Tesla Works The System To Give $7,500 Federal Credit Christmas Present To Future Model S Owners…And Maybe Themselves

5 years ago by Jay Cole 23

Would-be Tesla Model S owners not expecting their cars until January or February (and their credit until 2014) got a little good news from Tesla in their email in-boxes earlier this month when Tesla send out the following note:

Would You Like Your Tesla Model S A Month Or Two Early? How About Your $7,500 Federal Credit A Year Early?

Essentially, what the email is saying is that you can jump the line, or at the very least hurry the process to get your new Model S early…or at least get your paperwork done, netting the buyer the $7,500 federal credit in 2012.  Even without having the car in your driveway.

Email Offer A Result Of Slow Ramp Up Of Production?

As far as we can tell, a huge portion of the reservists in the US who are waiting on a 85 kWh Model S, with air suspension (like what is in production now) have received this email, and if they click “yes,” a Tesla representative will get in touch with them to walk them through this process.

What this email is not:

A guarantee by Tesla that you are going to get you Model S in December.  Quite likely, if you were going to get your car sometime in January, you are still going to get it in January.

Tesla makes no such assurance by responding to this email you will receive your car in 2012; but they do assure you that all the paperwork will be completed by year end and “sold” to you before January 1st, 2013, provided they can push the completed car outside into their factory’s parking lot before then.  The car is temporarily registered in California to mark the date, and then shipped direct to the customer at some later point.

By doing this, the car is sold within the calendar year, allowing owners to receive the $7,500 credit regardless of when they physically take possession.  Reportedly, customers as far away as Hawaii, are being offered this deal on cars not yet completed in California, and many have been told still not to expect the cars in 2012.

If you are a really big fan of Tesla, or really only care about electric cars themselves and not the financial maturation going on behind the scenes, you should probably stop reading now.

Are you gone?

You are still here?  Fine.

In our opinion, this bonus to customers (which is being accepted by numerous Model S reservists) is also a bigger bonus to the company themselves, and could be perceived as an attempt at achieving Q4/2012 delivery projections that have already been scaled back a few times, and to avoid any potential upset of the company’s near $4 billion market capitilzation.

While bringing the company to market Tesla had suggest they would deliver 5,000 Model S sedans by year’s end and another 20,000 in 2013 (5,000/quarter), then in a SEC filing it was reduced to a range of about 2,700-3,225.

“We now anticipate that we will deliver between 200 and 225 Model S vehicles to customers in the third quarter and between 2,500 and 3,000 Model S vehicles in the fourth quarter. As such, we believe we will be approximately four to five weeks behind our previously announced Model S delivery goals as of the end of 2012” – Sept 24th, 2012

“Given Tesla’s rate of progress over the past few months, we are confident of being able to deliver 2,500 to 3,000 Model S vehicles in Q4 and over 20,000 in 2013.” – November 5th, 2012

What is happening here this month (and with this offer), at least to this reporter, is Tesla is materially changing the way they do business to pull forward as many sales that would have otherwise happened in January into December to obscure their inability to ramp production and deliver the cars for their fiscal year end as promised.  Theoretically, even 2-3 weeks production pulled forward into 2012 could net Tesla close to an additional 1,000 sales.

Tesla’s current valuation is largely based on their ability to not only sell the Model S, but to be able to produce them in such a way (and in such a volume) that affords them profitability.

This new action of drawing 2013 sales into 2012, coupled with an announcement two weeks ago pushing deliveries of the first 60 kWh Model S deliveries out into January/early February, and the 40 kWh (along with all trim levels not equipped air suspension) into March/early April of 2013, would make us extremely nervous if we were shareholders awaiting on what Q1 2013 results were going to be, with a current market expectation of 5,000 cars to be delivered in those first three months of next year.

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23 responses to "Tesla Works The System To Give $7,500 Federal Credit Christmas Present To Future Model S Owners…And Maybe Themselves"

  1. vdiv says:

    Huh?

    Tesla can ether produce and deliver as many vehicles as possible in 2012 and meet the projections or not. Not sure how rearranging the wait list changes that. They do have a wait list, right?

    What about the rumored increase in the tax credit to $10,000 next year? If Tesla manages to deliver the car this year aren’t people forfeiting their chance of taking advantage of the higher credit?

    At the end of the day I don’t think $7,500 this year or next, or the possibility of an extra $2,500 credit makes or breaks the deal for people who can afford a $100,000 car.

