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Tesla Model 3 Deposits Are Already 10X Those of Model X (TSLA)

Tesla Motors Inc (TSLA) Tesla Model 3

Tesla Motors Inc introduced the Model 3 on the March 31st, 2016. Just one week later, the EV maker announced that over 325,000 customers had put down a $1,000 reservation fee for the Model 3. Tesla is aiming to deliver the first Model 3 vehicles in late 2017. The long wait seems to have had virtually no effect on demand for the vehicle. Although the Model 3 was designed and launched with the intention of it being a mass produced car, no one quite expected the car to get over 325,000 reservations within just a week.

Tesla Motors Inc (TSLA)

If you look at the data for previous Tesla cars, you can see the extent of the increase in demand – it’s been considerable.  Consider the Model X, an electric SUV which had a maximum range of around 250 miles. Around 35,000 Model X SUVs were reserved. Initial deliveries of the Model X SUV started in September of last year, with around 2,700 vehicles delivered by this April (less than 10% of the total number of reservations.) Tesla was aiming to produce around 1,000 Model X units per week (it seems that this target has not been achieved yet, as only a relatively small number of Model X vehicles have been delivered.)

35,000 Tesla Model Xs vs 350,000 Model 3s

If you then consider the fact that Tesla has received nearly 10 times the number of reservations for the Model 3 vehicle than they had for the Model X, then it becomes clear that manufacturing this number of vehicles will require the company to vastly increase production capabilities. It should be noted that the delivery of the Model X was not without delays. Ultimately, the first Model X SUVs were delivered in September 2015, nearly a 2-year delay from the initial planned date (early 2014.)

Tesla’s history suggests that delay is to be expected for the Model 3, and many customers will have to wait for a long time before they receive their Model 3. However, the $1,000 reservation fee is refundable, and there is a possibility that some deposit holders may change their mind and ask for refunds, thus reducing pressure on the American electric car manufacturer. Of course, as some deposit holders drop out of line, other new buyers will be placing deposits so it’s likely the “line” will continue to look something like it does currently.

Who gets their Model 3 first?

Adding to the uncertainty of delivery timing is this – Model 3 reservation holders will take delivery based on several factors which can be somewhat confusing.

  1. Current owners of Tesla vehicles get priority delivery over new owners.  If you already own a Model S, Model X or Roadster, you will take delivery sooner.
  2. If you order a more expensive Model 3 with more optional features you will get delivery faster than those who order vehicles with less features.
  3. US deliveries will be made before international deliveries
  4. Right hand drive vehicles will be delivered much later than left hand drive vehicles

Battery miracle required for on-time delivery

Tesla has taken the increased demand seriously, and there is reason to believe that they could meet the planned delivery date. Firstly, the firm is already in the process of building a battery gigafactory in Nevada. CEO of Tesla, Elon Musk, said “In order to produce a half million cars per year, we would basically need to absorb the entire world’s lithium-ion production.” Tesla’s factory will produce more lithium batteries than the rest of the entire world combined.

The building of the gigafactory in Nevada demonstrates Tesla commitment to manufacturing a large number of vehicles, without having to keep reservists waiting for too long. Tesla raised around $325 million from the reservation fees for its Model 3. This money will be used to help Tesla finance its plans to increase production, and meet the growing demand for its eco-friendly vehicles.

Although it seems unlikely thatTesla Motors Inc  can pull this off (especially if you look at their previous performance), it does seem that they are taking steps to ensure that customers aren’t left disappointed, and to ensure that the delivery of the Model 3 isn’t delayed by much.

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Adam Green is an experienced writer and fintech enthusiast. He he worked with LearnBonds.com since 2019 and covers a range of areas including: personal finance, savings, bonds and taxes.

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