Here's a calculation of the number of Model Y pre-orders as of the end of last year (12/31/19). Let me know your thoughts.
Footnote 11 to the financial statements in Tesla's 2019 10-K (released Feb 13, 2020) has the following information:
Based on this, for vehicles, the only prepayments included in the Customer Deposit liability are deposits that are fully refundable. Currently, it appears that the only vehicles that have a refundable deposit are the Model Y, Cybertruck and Model 3 sales in China and Canada, and I'm assuming this was also the case at 12/31/19. If I check the Tesla website, the Model 3 (U.S., Europe and others), S and X all have non-refundable order fees. The Model 3 switched from a refundable deposit to a non-refundable order fee in the U.S. in mid October 2019 (and I assume the same timeframe for Europe?). I don't know how long S and X have had non-refundable order fees. But in the case of the M3, given the end-of-year push, I think it's reasonable to suspect that the vast majority of the orders that were placed in the US and Europe before mid-October 2019 were completed by 12/31/19. If that's the case, then very little, if any, of the Customer Deposit liability as of 12/31/19 was due to M3 orders in U.S. or Europe (or X or S).
The Semi is not currently available to the public - probably only corporate clients from what I gather. I suspect that any purchase contracts for Semi are not structured with fully refundable deposits, so likely no portion of the Customer Deposit liability is due to contracts for Semi.
The footnote above also mention deposits for energy products. It's a little unclear, but the second half of the footnote suggests that only prepayments on account of energy products that are fully refundable are included in the Customer Deposit liability:
At least currently, solar roof and solar panels have a $100 non-refundable order fee. Powerwall has a $100 fee that is refundable until the power contract is signed. Like Semi, I assume that contracts for PowerPack and MegaPack are with corporate and municipality buyers and do not have fully refundable deposits in the contract.
During 2016, customer deposits increased $388mm to $663mm "primarily due to Model 3 deposits". Customer deposits increased another $190mm during 2017 as M3 was ramping up. During 2018, customer deposits decreased approximately $61mm "primarily due to Model 3 fulfillments." Interestingly, included in this was an increase of $56mm in customer deposits due to reclassifying the prepaid vehicle maintenance plan from deferred revenue to customer deposits.
From all of this, to me it seems reasonable to infer that, at 12/31/19, there were no (or close to $0) prepayments attributable to S, X, 3 (US and Europe), Semi, solar roof, solar panels or Power/Mega Pack in the Customer Deposit liability. Customer Deposits would therefore only include prepayments on account of M3 (China and Canada), Y, Cybertruck, Powerwall and prepaid vehicle maintenance plans:
$726 million of customer deposits as of 12/31/19 - $20mm (prepaid maintenance) - $1mm (powerwall deposits) - $2mm (Canada refundable deposits) - $34 (China refundable deposits) - $20mm (Cybertruck refundable deposits) = $649mm. $649mm divided by $2,500 equals 259,600 Model Y reservations at 12/31/19.
I'm sure I'm missing or misinterpreting some info or the underlying accounting principles, or my assumptions could be way off, so please point out any errors or issues that you see. For example, I think I could be misinterpreting how payments toward solar projects are reflected in Customer Deposits, and I don't understand how to include the vehicle trade-in concept noted in the footnote (or if either of those would be material). Happy to take any suggestions.
Thanks.
Footnote 11 to the financial statements in Tesla's 2019 10-K (released Feb 13, 2020) has the following information:
"Customer deposits primarily consisted of cash payments from customers at the time they place an order or reservation for a vehicle or an energy product and any additional payments up to the point of delivery or the completion of installation, including the fair values of any customer trade-in vehicles that are applicable toward a new vehicle purchase. Customer deposits also include prepayments on contracts that can be cancelled without significant penalties, such as vehicle maintenance plans. Customer deposit amounts and timing vary depending on the vehicle model, the energy product and the country of delivery. In the case of a vehicle, customer deposits are fully refundable. In the case of an energy generation or storage product, customer deposits are fully refundable prior to the entry into a purchase agreement or in certain cases for a limited time thereafter (in accordance with applicable laws). Customer deposits are included in current liabilities until refunded or until they are applied towards the customer’s purchase balance. As of December 31, 2019 and December 31, 2018, we held $726 million and $793 million, respectively, in customer deposits." Link
Based on this, for vehicles, the only prepayments included in the Customer Deposit liability are deposits that are fully refundable. Currently, it appears that the only vehicles that have a refundable deposit are the Model Y, Cybertruck and Model 3 sales in China and Canada, and I'm assuming this was also the case at 12/31/19. If I check the Tesla website, the Model 3 (U.S., Europe and others), S and X all have non-refundable order fees. The Model 3 switched from a refundable deposit to a non-refundable order fee in the U.S. in mid October 2019 (and I assume the same timeframe for Europe?). I don't know how long S and X have had non-refundable order fees. But in the case of the M3, given the end-of-year push, I think it's reasonable to suspect that the vast majority of the orders that were placed in the US and Europe before mid-October 2019 were completed by 12/31/19. If that's the case, then very little, if any, of the Customer Deposit liability as of 12/31/19 was due to M3 orders in U.S. or Europe (or X or S).
