Tesla Reaching Out To Model X Reservation Holders To Get Confirmed Orders

1 year ago by Eric Loveday 41

Tesla Model X Deliveries - Image Via Matt B

Tesla Model X Deliveries – Image Via Matt B

Tesla Model X Deliveries - Image Via Matt B

Tesla Model X Deliveries – Image Via Matt B

Investing site Motley Fool is reporting that Tesla has started to actively reach out to the 35,000-ish Tesla Model X reservation holders in an effort to get those individuals to convert reservations into confirmed orders.

There are a few ways to view this move by Tesla. Some believe actual demand for the Model X may be lower than anticipated and perhaps that’s why Tesla is trying to get orders confirmed.

Meanwhile, other feel that Tesla has finally got Model X production to the point at which it’s able to rather quickly fulfill orders. We believe in the latter viewpoint.

Motley Fool states:

“A member of Tesla Motors Club, the largest online community of Tesla owners and enthusiasts, recently said that they were “cold-called” by Tesla. The representative said that the Tesla currently has open production slots available and that any order confirmed immediately would go into production by the end of the month. The rep even offered to try to arrange a Model X demo unit so the customer could see one in person.”

Officially, Tesla would only state the following (via Jon McNeil, Tesla’s President of Global Sales, Service, and Delivery):

“… both the order rate on S and the conversion rate to orders on X has been very strong.”

Motley Fool adds this bit of interesting info on the monetary side of converting reservations to orders:

“Keep in mind that as soon as a reservation holder confirms their order, the $5,000 deposit that they had put down is no longer refundable. The customer can change the order configuration for another 7 days, subject to a $500 change fee, but they’re effectively committed at that point unless they can afford such an expensive change of heart.”

“Converting reservations to orders is extremely important right now. At the end of last year, Tesla was sitting on $283.4 million in total customer deposits, just waiting to be applied toward purchased vehicles and recognized as revenue. While that sum includes deposits for new and used Model S vehicles, the majority of those deposits are for Model X (around $175 million).”

Source: Motley Fool

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41 responses to "Tesla Reaching Out To Model X Reservation Holders To Get Confirmed Orders"

  1. bro1999 says:

    Q1 ends in 2 weeks….I bet Tesla would like to pad their numbers for the quarterly report by converting reservation holders into actual buyers.

    1. wraithnot says:

      Yep- and I also bet all the people they contacted live close enough to take delivery at the factory. I don’t think Tesla can count the car as delivered if it’s still sitting on a truck or train slowly making its way across the country. You still pay the destination fee if you pick up at the factory so the margins will also be higher for Tesla if they don’t have to pay the transportation costs. I got my Model S earlier than I probably should have because I offered to pick it up at the factory and picked a configuration that I knew they were already building.

      1. Jim_NJ says:

        Yeah, Tesla always has a massive push at the end of the quarter. Which is ironic, because Musk claims he is looking at the long term, not about monthly or quarterly numbers.

        1. Don’t get me started on what that guy says and what he does. He speaks from his other side most of the time.

        2. TomArt says:

          Musk is doing both, and he has to, now that it’s a public company.

      2. Pushmi-Pullyu says:

        wraithnot said:

        “I don’t think Tesla can count the car as delivered if it’s still sitting on a truck or train slowly making its way across the country.”

        That’s correct. Tesla takes payment of cars when they are delivered*, not before. Any cars produced but en-route to the customer are counted as “inventory”.

        *Some States in the USA require payment at the time an order is placed, rather than on delivery, so for those few States, Tesla does take payment before delivery.

        1. Mike I says:

          Even if they take the money, they cannot recognize the revenue for accounting purposes. It’s booked as a liability against cash assets until the customer actually takes delivery.

      3. Nix says:

        wraithnot — Actually, Tesla doesn’t even book a sale until later than that. Tesla doesn’t book the sale until the funding is fully closed.

