Electric-car maker Tesla (NASDAQ:TSLA) started taking reservations for its Model 3 over two years ago on March 31, 2016. Since then, the company has hit numerous challenges with ramping production of its first vehicle intended for the mass market and has finally been making some meaningful progress. It announced at the beginning of the month that it had hit its weekly production target of 5,000 Model 3 vehicles (that target had been delayed several times).

However, there is mounting evidence that demand isn't quite where Tesla had hoped.

Model 3 interior

Image source: Tesla.

Come one, come all

Tesla had been slowly inviting reservation holders to configure and order their Model 3 vehicles in waves, based on factors like ownership status and geographical location. The company invited all reservation holders to order in late June, which would seemingly open a floodgate of new orders. Just yesterday, the company abandoned its reservation system altogether, and anyone in North America is now welcome to configure and order a Model 3 -- no reservation required.

The timing of those events strongly suggests that order conversion rates among Model 3 reservation holders is rather poor, since if a significant proportion of reservation holders were placing orders, Tesla would already have its work cut out to produce and deliver those orders. Tesla still has approximately 420,000 Model 3 reservations.

Responding to criticism about cutting off an analyst during a recent earnings call, CEO Elon Musk had said that it would take Tesla two years to "satisfy existing demand."

But that would require a 100% order conversion rate, and Musk tends to incorrectly equate reservations (with refundable deposits) with sales. Customer deposits represented a third of Tesla's cash position at the end of the first quarter. The answer to RBC Capital Markets analyst Joseph Spak's question on Model 3 order conversion rates is of utmost concern to investors right about now, but only Tesla has that information and Musk refuses to share it.

The evidence is mounting

Last month, Second Measure Research estimated that the order conversion rate was a mere 8%. Meanwhile, Tesla had also reduced its estimated delivery timing. New orders were expected to be delivered within four to six months, down from its prior estimate of 12 to 18 months.

Those were additional data points that implied conversion rates were poor, but Tesla opening up orders to everyone is the clearest sign yet that Model 3 demand is underwhelming, at least at the current starting price points of $49,000 to $64,000. Many could be waiting for the mythical $35,000 base model, which won't be available for another six to nine months -- at which point the U.S. federal tax credit will likely to have already started to phase out, potentially hurting demand further.

Offering the base model too soon could crush Tesla's financials to the point of death. Don't just take my word for it, either: