Blog 63,000 Canceled Model 3s is Like a Shorter Line at the Hamburger Stand

Tesla CEO Elon Musk compared the electric car company to a busy hamburger restaurant on Wednesday’s quarterly earnings call.

When explaining his thinking around the cancelation of 63,000 Model 3 preorders, Musk used the opportunity to underscore the difficulties ahead in scaling production.

“Those cancellations occurred over the course of more than a year,” Musk said. “I think [these numbers] are inconsequential. With a small amount of effort we can easily drive the Model 3 reservation number to something much higher but there’s no point. It’s like if you’re a restaurant and you’re serving hamburgers and there’s like an hour and a half wait for hamburgers, do you really want to encourage more people to order more hamburgers?”

The company had a total of 518,000 preorders but 455,000 net orders at last count. The company hopes to a hit a run rate of 5,000 vehicles per week by the end of 2017 and 10,000 vehicles per week in 2018. So, if you order a Model 3 today it likely won’t be delivered until the end of 2018.

You can access a webcast of the earnings call here.

 

[Mike K]

63,000 cancelled pre-orders is way less than I would have expected. If anything I thought they were hiding the number because they had lost a bunch of pre-orders but that's a bit over 10% net. Not huge by any stretch.

 

[shrspeedblade]

What I really wonder/wish to know is were those cancellations an even spread, or did they come more out of March 31 linestanders or people who reserved online later? Obviously from the board alone one can deduce that some of those cancellations were people opting for a Model S, new or CPO, instead. My wild hunch is they came out of the later reservations more but we will see.

Regardless, the line in front of you wherever you are (unless you just made a reservation) has gotten shorter. Just how much so time will tell.

 

[JonathanD]

Just wait until people see these things in the wild, get to ride in their friend's, etc. This is a vehicle segment where things traditionally change very incrementally. Each model refresh is a little bit better than the last. Now comes a Tesla cannon ball into the middle of the swimming pool. It's something completely different. It's going to be massively disruptive and I think demand is going to outstrip supply for years to come.

 

[ModelNforNerd]

Between cancellations, the previously (until early Saturday morning) unheard-of "First Production" option, and (what I suspect) will be the decision of many to defer until Dual Motors becomes available.....

I'm closer to the front of the line than I assumed I was a week ago at this time.

So much so, I've already called my electrician.

 

[Saghost]

Just wait until people see these things in the wild, get to ride in their friend's, etc. This is a vehicle segment where things traditionally change very incrementally. Each model refresh is a little bit better than the last. Now comes a Tesla cannon ball into the middle of the swimming pool. It's something completely different. It's going to be massively disruptive and I think demand is going to outstrip supply for years to come.

Definitely interesting times. I'm curious how the larger public that isn't particularly concerned with climate change or interested in EVs is going to respond to the car. It should be fun to watch.

 

[Thomas Edison]

Tesla CEO Elon Musk compared the electric car company to a busy hamburger restaurant on Wednesday’s quarterly earnings call. When explaining his thinking around the cancelation of 63,000 Model 3 preorders, Musk used the opportunity to underscore the difficulties ahead in scaling production. “Those cancellations occurred over the course of more than a year,” Musk...
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Called it
455,000 active reservations at the time of the July Model 3 event.

 

[ModelNforNerd]

I'm sure I'll never know how many of those 63,000 cancellations were ahead of me........LOL

 

[voize_reazon]

Just wait until people see these things in the wild, get to ride in their friend's, etc. This is a vehicle segment where things traditionally change very incrementally. Each model refresh is a little bit better than the last. Now comes a Tesla cannon ball into the middle of the swimming pool. It's something completely different. It's going to be massively disruptive and I think demand is going to outstrip supply for years to come.

I totally agree. For a very large % of drivers, a Tesla has been out of reach due to the cost. Even at $50,000 fully loaded, a Model 3 is in the price range with many nice cars on the road. If this car is as good as advertised (and based on the early reviews and quality of the S and X, I'm sure it will be), I think Model 3 will be a culture changing product. I know we keep reading about comparisons to the roll-out of the iphone and I can see why.

People will start seeing more of these on the road, friends (and friends of friends) will get one, demand will increase. I fully expect Tesla to build more plants to try to keep up with demand. The super charger network will continue to grow. Businesses/restaurants will want Tesla super chargers nearby, knowing potential customers will need something to do while their Teslas are charging.

 

[Alketi]

What I really wonder/wish to know is were those cancellations an even spread, or did they come more out of March 31 linestanders or people who reserved online later? Obviously from the board alone one can deduce that some of those cancellations were people opting for a Model S, new or CPO, instead. My wild hunch is they came out of the later reservations more but we will see.

The fact they're accelerating and simplifying the Model Y should tell us everything we need to know about demand ...

 

[ModelNforNerd]

The fact they're accelerating and simplifying the Model Y should tell us everything we need to know about demand ...

Yea, my situation may be such that a Model Y will make sense for me when it comes out.

By then, I'll be a "current owner", though.

 

[Trips]

Tesla intentionally cancelled a bunch of people that ordered multiple times.

From June 7th, 2016 until mid October 2016 my reservation moved up 800 spots. This is based on the ReservationID. I keep getting a little closer as long as the current owners do not start cutting the line.

 

[ModelNforNerd]

Tesla intentionally cancelled a bunch of people that ordered multiple times.

From June 7th, 2016 until mid October 2016 my reservation moved up 800 spots. This is based on the ReservationID. I keep getting a little closer as long as the current owners do not start cutting the line.

I think they can only cut prior to that region's build window.

For example, if Tesla is in the middle of making Standard models for the East Coast, they're not going to stop the process because some owner in California decided that day that he wanted one.

 

[flamingoezz]

Really? I was expecting closer to 5%.

63,000 cancelled pre-orders is way less than I would have expected. If anything I thought they were hiding the number because they had lost a bunch of pre-orders but that's a bit over 10% net. Not huge by any stretch.

 

[SMAlset]

I would be surprised if the vast majority of people who plunked down the $1000 hold would cancel before they actually got a chance to ride in a Model 3 or see it in person and make up their minds that way. Of course there would be some people who couldn't wait it out (needed to replace a car they had now, needed the money, really didn't like a feature like the sole middle display) but I think people got a pretty good look at what the car would be like and they either were interested or not. So am not really surprised to see that small of a percentage of cancellations.

Hubby said he thinks millennials would be the least bothered by the minimal look of the car and the sole display and would be among their largest owner base. Also more comfortable with new tech beyond what the Bolt and other EVs offer. Now to me when I look at the design of the Bolt for example and compare it the sexy look of the Model 3, I have a hard time seeing why people would choose it over the Model 3. Definitely think guys would be more attracted to the sporty sleek look of the 3. Woman maybe if they needed the height of the hatch of the Bolt to frequently carry bulky things (during shopping, errands with the kids or garage sale excursions for example) would see it as more of a plus than the trunk height of the 3. Will be very interesting to see what the demographics will be for each.

 

[Alketi]

Yea, my situation may be such that a Model Y will make sense for me when it comes out.

By then, I'll be a "current owner", though.

Being a current owner means you'll get the Y sooner.

My friend ordered a Model 3 six months after me, then leased an S for two-years, and is now ahead of me in in the Model 3 line. Current owners are bumped regardless of when they order.

 

[EinSV]

The line at the hamburger stand has gone from 373,000 customers to more than 455,000. Some people were hungry and did not want to wait any longer so they splurged on a pricier burger at the stand's more upscale restaurant down the street (Model S/X). Others settled for a hot dog. In the meantime, for every 10 customers who got out of line another 25 jumped in and the line keeps getting longer and longer.

 

[ModelNforNerd]

Being a current owner means you'll get the Y sooner.

My friend ordered a Model 3 six months after me, then leased an S for two-years, and is now ahead of me in in the Model 3 line. Current owners are bumped regardless of when they order.

Within the production run for their region though...

I don't think Tesla is going to stop the East Coast production run to backtrack and build West Coast owner cars.

Once they get to "First Production" for the East Coast.... They will burn through as many orders as they can.

 

[gambit48]

Definitely interesting times. I'm curious how the larger public that isn't particularly concerned with climate change or interested in EVs is going to respond to the car. It should be fun to watch.

That would describe me, my family, neighbors, and pretty much everyone I know that doesn't already have some kind of hybrid or EV. If they cared that much about climate change, they'd already have a hybrid or EV.

I mean, it's not that I don't care at all about the environment, it's just that the amount of pollution one current ultra low emissions vehicle creates vs a pure EV won't make enough of a difference to make me pull the trigger on something as expensive as a car. It just doesn't move the needle enough to influence my buying decision all that much.

I want a Tesla EV for other reasons. A big part of that is the broad scale of the Supercharger network. That is a deciding factor to make me pull the trigger and why I won't consider waiting for an upcoming EV from a company like BMW or GM.

 

[Scott Franco]

Cancelled reservations in front of me: fascinating.

Cancelled reservations after me: don't care.