        For example, if you pay with a check, Tesla doesn’t book the sale until the bank clears the check, closing the transaction.

        If you pay by a bank loan, the sale isn’t booked until the bank loan is actually approved by the underwriter, and the loan is funded.

        Same with a third-party lease, where the lease has to go to underwriting and be funded.

      4. Coiled says:

        I doubt Tesla is trying to boost deliveries at this late date. Two weeks from a confirmed order to delivery is too short to be realistic.

        More likely they are trying to boost order confirmations, which will also be an important number in the quarterly report.

        If they really are short on parts, though, it would be a minor PR disaster to get people to confirm their orders and then leave them waiting for months. So they’re reaching down the list to get confirmations of the orders they can actually meet. The orders being confirmed now will probably be delivered in a normal time frame, say 6-12 weeks.

        That’s my guess anyway.

        1. Mike says:

          The thread referenced in Motley Fool started 10 days ago. Another poster said he had received a similar call and was offered delivery of a 90D by the end of the month if he finalized right then. Otherwise, end of summer.

  2. Jonathan B says:

    I seem to recall a bunch of you hating on me when I said that the launch of the Model 3 was going to negatively impact the order conversation on the Model X. This seems like exactly what is happening. The vast majority of Model X orders are existing Model S customers and before they part with $80K+ on an SUV, they want to see what’s happening with the $35K EV coming next year. I would be doing the same thing. Had Tesla gotten the Model X to market 9-12 months ago, they likely would have had a much easier time converting orders.

    1. Skryll says:

      I don’t consider the model 3 a replacement for my model X order. Just trying to get the financials to work out 🙂 I will also put a reservation in for the model 3 just in case, if anything it could replace the Volkswagen e-Golf.

    2. Pushmi-Pullyu says:

      I doubt a lot of Model X reservation holders are waiting to get a look at the Model ≡ before finalizing their order. I doubt there’s a lot of cross-shopping between high-end CUVs and upscale compact sedans like the BMW 3-series.

      Based on various comments on the Tesla Motors Club forum, I think a lot of Model X reservation holders are waiting until Tesla works out some early production problems and/or they’re waiting on currently unavailable options such as the non-premium second row seats. Or at least, some of them are waiting for those reasons. As always, it’s dangerous to extrapolate to a generality from anecdotal evidence or a very small sample size.

    3. ItsNotAboutTheMoney says:

      They need to get as many Xs delivered during Q1 as possible to
      a) bring in money
      b) show that X production is ramping up.

      It seems that because Tesla is not able to produce all specs right now, and because they can only book CA sales in Q1 at this point, they’re having to go farther along the reservation list to maximize those deliveries.

  3. Pushmi-Pullyu says:

    There is always an effort by Tesla to push out as many deliveries/sales as possible at the end of a quarter, so this is actually nothing new. As I recall, there were also reports at the end of 2014 that Tesla was reaching out to Model S reservation holders. You will notice that the end of first quarter 2016 is rapidly approaching.

    I think what’s going on here is a combination of Tesla trying to maximize its quarterly sales/deliveries (as it always does) along with many configurations of the Model X being unavailable due to backordered parts… parts which haven’t worked properly and had to be redesigned. So I’ll speculate that Tesla is reaching out to those Model X reservation holders, and only those, who have configured their car in a way that it can be produced without any of those backordered parts. Heaven knows that Tesla has enough total Model X reservations that they shouldn’t be needing to reach out to increase the current overall volume of orders!

    1. Three Electrics says:

      One big reason that reservations aren’t converting, in my view, is the lack of test drives. Many would have to buy sight unseen. The “Meet Model X” events were a good first step, but they sold out in minutes, and some of the displayed cars had issues. At those events salespeople had special incentives to get resevation holders to confirm by the end of the night, which may have come across as too much pressure.

  4. Three Electrics says:

    There’s another dynamic at play here, which is an attempt to satisfy as many California orders as possible before the tax situation becomes less favorable in that state.

