Please ensure Javascript is enabled for purposes of website accessibility

Tesla's Model 3 Reservation Count Likely Hasn't Changed Much

By Evan Niu, CFA - Mar 14, 2017 at 7:21PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

That's not necessarily a bad thing.

It's now been nearly a year since Tesla (TSLA 4.53%) provided its one and only disclosure on how many Model 3 reservations it has collected. When Tesla conducted its secondary offering last year, it confirmed that in the month and a half following the Model 3 unveiling it had garnered 373,000 reservations as of May 15, 2016. Since then, numerous analysts have asked for updates on this figure, which management has declined to answer for fear that any updates would be needlessly overscrutinized.

There are only clues, but it looks like Tesla's total Model 3 reservation tally hasn't changed much over the past year.

Model 3 in a garage

Image source: Tesla.

Normal fluctuations

The balance sheet line item to look at is customer deposits. This figure naturally fluctuates as customers place deposits for new vehicles, which are subsequently released when the vehicle is delivered. Throughout 2014 and 2015, these fluctuations were often in the $20 million to $30 million range.

At $1,000 per reservation, the aforementioned 373,000 figure from last year represents $373 million worth of deposits. Due to the timing of the unveiling last year, which occurred on the very last day of Q1 2016, not all deposits taken on March 31 were captured in the corresponding balance sheet data due to credit card and bank processing times. In other words, that $373 million increase in deposits took place over two quarters in terms of balance sheet dates.

Chart showing customer deposits over time

Data source: SEC filings. Chart by author.

The difference between deposits on Dec. 31, 2015, and June 30, 2016, was $396.5 million, or that same $373 million and then some within range of standard fluctuations. But since then, customer deposits have not changed meaningfully beyond what would be considered standard fluctuations. More specifically, CFO Jason Wheeler attributed last quarter's sequential decline of $27 million to a large number of Model X Signature Series that were delivered, which originally had higher deposits.

This suggests that Tesla's total Model 3 reservation tally has not changed much.

That's not necessarily a bad thing

To be clear, this is not necessarily a bad thing. Wheeler notes that Tesla does not "want to make the line longer at this point," and CEO Elon Musk said the company "anti-sells" the Model 3 for this reason. So the company is not actively trying to grow the Model 3 line, and the first year's worth of production is already effectively allocated to current reservation holders; Tesla's site says new reservations won't deliver until "mid 2018 or later."

The initial spike in reservations was certainly driven by pent-up demand from enthusiast consumers that have long wanted a Tesla but have been waiting for a more affordable option. For consumers that are considering a wider range of brands for their next vehicle purchase, there's little to no point in placing a $1,000 deposit for a vehicle that won't be delivered for another year or longer. It's easier to sit on the sidelines and see how things play out, and see if Tesla can execute better in areas like quality control and customer support.

A longer line is also meaningless to Tesla if it's already backlogged by over a year, and its main focus is ramping production and addressing any early issues that arise (which is why the first deliveries will go to employees in the Bay Area, close to the Fremont factory). There would very likely be a tendency among critics to spin a relatively unchanged reservation count as a negative storyline, which may be what management is trying to avoid by not giving updates.

What matters most for the time being is just getting the $35,000 electric vehicle out there.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Tesla, Inc. Stock Quote
Tesla, Inc.
$737.12 (4.53%) $31.91

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.