The Semi is not currently available to the public - probably only corporate clients from what I gather. I suspect that any purchase contracts for Semi are not structured with fully refundable deposits, so likely no portion of the Customer Deposit liability is due to contracts for Semi.
The footnote above also mention deposits for energy products. It's a little unclear, but the second half of the footnote suggests that only prepayments on account of energy products that are fully refundable are included in the Customer Deposit liability:
"In the case of an energy generation or storage product, customer deposits are fully refundable prior to the entry into a purchase agreement or in certain cases for a limited time thereafter (in accordance with applicable laws)."
At least currently, solar roof and solar panels have a $100 non-refundable order fee. Powerwall has a $100 fee that is refundable until the power contract is signed. Like Semi, I assume that contracts for PowerPack and MegaPack are with corporate and municipality buyers and do not have fully refundable deposits in the contract.
During 2016, customer deposits increased $388mm to $663mm "primarily due to Model 3 deposits". Customer deposits increased another $190mm during 2017 as M3 was ramping up. During 2018, customer deposits decreased approximately $61mm "primarily due to Model 3 fulfillments." Interestingly, included in this was an increase of $56mm in customer deposits due to reclassifying the prepaid vehicle maintenance plan from deferred revenue to customer deposits.
From all of this, to me it seems reasonable to infer that, at 12/31/19, there were no (or close to $0) prepayments attributable to S, X, 3 (US and Europe), Semi, solar roof, solar panels or Power/Mega Pack in the Customer Deposit liability. Customer Deposits would therefore only include prepayments on account of M3 (China and Canada), Y, Cybertruck, Powerwall and prepaid vehicle maintenance plans:
- We know the liability for deposits on account of prepaid vehicle maintenance plans was roughly $56mm as of 12/31/18. I believe new sales of these plans were stopped in March 2019. Assuming additional people cancelled those plans during 2019 as reliability figures were released, and the remaining liability burned off to some extent during 2019 as other plans were used up, let's assume that $20mm of prepaid service plan liability remained as of 12/31/19.
- The $100 prepayment on account of powerwall sales is only refundable until the purchase contract is signed. I'm assuming that the amount of open refundable deposits as of 12/31/19 was de minimis. Even $1mm of deposits would be 10,000 open pre-contract orders. Let's use $1mm to keep it simple.
- There were 9,900 M3 sales in Canada in 2019. Delivery to Canadian customer is currently out about a month, so let's assume 825 open orders as of 12/31/19 (1/12 * 9,900). 825 X US$2400 = approx $2mm in deposits.
- China orders are out to second quarter. Let's call that 12 weeks @ 1,000 per week open as of year end. (I know, this is pretty tough). 12,000 X 20,000 Yuan (US$2,845) = US$34mm.
- Finally, Cybertruck. I don't know the most recent estimate before year-end, but I see 200,000 thrown around a lot. At $100, that is $20mm.
$726 million of customer deposits as of 12/31/19 - $20mm (prepaid maintenance) - $1mm (powerwall deposits) - $2mm (Canada refundable deposits) - $34 (China refundable deposits) - $20mm (Cybertruck refundable deposits) = $649mm. $649mm divided by $2,500 equals 259,600 Model Y reservations at 12/31/19.
I'm sure I'm missing or misinterpreting some info or the underlying accounting principles, or my assumptions could be way off, so please point out any errors or issues that you see. For example, I think I could be misinterpreting how payments toward solar projects are reflected in Customer Deposits, and I don't understand how to include the vehicle trade-in concept noted in the footnote (or if either of those would be material). Happy to take any suggestions.
Thanks.