  5. Three Electrics says:

    This is the original post:

    They just cold-called me at home and said this exactly: “We have open production slots open right now and if I configure immediately, my car will go into production before end of March”.

    I said basically thanks but no thanks. I want to sit in it and take a nice look at my own pace and not at a specialized event with other people buzzing around. Not interested. I want to see it in the showroom under my own timeline. And when I’m ready, I’ll pull the trigger. Not one second before.

    He said, how about if I can get one to you? My mouth hit the ground, I was stunned. Again, I declined. It’s great they want to go the extra mile, but it felt a little desperate. There are obviously a lot of people, way more than we thought, that are not hitting the order button. They don’t cold-call order holders offering production slots if there is a long list of completed orders waiting in the cue.

    1. pjwood1 says:

      Tesla knows better than to run unconfirmed orders down the line. They may have enough confirmed to keep the line busy, but just want to be efficient about batching up paint colors, etc.

      Above said, test drives are a wise idea.

    2. Nix says:

      Technically it isn’t a “cold call” when you have an existing contract with a company….

      That would be considered more of an “inside sale”, because there is already a written reservation contract/agreement in place.

      A cold call would be if they looked up “Three Electrics” in the phone book and called you to see if you wanted to buy a Model X tonight. Or if they took your number from a contest entry you entered at a car show, etc.

      So if this guy already felt that an inside sales contact with a company he already had a deposit agreement with was a “cold call”, and he rejected an offer to accommodate his EXACT demands, it smells to me like he was having cold feet long before the call.

      There were plenty of folks who could afford to put down a deposit on the Model S, who choked when trying to come up with the rest of the money when they came out. Some of them tried to come up with excuses to blame Tesla, so they didn’t have to admit they weren’t as baller and loaded with cash as they pretended to be when they bragged about putting down their deposits.

      He sounds more like one of those folks than somebody with an actual real objection. He seems to be stretching pretty hard for excuses, even when offered extraordinary customer service.

      1. ModernMarvelFan says:

        ” so they didn’t have to admit they weren’t as baller and loaded with cash as they pretended to be when they bragged about putting down their deposits.”

        LOL.

        You mean those people who stretched for a S40 and heard that Tesla cancelled it but can’t afford the S60 instead?

        =)

    3. Pushmi-Pullyu says:

      Okay, so we’ve got what appears to be a contradiction here: On the one hand, Tesla says Model X reservations are coming in faster than they did for the Model S when it was new. On the other hand, this post claims Tesla is reaching out to reservation holders and trying to talk them into converting to actual orders.

      Tesla bashers, of course, are not so subtly suggesting Tesla is lying about their numbers (numbers for production, sales, deliveries, reservations, and “inventory”); that’s a favorite tactic of theirs, and one that they’ve been using for year. A tactic they keep using despite the fact it turns out they’re wrong every single time.

      Another possibility is that the post in question is simply not true, despite the details and apparent sincerity there. However, I prefer to look for a way in which both can be true, which I think in the real world is most often the case — and I’m not talking about just Tesla.

      Wraithnot posted above:

      “I also bet all the people they contacted live close enough to take delivery at the factory.”

      Now that appears to me to be a logical way to resolve the apparent contradiction. It’s getting very close to end of quarter, and only those potential customers within a rather short travel distance from Tesla’s factory could get delivery and make payment in time to be counted on Tesla’s next fiscal statement.

      So thanks to wraithnot for giving us a rational scenario.

  6. Dan J says:

    Tesla customer service sucks!!!
    Have now asked for a deposit refund twice for the model X.
    Tesla promises to reply within 48 hours, but still no answer. Just silence!
    Wonder if this is a way to make me change my mind.

    1. Pushmi-Pullyu says:

      Gosh yes, it’s not like Tesla customer service reps would be busy preparing for a major event right now, is it? [/snark]

    2. Dan J,
      They need your munny till qtr end to bloat the deposit figure. Then, they will apply to get your deposit amount from their line of credit.