  2. James says:

    Any way we look at it – Tesla is learning how to mass produce
    automobiles. Detroit has been doing this for 100 years –
    yet still with mixed results in quality. Anyone successful
    enough to afford a Model S surely understands they are
    buying a car from a new company that is getting up to speed.

    Quality is job number one ( ugh, such an overused statement! –
    Sorry! LoL ) at this point and any which way Tesla decides
    to stave off bad numbers at this point is OK by me. This
    is a clever way to insure many S buyers an immediate
    tax break while smoothing out the transition from hand-made
    Roadster company to full-blown luxury car competitor.
    At any rate, it’s a new process for Tesla, and shooting
    cars out the door at the expense of quality ( Hello, Fisker? )
    is DEFINATELY not the right approach. Elon knows
    at this price category, customers will not accept
    unique-quirkey questionable quality cars over
    established brands like BMW, Mercedes, Audi and Lexus.

    We here on this site may think the S’s innate
    advantages over infernal combustion make a buyer
    just happy to have one – but the realities for Tesla’s
    long term success bank on it’s reputation as
    reliable and glitch-free.

  3. James says:

    Hey Jay, in lieu of my redundant sentences above,
    is there any chance we’ll get an edit button any
    time soon?

  4. James says:

    Anyone who has ever had a house built or remodeled
    has come face-to-face with delays and overruns.
    Everyone complains and tells the stories of how
    painful it was to wait for the work to be completed, but
    it’s usually only weeks or months once they’ve moved
    in before those become faded memories.

    What is a Tesla buyer getting for his/her wait? Basically
    an instant classic ( See other InsideEvs headlines ).
    Waiting for your Model S may not be joyful, but in
    return for your patience you’ll be rewarded with a car
    that just isn’t exclusive for it’s rarity, but for a
    truly is groundbreaking, rather than just an evolutionary
    step along the motoring way.

    Silent, joltingly fast and oozing with tech – this is a
    car your neighbors and co-workers do not have.
    All this wrapped up in a sexy sexy smooth design
    that’s low and distinctive while having cues from
    the sleekest sedans and coupes from ages past.

    Really, once your car is in the garage – the pain
    of the wait will subside rather quickly – 0-60 in
    four seconds quickly, I presume.

  5. Kelly Olsen says:

    If the sale is made, money is transferred and the DMV paperwork is done with title, etc, it makes no legal difference if the car is sitting in the Tesla parking lot or the owner’s garage. It is their car and the owner is entitled to whatever they re entitled to.

    Maybe you are suggesting that they are making the sale without the cars being assembled. That’s an interesting one but I know of lots of things that people pay up front for that has to be put together and delivered after payment.

    Of all the things that are going on in the business world involving fraud or whatever you are suggesting, I think there are MUCH bigger things out there to dissect.

  6. Josh says:

    I agree that Tesla is prioritizing owners that are willing to pay for their car in 2012, to help the Q4 numbers. I think they are running into bottlenecks on delivery cars at their 400 per week production rate. Telsa is learning that building cars JIT and delivering cars direct to customers is not as easy as it looks on paper.

    i.e. “My lease isn’t up, I don’t want it yet.”, “I will be on vacation, how about next month?”, “Don’t need the tax credit this year, how about 2013 payment.”, etc.

    I think they will get it figured out soon enough. Getting down to a shorter lead time will help things also. Not selling my TSLA yet 🙂

    The only risk I would see with future production rate would be if engineering on 40 kWh pack and the standard suspension fell behind schedule. The 60 kWh pack has already passed through EPA, so it should be starting production now.

  7. GeorgeS says:

    Hi Jay,

    Could you PLEASE stop using that picture of Elon. It really is very unattractive…..

    PS I don’t really there is anything wrong w/ what Tesla is doing. And Ca probably likes it as all vehicles get registered first in Ca even if they are going out of state. That really gripes me more.

    1. Jay Cole says:

      Okay I’ll retire that one…but just for you George, (=

      There is nothing technically “wrong” with what Tesla is doing, or not legal as Kelly suggests earlier…I in no way meant to infer that, if it came across that way. I am just suggesting Tesla looks to be getting creative here to meet (lowered) 2012 benchmarks. And that is a slippery slope.

