On March 31st 2016, Tesla began taking fully-refundable deposits (reservations) for the to-be entry level vehicle, the Model 3. The cost for one of these reservations was $1,000. With that payment, you get a spot in the Model 3 production queue.
Within the first week, Tesla took over 325,000 reservations which represented $325 million+ in new money for Tesla to invest into Model 3 production along with the doorway for up to $14 billion in potential sales. My call is that it'll end up being much less.
Here's where my view comes into play.
My bet is that at least 33% (one-third) of those reservations will be pulled out. The $1,000 payment is not a deposit, it's a 'reservation'. The $1,000 covers the cost of a place within the ordering queue, not a part of the value of the car (unless you do order it | see parts 1 & 3 of the Reservation Agreement). It's purely a marketing concept from Musk. It's a smart idea from a smart guy, I'm not alleging any wrongdoing from him- just that the reservation figure should be taken as a tiny grain of salt in the grand scheme of things. A lot of people will likely go through with it and buy the car, but just as many are impulsive and just want to feel they're part of a movement (the "week that electric vehicles went mainstream").
Many people see Tesla as a tech company. People wait in lines to pay for hot releases from tech companies. Whenever the new iPhone is coming out, people line up around the block of many Apple Stores waiting to be one of the first owners of the new device. Many do it not out of need, but to be the first member of their social circles to have the hottest new device. People are excited about it for a bit, and it eventually dies off, but 'bragging rights' chasers and/or tech-lovers love the idea of being that person.
It's hard to do the same with a car. Outside the realm of highly-exclusive, limited-edition cars, people tend not to rush into waiting to be the first to pull the trigger on a new car. It is simply too expensive with not enough reward to justify purging a great deal of one's financial capability for temporary bragging rights. So, Tesla, which many people see as a tech company, came up with a brilliant marketing idea: Offer the car for a phone-like price and start taking orders just like a phone release. It gripped the attention of tech-lovers: They could pay a phone-like price to earn some instant bragging rights without any risk of losing that money. As stated, many will pull through, but I believe a big chunk have done it just for mostly impulsive, social reasons.
In short, those who are trying to ride this like an iPhone launch get to satisfy their impulsivity for no cost at all.
My suspicion is that a huge chunk of the current reservation figures will be pulled out and the number will end up being less than 300,000, and likely much closer to the sub-200,000 mark. If Tesla can't pull through on upping its maintenance capabilities then it could be drastically lower.
It's still a big number, but don't buy TSLA with the assumption that $14B in Model 3 sales is promised revenue.
Another way to think about this is as an alternative IPO.
Get this:
Elon Musk actually convinced a bunch of folks that they could take a share (reservation queue spot) for $1,000 instead of actually buying shares in TSLA stock. He didn't have to sell anything and he still raised several hundred million dollars. Those that end up pulling out their $1k may end up with a case of "reserver's remorse" when they realize they could've bought stock and ridden this enormous bubble/wave of TSLA's value instead. Nobody who ordered a Model 3 with the intention of getting a 'sexy' EV at an affordable price will be getting an affordable price. Tesla has stated it will first deliver to those orderers that configured their car to the priciest specification. By the time affordable Model 3s hit the market, the federal tax incentive will have expired.
Reservation holders also are not people who need a car soon, otherwise they wouldn't have placed said reservation when their car won't be delivered until 2018-19. So in my opinion, this was a highly misguided placement of said $1,000. It's not much, but given its degree of pointlessness, it may as well be much higher. If one bought $1,000 (or more) of TSLA on March 31, 2016, the price would have been $229.77 per share. It has since peaked at more than $380 per share and is now (Jul 21, '17) trading at $328 per share. If you bought $1,000 in stock, it would've gotten you just four shares. But those same four shares would now be worth almost 33% more, a much better return than a slightly quicker delivery of a Model 3 (if they even stay on schedule, see track record here).
Tl;Dr: If investing in TSLA, disregard the current count for Model 3 reservations. I believe many (up to 33%) of the original reservation holders will pull out, only having done so in the first place out of impulsivity and a craving for bragging rights (iPhone-like tech hype).
For those that did place their reservations with the intention of ordering a Model 3, I believe that was a misguided allocation of dollars and you would've been better off with some patience and/or a purchase of TSLA shares.
Additionally, if you view current Model S values on the used market, many are listed at or around $40,000. The value will easily be undercut by the Model 3 because it supposedly will come standard with 'Auto Pilot', whereas many Model S in that price range do not. This, to me, will push the value of those Model S values near or below the $30k threshold and will in turn be a much better value.
Obligatory disclaimer:
I have no stake in TSLA and am only giving my opinion of the situation(s) at hand.
Thanks for reading.
Submitted July 21, 2017 at 06:54PM by Tnargkiller http://ift.tt/2eCNwiU
