Reservation Cancellation Rate

[Citizen-T]

I know of a few people that dropped their old reservation and placed a new one before the price increase. Basically they were trying to move back in line (because they weren't ready to take delivery) but didn't want to take the hit from the price increase. If that was a widespread tactic, that could throw a wrench in both our reservation tally and cancellation rate.

 

[CarbonTax]

I was resv 3130, considering the 40/60kWh and cancelled in October because (in order of significance):

1. needed a car by 12-31-12
2. wanted to use TSLA position to finance at least half of the cost
3. wife bitching
4. did not want upgraged air suspension
5. not thrilled with spartan interior

I received my refund check quickly, and am still considering trading in my 2013 Volt for an S, or waiting for the Gen III

 

[smorgasbord]

A cancellation rate of over 8500 out of 14,500 would be scary (~60%) if true. However, I think we need to subtract the 3800 known skipped slots in Nov/Dec last year, and I think we need to do something like take the median of the finalization time float - which would be about 900 cars. So 4700 skipped slots do not "count" towards cancelations. Then you have to factor in 40kWh and coil suspension and red. Any one of those options results in a skip, but we have to watch out for double counting. For instance, I'll wager everyone with a 40kWh battery is getting the coil suspension. Then again, some people may be ordering the red just to have a later delivery at the old pricing. Even so, the cancelation rate comes out pretty high. Hmm.

Note that since 5253 was just delivered, that's about 3000 cars this calendar year in 7 weeks, or over 400 cars/week.

Anyone got any math to show that the cancelation rate isn't over 25%? Interesting that a few months ago it was all about production, and now that it seems production is at least as good as was promised, the worry going into the earnings call today is about demand.

 

[JRP3]

I received my refund check quickly, and am still considering trading in my 2013 Volt for an S, or waiting for the Gen III

Will that be after the divorce? :wink:

 

[Citizen-T]

A cancellation rate of over 8500 out of 14,500 would be scary (~60%) if true. However, I think we need to subtract the 3800 known skipped slots in Nov/Dec last year, and I think we need to do something like take the median of the finalization time float - which would be about 900 cars. So 4700 skipped slots do not "count" towards cancelations. Then you have to factor in 40kWh and coil suspension and red. Any one of those options results in a skip, but we have to watch out for double counting. For instance, I'll wager everyone with a 40kWh battery is getting the coil suspension. Then again, some people may be ordering the red just to have a later delivery at the old pricing. Even so, the cancelation rate comes out pretty high. Hmm.

Note that since 5253 was just delivered, that's about 3000 cars this calendar year in 7 weeks, or over 400 cars/week.

Anyone got any math to show that the cancelation rate isn't over 25%? Interesting that a few months ago it was all about production, and now that it seems production is at least as good as was promised, the worry going into the earnings call today is about demand.

Let's assume for a minute that we lost a huge portion of the order backlog for whatever reason. I agree that this could be bad news for cash-flow. But, demand? As long as there are enough new reservations coming in to support the production rate once the (now smaller) backlog is burned down, there is no demand problem. The rate of acceleration in the Reservation Tally thread makes me think that we are fine (especially once Europe and Asian come online in a more significant way).

But perhaps the most obvious argument that "we're fine" has to be in what you just pointed out. All indications are that Tesla is operating at a rate greater than 20k/year. If there was a cancellation problem that would leave them with not enough demand for 20k, wouldn't they dial that back? 20k is all they promised after all. If your backlog is shrinking and your incoming rate doesn't offset it, it'd be stupid to plow forward like that.

 

[Yuri_G]

A cancellation rate of over 8500 out of 14,500 would be scary (~60%) if true. However, I think we need to subtract the 3800 known skipped slots in Nov/Dec last year, and I think we need to do something like take the median of the finalization time float - which would be about 900 cars. So 4700 skipped slots do not "count" towards cancelations. Then you have to factor in 40kWh and coil suspension and red. Any one of those options results in a skip, but we have to watch out for double counting. For instance, I'll wager everyone with a 40kWh battery is getting the coil suspension. Then again, some people may be ordering the red just to have a later delivery at the old pricing. Even so, the cancelation rate comes out pretty high. Hmm.

Note that since 5253 was just delivered, that's about 3000 cars this calendar year in 7 weeks, or over 400 cars/week.

Anyone got any math to show that the cancelation rate isn't over 25%? Interesting that a few months ago it was all about production, and now that it seems production is at least as good as was promised, the worry going into the earnings call today is about demand.