      Perspective is an odd thing, and you usually don’t get it until after the fact. If someone where to buy Tesla shares based on potentially inflated Q4 results, and then the company’s next quarter does indeed come up short because of this action today, causing that position to become strained, they probably would/will have a very specific reaction.

      When Tesla said they would deliver 2,500 to 3,000 cars this quarter, it was assumed that was meant in the traditional way they had been doing business…not that Tesla would potentionally do the transaction weeks ahead of the physical delivery and then get around to delivering the car at their leisure in 2013.

      1. evnow says:

        Well, they can potentially repeat this in March – may be add a bit of extra for those willing to “buy” quickly.

        1. Jay Cole says:

          On a personal note, if I could wish for anyone to be ultimately be successful selling EVs, it would be Tesla.

          Publishing stories like this was not something we relished when conceiving of a site dedicated to only “getting in deep” on electric vehicles.

          I actually have been sitting on this story for over a week going over if we really wanted to go to press knowing 99% of readers (or Tesla) probably wouldn’t enjoy it all that much. In the end, we felt it was relevant both to the segment, and to those interested in Tesla as a company, and would be a disservice to readers for us to ignore it.

          1. Josh says:

            Jay,

            I am glad you did the piece. It shows how tough the car business (and not using dealers) really is. I think everyone here is rooting for Tesla, but have a real view of their challenges is interesting.

            I think we have learned so far, they adapt well and find solutions. Through the year, I think we will focusing less on ramp up and more on sustained demand.

  8. Bonaire says:

    I thought everyone on the list wanted delivery ASAP. No?

    The pains of reservation-based luxury car delivery. Primary pain? The Customers 🙂

    1. Bonaire says:

      Reading the story – it sounds like a lot of people who were set for December delivery are not taking delivery. That may be scary for Tesla in terms of setting up for the sales numbers they promise for next year. It doesn’t sound like they are going to put the sale into December and deliver in January.

      1. Jay Cole says:

        If you click “yes, I want a December delivery,” Tesla reps are contacting responders to complete the transaction before year’s end and before the arrival of the car. Sales are being completed now for physical arrival dates into 2013.

        1. Josh says:

          I lurk around on the Tesla forums, and it seems like if you say yes and you are on the West Coast, you will still get your car this year (pretty much guaranteed if you do factory pickup). Even on the East Coast, your car will be complete at the factory or in transit.

          This is still a good deal for customers who want to get a 2012 tax credit (why is it not an instant rebate yet!?!). Also some states like Texas, Mass, etc. this is the only legal way to do the transaction (Thanks NADA).

  9. georgeLeaf says:

    are you guys running out of stuff to write about so you have to pick on the one left standing? seriously, this muckraking is in poor taste IMHO, it’s so Faux News! Tesla is pulling rabbits out of the hats right and left and actually ramping up production dramatically more or less as planned, dazzling customers and even some of their worst critics with this award winning car, and all you guys can come up with is FUD about their year end strategy. They are setting a new standard for the car and about the only company left with an EV product that is really turning heads and getting rave reviews. If they can bump the numbers a bit here and there to help keep the momentum going and help out their customers at the same time, then good for them!!

    1. Open-Mind says:

      Darn right. Jay, we expect you to always be an EV cheerleader that either spins bad news or just ignores it completely. You should be more like MSNBC covering President Obama. In the spirit of Christmas, Tesla is just being giving like Santa. Yeah, that’s the ticket. 😉

  10. Dave R says:

    IMO I think Tesla is doing this primarily for the customers here. There are probably a good number of savvy customers who have already adjusted their federal tax withholdings expecting to take delivery in 2012 based on Tesla’s earlier sales projections.

    Of course, now that many of those deliveries have been pushed out to 2013, that leaves many people either crossing their fingers that they get lucky and Tesla gets them the car before 2013, or they have to cut the feds an extra $7500 as soon as possible to avoid any underpayment penalties that the tax-man may leverage for underpaying their taxes by a significant amount.

    So by pre-selling cars to people who are very close to delivery this firms up the tax situation for those customers and gives Tesla some extra “sales” for Q4.

    Win-win!

  11. MailboxJunk says:

    This isn’t any more “deceptive” or “questionable” as other companies having fire sales at the end of each quarter to meet their guidance numbers. Dell would practically take a loss on their each PC sold at the end of the quarter if they were really behind on the top line.

  12. kcveins says:

    Help me out here – how did they re-lower the guidance?