  7. R.S. says:

    If I wanted to be cruel, I’d mention a recent leak and an upcoming big event.

  8. PVH says:

    Tesla Model S is a success, model 3 will be a success, model x will be a failure.

    1. Anon says:

      Seems a little early to call anything Tesla has done, a failure. They seem to be a young, agile and hungry company out to prove themselves in the marketplace.

      If you recall, many people predicted the S would suck, and no one would ever pay that much for a slow, boring EV, too. Time has proved over and over this wasn’t at all the case. Same thing for Model X. Its significance hasn’t really sunk in yet.

      1. ModernMarvelFan says:

        The major difference I can see is the fact that I don’t know a single person who thinks Model S isn’t good looking.. They either find it good looking or exceptionally good looking..

        But I know plenty of people who agree with me that Model X is ugly…

        I think that will always haunt Tesla especially considering how “good looking” the Roadster and Model S are…

  9. Pablo says:

    I had the opportunity to speak with a Tesla manager candidly regarding their end of quarter activity and the end of each quarter is their busiest time. They’re simply trying to increase confirmations on their newest product to show strong numbers for the quarter. This is probably aligning with some significant increase in their production capability as well. Their main goal will be to get as many cars built to alleviate the demand and make sure that their Model X numbers look strong to reassure their investors.

  10. acevold says:

    If they were already out of reservation holders, why don’t they make their online Model X configuration tool available to all non-reservations holders. To me that would be a sign that they are near the end of the list

    1. Pushmi-Pullyu says:

      Thanks for raising the issue.

      The main reason why I don’t believe that Tesla is running short of Model X orders, despite the post above, is all the comments and/or complaints over on the Tesla Motors Club forum about Tesla not giving Model X reservation holders access to the configuration screen, which would allow them to finalize their order. It seems pretty clear that Tesla would rather make most reservation holders wait before placing their order, rather than having a bunch of completed orders rapidly piling up in the system.

      In other words, Tesla seems to be allowing people to place orders no faster than they’re actually producing cars. That way, someone who has actually placed an order only has to wait for an average of (estimating here) perhaps six weeks, instead of months or years. My guess is that Tesla thinks this will cut down on the frustration level of potential customers. I hope they’re right!

  11. tedfredrick says:

    My son put down $5K and three days later configured his car. Four days later got a email that said his car was built and will be ready for pickup before the end of March. This story is real!

    1. tedfredrick says:

      By the way we live in CA

      1. Sad, very sad. It takes me longer to get my suits made by a tailor. Bob Lutz over estimated how many pieces of this ugly thing Tesla will sell.

  12. Get Real says:

    Man, the trolls are in full force here. I guess they think they have to slime Tesla now before the Model 3 unveiling wipes out all doubt about Tesla’s bright future.

    1. tedfredrick says:

      Who are you calling a troll??

      1. Get Real says:

        Sorry ted, I was referring to the looney (not the Canadians).

  13. Noel Morin says:

    I’m glad that they are reaching out. Relying on one email invitation is not sufficient. I know of at least one long-time reservation holder who did not get the email and almost gave up.

    She visited the site and found that she was able to place an order. She’s now waiting for a delivery date.

  14. Mayhemm says:

    I’ve been a Model X reservation holder since early 2013 and was finally given access to the design studio for the vehicle last week. However, I will not be confirming my order in the foreseeable future for two reasons:

    1) There are still no Model X in Tesla showrooms or available for test drives. I’m not making a major purchase like this sight-unseen.

    2) There is currently about a 30 percent price premium on the vehicle for the Canadian market (presumably because our dollar is so weak right now). A basic 70D Model X STARTS at $120k! I’m going to give that some time to settle before confirming my order.

    1. TomArt says:

      Understandable. I’m not a reservation holder, but I have yet to see a Model X in any of the nearby showrooms or in the wild. In fact, I have never seen it in person.