Why Tesla Is Losing So Many Model 3 Reservations in 2018
We’ve known Tesla fans are loyal for several years now. However, there are some things no one will put up with — even the die-hard fans of CEO Elon Musk.
Apparently, the list includes Model 3 reservations the company is taking too long to deliver. It won’t come as a surprise that many people got sick of waiting for a car was supposed to reach their driveway in 2017.
However, you may be surprised at just how many people dropped their Model 3 reservations and asked for their money back. Second Measure, a data analytics company, crunched the numbers in June 2018 and discovered 23% of the Model 3 deposits had been returned to customers.
Here’s what’s behind all those unfilled reservations — and why the pace of refunds has been getting higher in recent months.
Refunds outpace deposits by more than 2-to-1.
Since April 2016, reservations for the Model 3 increased steadily every month. Meanwhile, the number of refunds nearly matched those figures, Second Measure data shows.
By August 2017, the refund count sat at 12% of all reservations. Eight months later, it had nearly doubled (to more than 100,000 refunds). That happened because of a surge in cancellations beginning in 2018.
Through the first four months of this year, refunds outnumbered deposits by a rate of two-to-one. (In April, the last month for which there is data, there were almost three times as many refunds.)
Delivery delays vs. tax credits vs. vehicle quality
If you ask me, I canceled my Tesla Model 3 reservation for a combination of reasons:
- Continued delays, with no clear timetable
- Tesla’s shift away from building the $35,000 model
- Possibility of losing access to tax credits
- Poor build quality in early models
The first Model 3s to make it to customers cost $50,000. When Musk announced the dual-motor version, he said that one would cost $78,000. These were a long way from the affordable Model 3 I planned on buying, and I imagine many other customers felt the same way.
Of course, reports of the poor build quality of early models likely scared away people, too. If you lead a busy life and don’t have time for car headaches, this probably isn’t the car for you in 2018.
Then there are those who heard Musk market the Model 3 as the first mass-market electric car from Tesla. Unless those models make it to market by the end of the year, it’s unlikely there will be full tax credits ($7,500) left to claim.
Finally, folks who wanted to be in a new car this year simply couldn’t wait any longer.
Tesla disputed the report — but didn’t back it up with data of its own.
When auto journalists saw the Second Measure report and asked Tesla for confirmation, the automaker denied the large number of canceled Model 3 reservations. However, Tesla’s press shop failed to provide figures backing up its claims.
Instead, it referred a writer from The Drive to the company’s first-quarter shareholder letter. The problem here is obvious: Tesla didn’t count the numbers for April, which had the highest number of cancellations of all.
As of the third week of June, Tesla’s year hadn’t gotten any better. The company announced it was laying off several thousand employees in an effort to cut costs.
Yet there was a bit of good news for anyone still holding onto a Model 3 reservation: Production workers were mostly spared in this round of cuts.
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