LearnBonds.com

Are Tesla Motors Inc (TSLA)’s Claims of 400,000 Model 3 Reservations Legit?

Tesla Motors Inc (TSLA) Store in Sunnyvale, CA

Tesla Motors Inc (NASDAQ:TSLA) claims they have received somewhere in the neighborhood of 400,000 reservations for thier affordable electric car – the Model 3. Many of these reservations – as would be expected – have come from tech minded, environmentally conscious drivers, but some (as recently confirmed) have come from skeptics who doubt the legitimacy of the 400,000 pre-orders and who question the Model 3 reservation process. The number is so big and it grew so fast that it’s causing some to examine the reservation process looking for anything that could be inflating the number.

Tesla Motors Inc (TSLA) Store in Sunnyvale, CA
Tesla Store in Sunnyvale, California. Photo: Learnbonds.com

Tesla limits individuals to a max of 2 Model X Deposits?

Elon Musk recently made comments indicating that the Model 3 is not the only “low priced” EV the company will be building. For now though, the Model 3 – priced at an sort of affordable $35,000 – is thought to be Tesla’s mass-market car. With the sedan due to begin delivery in late 2017 or early 2018, Tesla Motors Inc (NASDAQ:TSLA) is hoping to secure its position as the world leader in EV manufacturing and sales. The Model 3 is on its way to becoming a huge hit as more than 400,000 reservations have already been accepted for the EV. The Model 3 will outsell other popular cars like Toyota Camry and Honda Accord if all of those reservations actually convert into sales.

According to Tesla, there is a two-car reservation limit per person on the Model 3. “Over 325k cars or ~$14B in preorders in first week. Only 5% ordered max of two, suggesting low levels of speculation,” CEO Elon Musk tweeted earlier this month.

However, some skeptics are of the opinion that this large number of reservations could be misleading. And this is the reason why Anton Wahlman – a former equity analyst now a private investor in Silicon Valley – ordered 20 Model 3 sedans through the online order form not because he is a great fan of EV’s, but to verify Tesla’s claim.

Despite Musk’s claim that individuals could order a maximum of two Model 3s, Wahlman found that he was able to keep ordering vehicles on the Tesla’s website as long as he used a credit card to make a deposit of $1000 each time. As the reservation deposits are refundable, you can place an order and then cancel.

To see a list of high yielding CDs go here.

Just to test Wahlman’s theory, Yahoo Finance did the same thing and ordered four Model 3s in about two minutes – two orders of two each – using the same credit card. They received a confirmation screen with a button, which sent them back to the order form.

Is Tesla deliberately inflating reservation numbers?

Wahlman’s research proves that anybody can order more than 2 Model 3s. So, it is possible that to inflate the pre-order numbers, some Tesla fanatics are ordering multiple Model 3 that they do not plan to ‘buy’? Or, maybe Tesla has changed the reservation process to boost its image in front of investors.

Tesla’s stock has increased by 8% since it introduced the Model 3 on March 31. This is a sign that the market is quite pleased with the the whole idea of the  Model 3. If the electric car maker is deliberately inflating the number, it would be revealed down the road in the form of higher than expected cancellations or actual sales being lower than the number of deposits.

Wahlman doesn’t think Tesla is trying to trick anyone, but he does want to see true and legit proof of the numbers. In a blog post, he wrote, there is good evidence supporting about 115,000 orders, “But after those 115,000, it gets iffy,” adding “There’s just no evidence as to how ‘real’ the rest of the 400,000 number is.”

When asked about why he was looking into Tesla Motors Inc (NASDAQ:TSLA)’s ordering process in the first place, he said, “I did it to find out whether the company was truthful in saying (or at least strongly implying) that there was a ‘max of two.’”

Wahlman might not take delivery of those 20 Model 3s and will perhaps cancel the order. But, the important question is – how many other customers are doing the same?

On Friday, Tesla shares closed down 2.81% at $240.76. Year to date, the stock is up over 1%.

All trading carries risk. Views expressed are those of the writers only. Past performance is no guarantee of future results. The opinions expressed in this Site do not constitute investment advice and independent financial advice should be sought where appropriate. This website is free for you to use but we may receive commission from the companies we feature on this site.
Avatar

Aman Jain

Aman is MBA (Finance) with an experience on both marketing and Finance side. He has work as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, playing PC games and cricket.

2 Comments

  1. I really doubt there are people willing to plunk 20K down and waste their time and effort to bolster Tesla’s numbers. Next you will be claiming that the lines around the blocks at most stores prior to the unveiling was also a setup by Tesla to look good. Love the conspiracy theories, doom and gloom
  2. What does it make any difference? 10 people ordering 1 each or one orders 10. I have ordered 3 and am hoping I will get all. But probably at the time of delivery, I will be caught and told that the limit is 2 for now, so the 3rd or more have to wait for their turn probably at the end of the line… which may be long.

Comments are closed.

HTML Snippets Powered By : XYZScripts.com