    …..While bringing the company to market Tesla had suggest they would deliver 5,000 Model S sedans by year’s end and another 20,000 in 2013 (5,000/quarter), then in a SEC filing it was reduced to a range of about 2,700-3,225. “We now anticipate that we will deliver between 200 and 225 Model S vehicles to customers in the third quarter and between 2,500 and 3,000 Model S vehicles in the fourth quarter. As such, we believe we will be approximately four to five weeks behind our previously announced Model S delivery goals as of the end of 2012″ – Sept 24th, 2012………

    This is correct – they lowered the guidance from 5000 for the year to 2700-3225 for the YEAR….Q3 + Q4

    ………..Then, 11 days later, after their Q3 results it was lowered again
    “Given Tesla’s rate of progress over the past few months, we are confident of being able to deliver 2,500 to 3,000 Model S vehicles in Q4 and over 20,000 in 2013.” – November 5th, 2012………..

    This is NOT lowering their numbers – they are quoting the Q4 numbers (they delivered approximately 225 cars in Q3) .

    I would read this as saying that they are still guiding the same way as they were – articles like this makes one think that someone is deliberately trying to beat down on a company.

    1. Jay Cole says:

      You are correct, that reads improperly.

      Tesla’s has just lowered the 5K estimate to 2,700 to 3,225 for 2012 in one notice, then re-iterated it again seperately later. They did not reduce numbers twice to get to 2,700 to 3,225 Our apologies on the error, we have updated/corrected the article to reflect. Thank you for pointing that out to us.

      I can assure you we in no way are looking to “beat down the company,” quite the contracty, we hope it suceeds. The premise that Q4 numbers are going to be artificially inflated because of this action taken by Tesla are not materially effected by the number of times Tesla did or did not reduce estimates to get to the 2,700-3,225 level.

  13. Koz says:

    I thought Tesla’s projection for 2013 used to be 15k, then they upped it to 20k. They have built 3000+. Vins in the 3000’s are in production and 2900’s in delivery. Tesla’s transaction model means payment typically on delivery. Many people are deferring delivery because of holiday conflicts. Those “2012” deliveries would count as 2013. Pretty savvy of them to try to find a way to balance that out.

    Jay, you clearly have a strong desire for EV’s to succeed but you also have your perceptions. One of those is a fairly consistent negative slant towards Tesla and GM in your comments over the years. Sometimes it is calling a spade a spade and sometimes it is calling an unknown card a spade. This feels like one of the unknown card situations.

    1. Jay Cole says:

      Hey Koz,

      I know it seems that way, and it bums me out to read myself sometimes as well, lol.

      My ‘negative slant’ with GM on the Volt (I was also on them in ’07-08 about how they had to go bankrupt, and that they were fudging their quarterly numbers/outlooks) was with their sales projections.

      Before Volt production started, while GM was saying 60k in 2012 and up to 120/250 k at some point (as per Bob Lutz), I was pounding the table at 25K for 2012 if they sold the car at $40k…and thats about where it ended up.

      My piece at GM-Volt on Feb 24th, 2010:
      http://gm-volt.com/2010/02/24/op-ed-forecasting-future-demand-for-the-volt/

      My other issue before that, was GM was showing/touting the concept and I was pointing out that what they were producing (Delta II based conversion) was nothing like what they were displaying (covered tarps over what we know today)…and I think that fact (for better or worse on the end product) was flushed out fairly well over time.

      (To be fair, I guess I took umbrance to GM when they rolled out that 230 MPGe thing as well)

      So, I was a downer, but I think history beared out that I was mostly reporting the situation accurately.

      Here with Tesla, I find myself with some similar issues…not with the product they are putting into production (it is great) but what they are selling us on production and ongoing demend levels.

      Tesla has issued VINs up into the 3000s, but those are not reflective of deliveries to customers. They are not built and delivered sequentially, some customers are just taking deliveries of car with VINs in the 1000s, while some higer number VINs still have no delivery dates and for sure will not be delivered in 2012.

      I believe the highest VIN from Tesla is low 3,100s (Dec 27) and that (I think) demonstrates my point that the 2,700-3,225 estimate to deliver cars is in jeopardy. They certainly can’t hit the high end. This ‘pulling forward’ of cars not to be delivered in 2013, but recorded for 2012 calls into question whether or not they are even able to hit the low end of revised guidence. Without pulling forward orders in this manner, I think they have no shot.

      …imo, (=