I don't think it's wise to try to calculate the cancellation rate from reservation numbers and VIN numbers. The VIN assignments tend to vary based on batching, options like the ones you listed, and factors we can't account for. The reservation rate currently seems to be hovering around 45-50 cars a day counting the US and Europe. So even if the cancellation rate ramped up in the beginning of the year it will level off and the reservation rate is now steady after the price increase.

 

[Mycroft]

As a point in the statistics, I haven't cancelled my reservation, but due to life circumstances, I was unable to buy the car.

I'm keeping my reservation, primarily to keep my foot in the door and maybe be able to get in at the head of the line for Roadster 3.0.

 

[K Hall]

We will soon know in about 3 hours.

 

[Zzzz...]

At the end of Q3 '12 TM accumulated 13200 reservations.

Q4 '12 production rate was below 5k units. We will be able to see how new reservations and cancellations minus produced units affected reservation backlog. If number drops below 13200, I would be concerned about continues demand for S.

On the other hand as of now new reservations are coming at ~22 000 units per year rate.

 

[agelston]

Reposting the numbers for canacelation rates

"Q1 cancellations are likely to remain elevated"

To get the cancelation rate
"As a result, we added more than 6,000 new reservations in Q4, up from almost 2,900 in Q3."
"After deliveries and cancellations, our net reservations at year end, were over 15,000, up from about 13,000 at the end of Q3"
"we delivered pproximately 2,400 Model S vehicles during the quarter"

So, with a 0% cancelation rate, net reservations should have increased (6000-2400)=3,600. Since net reservations only increased 2,000, that means that 1,600 cancellations occurred in Q4. A significant amount. Probably about 1/2 to 1/3 of reservation holders asked to convert to non refundable configs. (assuming 5,000 asked to convert, the next quarters production)

 

[CapitalistOppressor]

I know of a few people that dropped their old reservation and placed a new one before the price increase. Basically they were trying to move back in line (because they weren't ready to take delivery) but didn't want to take the hit from the price increase. If that was a widespread tactic, that could throw a wrench in both our reservation tally and cancellation rate.

Ah yes, I just posted this in the Tally thread. That's the interpretation I've been making for the past week or so since I switched sides on this issue.

 

[gregincal]

Reposting the numbers for canacelation rates

"Q1 cancellations are likely to remain elevated"

To get the cancelation rate
"As a result, we added more than 6,000 new reservations in Q4, up from almost 2,900 in Q3."
"After deliveries and cancellations, our net reservations at year end, were over 15,000, up from about 13,000 at the end of Q3"
"we delivered pproximately 2,400 Model S vehicles during the quarter"

So, with a 0% cancelation rate, net reservations should have increased (6000-2400)=3,600. Since net reservations only increased 2,000, that means that 1,600 cancellations occurred in Q4. A significant amount. Probably about 1/2 to 1/3 of reservation holders asked to convert to non refundable configs. (assuming 5,000 asked to convert, the next quarters production)

A significant amount, sure, but I don't see how you get 1/2 to 1/3. Over 6,000 people were asked to finalize during the quarter.

 

[Neech]

Too many assumptions are being made about cancellations just because there are gaps in the numbers. Granted, I'm sure many of them cancelled because they changed their mind. But, I would bet there were quite a few that cancelled and will re-reserve later in order to get delivery later in the year. I for one was originally expecting delivery around July/August (reserved in Nov 2012) and was perfectly fine with that. I wanted the time to save more $$. When the rush was on to finalize with much earlier deliveries, I debated about cancelling for now and re-reserve so I could still get the car in the summer. Or I was going to go without the air suspension to get the delay. But, I stuck with the original res because I didn't want to pay the price increase. In order to prolong my res, I waited until the last minute to finalize (10:30 that night) and then waited a few more days to sign off on the final contract. I am one of those pain in the butts that is creating a gap in the numbers.

 

[K Hall]

Too many assumptions are being made about cancellations just because there are gaps in the numbers. Granted, I'm sure many of them cancelled because they changed their mind. But, I would bet there were quite a few that cancelled and will re-reserve later in order to get delivery later in the year. I for one was originally expecting delivery around July/August (reserved in Nov 2012) and was perfectly fine with that. I wanted the time to save more $$. When the rush was on to finalize with much earlier deliveries, I debated about cancelling for now and re-reserve so I could still get the car in the summer. Or I was going to go without the air suspension to get the delay. But, I stuck with the original res because I didn't want to pay the price increase. In order to prolong my res, I waited until the last minute to finalize (10:30 that night) and then waited a few more days to sign off on the final contract. I am one of those pain in the butts that is creating a gap in the numbers.

