wait times currently advertised as 4-12 months, potential buyers joining the bottom of the queue may be unwilling to purchase the electric car if they find themselves ineligible for major federal EV tax credits up to $7,500, expected to be phased out this year by the Trump administration.
Earlier this month, Elon Musk came under fire for skirting questions during the Tesla Q1 earnings call when asked to disclose how many Model 3 reservations have gone on to be configured for purchase.
The analysis from Second Measure also shows configurations are also on the rise. In April, the number of configurations nearly tripled month-over-month among Model 3 reservation holders. These findings may exclude some customers who used different payment methods for the deposit and configuration.
A rising rate of configurations sounds like a happy ending for Tesla fans, but this story has a twist—the configurations include other Tesla models.
Some current Model 3 reservation holders tired of waiting are purchasing a more expensive Model S or Model X instead. Both models start at more than double the price of a base Model 3. The Model S starts at $74,500, making the upsell to one nearly the equivalent of selling two Model 3's.
Originally hailing from New Jersey, Eric is a automotive & technology reporter covering the high-tech industry here in Silicon Valley. He has over 15 years of automotive experience and a bachelors degree in computer science. These skills, combined with technical writing and news reporting, allows him to fully understand and identify new and innovative technologies in the auto industry and beyond. He has worked at Uber on self-driving cars and as a technical writer, helping people to understand and work with technology.
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