Tesla reported 1,500 cancellations in Q4. It's not an issue this year.

 

[dmckinstry]

As a point in the statistics, I haven't cancelled my reservation, but due to life circumstances, I was unable to buy the car.

I'm keeping my reservation, primarily to keep my foot in the door and maybe be able to get in at the head of the line for Roadster 3.0.

I'm in the same position as you. I don't know when I'll be able to afford the car I want, but I've deferred for the time being. However, I do want the Model S and not a Gen III or Roadster 3.0.

 

[onlinespending]

Too many assumptions are being made about cancellations just because there are gaps in the numbers. Granted, I'm sure many of them cancelled because they changed their mind. But, I would bet there were quite a few that cancelled and will re-reserve later in order to get delivery later in the year.

I for one cancelled my ~2300 reservation simply because I wasn't entirely happy with the interior and wanted to wait to see if there were any major bugs/issues with the first model year of the Model S that would crop up. Money was far from an issue, but I just wouldn't have been satisfied with the purchase at that time. I fully intend to purchase a Tesla vehicle (either a 2nd gen Model S, or Model X), but likely won't do so until 2014 or 2015. I imagine there are quite a number of people that are on the fence like myself and are waiting for one reason or another that would give them the confidence to make the purchase. Demand for Tesla vehicles will only increase as more of people's concerns are addressed (e.g. increased Supercharger density, increased range in subsequent generations, reduced price, improved interior, added features such as parking assist, etc.). The future looks bright.

 

[montgom626]

Maybe it's just me, but I'm not sure I care what the cancelation rate was. That just means that people who thought they might want the car in 6 months realized they don't have the money yet. The new reservation rate is the important metric here. Since you finalize basically when you reserve now, there should be no cancellations going forward.

You are most likely correct. Also, way too much speculation about an issue none of us has any visibility on.

 

[Plug Me In]

Probably the only sure fact is the cancellation rate is higher than any of us fan boys and fan girls think it should be. The only cancelled reservation that I know personally is a friend who thought the wait time was too long. His # was in the 5000's, probably reserved last summer and expected about a 10-12 month wait. He was surprised when we discussed this in December and I told him he would have had his car by then or January at the latest (apologies to those 5K res #'s who are still waiting).

Anyway I expect the cancellation rate to dip significantly as finalizing occurs almost immediately and deliveries occur more quickly.

 

[jandkw]

I canceled my reservation last August but re-booked in November. Other than the fact that there are many premium cars to consider, the reason was I never had the opportunity to test drive the MS because I live 250 miles away from the closet DC store. I don't know if Tesla counted me as one of the cancellations. Well, I decided to test drive the MS in DC and the rest is history. Now I owned the MS for two weeks and enjoy every minute of it. I had my friends and relatives test drove my MS and everyone was excited about the ride and performance. The only way for Tesla to attract more customers is to figure out a way for people test drive the MS.

 

[smorgasbord]

So, this is one thing to really love about Tesla - they do the right thing for customers and themselves and have the proper time perspective. Take the reservation queue.

Tesla is getting punished in the market today for actively driving the reservation queue down - by both delivering cars and forcing people to lock-in their configuration and make their deposits non-refundable. In yesterday's conference call, Musk even said this was intentional: "So, we’re trying to clean out basically anyone who wasn’t serious about buying the car."

It's smart to shrink the reservation queue down. A long queue discourages serious people from ordering a car. If you need/want a car today, you can't/don't want to wait what you think is 9 months. A month or two wait is bad enough, but tolerable since you're ordering your car just the way you want it, instead of compromising from what's on the lot at the dealership. Musk is obviously confident in demand for the car, and has stated so on multiple occasions.

The idea that Tesla needs to have a big reservation queue is wrong, IMHO. No other non-handbuilt car company lives or dies by a reservation queue. Between serious buyers not being lost to a seemingly too big queue and Tesla itself gaining better insight into what's needed to make the next few months of vehicles, Tesla is dong the right thing by weeding out non-serious buyers. Wall St. doesn't see it that way, maybe because they're all afraid demand will dry up, like it did for the Leaf and Volt. Tesla could have played the game and kept the queue too large, but they've got the balls to do the right thing.

Tesla is exactly the kind of company I want to be investing in.