Reservation Cancellation Rate

[smorgasbord]

There's been some blogging over high reservation numbers not only getting configured, but getting delivered, meaning there are lots of cancellations.

In this TMC post, reservation 11,808 became VIN 5032 delivered 2/2013

In this TMC post, reservation 14,417 became VIN 5776, to be delivered within a month from today.

11808->5032 means 6776 reservation slots were skipped.
14417->5776 means 8647 reservation slots were skipped.

Or, a delivery of 744 slots out of 2609. That seems pretty bad (72% drop out rate). Are there really that many 40kWh or coil suspension or red cars being desired? The non-air suspension is the only thing I think is really popular, since many people don't pay for suspension upgrades on other cars.

At the local Tesla store, they're quoting about 3 months from reservation to delivery for 85 kWh, air suspension, non-red cars, and about 6 months otherwise.

The only rationale explanation is that Tesla is building cars way out of order. And the out of order comes from people finalizing right away versus people waiting a month (1600 cars) to finalize. Right?

 

[avatar]

I can confirm the same from the Washington store. Store rep also said production was "over 400" cars per week.

 

[anticitizen13.7]

Or, a delivery of 744 slots out of 2609. That seems pretty bad (72% drop out rate). Are there really that many 40kWh or coil suspension or red cars being desired? The non-air suspension is the only thing I think is really popular, since many people don't pay for suspension upgrades on other cars.

The only rationale explanation is that Tesla is building cars way out of order. And the out of order comes from people finalizing right away versus people waiting a month (1600 cars) to finalize. Right?

I haven't seen anyone here reporting delivery of a standard suspension Model S, so I'm assuming that there are probably a lot of these that Tesla has not yet built. A convoy of winter testing cars recently spotted (http://www.teslamotorsclub.com/showthread.php/14032-Is-Tesla-winter-testing-in-North-Dakota) suggests to me that there may be more verification going on for some of the options (or lack of option) that haven't shipped.

 

[smorgasbord]

In looking over the Reservation Tally thread, it looks like about 3800 slots were skipped before Nov 5, 2012. That reduces the drop-out rate since to about 25%-33%, modulo the finalization time. So, maybe not bad at all?

 

[Doug_G]

I'm guessing it's a combination of moderate drop-out rate, skipping configs that can't be built yet, plus a higher-than-advertised production rate. But we'll know soon enough...

 

[Citizen-T]

There is certainly still some geo-batching going on as well.

 

[blakegallagher]

During last quarter what was the cancellation rate? 15 percent or so if I remember correctly. I dont really see it being to much higher than that ... maybe 25 percent at the max. Most likely though I would think it would be around 15 percent. I know some people were most likely suprised when they thought they would have 6 months to get the money together and were asked to finalize after a month or so but I think the worries of 50 percent + cancellation rates are unfounded. .... very excited to find out though ... I am out of about half of my position which is mostly in may 34 calls now. If there is a big pullback I will load back up .... in pre trading I saw we were up over 40 briefly ... if we go much higher I will trim my position further and hope I am not missing out on the fabled "short squeeze"

 

[Cattledog]

Smorgie - I was VIN 3143 delivered 1/9, so VIN 5032 being delivered at least illustrates fabricating/delivering 400/week minimum. Which we have heard tweeted anecdotally, so simply information triangulation.

There's been some blogging over high reservation numbers not only getting configured, but getting delivered, meaning there are lots of cancellations.

In this TMC post, reservation 11,808 became VIN 5032 delivered 2/2013

In this TMC post, reservation 14,417 became VIN 5776, to be delivered within a month from today.

11808->5032 means 6776 reservation slots were skipped.
14417->5776 means 8647 reservation slots were skipped.

Or, a delivery of 744 slots out of 2609. That seems pretty bad (72% drop out rate). Are there really that many 40kWh or coil suspension or red cars being desired? The non-air suspension is the only thing I think is really popular, since many people don't pay for suspension upgrades on other cars.

At the local Tesla store, they're quoting about 3 months from reservation to delivery for 85 kWh, air suspension, non-red cars, and about 6 months otherwise.

The only rationale explanation is that Tesla is building cars way out of order. And the out of order comes from people finalizing right away versus people waiting a month (1600 cars) to finalize. Right?

 

[Alpha]

I am a little worried about higher cancellation rates than anyone has expected.

One data point here, I had both a Model S and Model X reservation (because I couldn't decide which one to get at first.) I made my S reservation in Nov. and my X reservation in early January. I decided to go all in and get the P85 Model S - I needed the 5K from the X reservation to help support this, so I cancelled my X reservation in mid Jan. It took them over 2 weeks to refund my cancellation on the X - I called twice, (the 2nd call being 4 days ago) to ask why such a long delay on getting the refund and they told me, "quite honestly, we've been inundated with cancellations." Not a good feeling to hear this. (BTW I finally did get my refund on Monday, but it felt like only because I started getting a little bit testy with them...)

Of course, I don't know for sure how bad this really is. But it's making me quite nervous going into earnings. I believe most cancellations are after Q4 2012, so I'm not sure how much they would need to talk about and report on this as it would be a Q1 2013 problem...

 

[aznt1217]

hmmm not sure what to make of those cancellations. I could've sworn last tally was 20k reservations.

 

[Citizen-T]

I am a little worried about higher cancellation rates than anyone has expected.

One data point here, I had both a Model S and Model X reservation (because I couldn't decide which one to get at first.) I made my S reservation in Nov. and my X reservation in early January. I decided to go all in and get the P85 Model S - I needed the 5K from the X reservation to help support this, so I cancelled my X reservation in mid Jan. It took them over 2 weeks to refund my cancellation on the X - I called twice, (the 2nd call being 4 days ago) to ask why such a long delay on getting the refund and they told me, "quite honestly, we've been inundated with cancellations." Not a good feeling to hear this. (BTW I finally did get my refund on Monday, but it felt like only because I started getting a little bit testy with them...)

Of course, I don't know for sure how bad this really is. But it's making me quite nervous going into earnings. I believe most cancellations are after Q4 2012, so I'm not sure how much they would need to talk about and report on this as it would be a Q1 2013 problem...

There is another explanation for this. More people are being asked to configure per unit of time of late than in the past. This means that even if the reservation rate has decreased as a percentage of those being asked to configure, the number of cancellations that need to be dealt with each day has exploded.

I'm not saying that this is what happened. Just giving a counter-example to demonstrate that this is not necessarily proof of a higher cancellation rate.

 

[Alpha]

Yeah it's hard to know anything for sure on that. We really should have a prominent sticky thread for Cancellation Tally in the appropriate place just like there is one for the Reservation Tally

This probably does not exist as people aren't nearly as excited about cancelling as they are on reserving so it's been somewhat under-reported. I was quite sad at my cancellation and wished that I could keep both reservations.

Cancellations leave holes in the reservation sequence numbers and there is no reliable way to know how many holes there are (short of Tesla telling us...)

 

[gregincal]

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.

 

[Alpha]

A higher than expected cancellation rate would have at least 2 really bad negative connotations: 1) A direct loss of expected operating funds for running the business (5K per cancellation) 2) A signal of weaker than expected demand for the product.

Ultimately I think even lower than expected demand would be a blip for Tesla long term, but if it is significantly lower it could hurt things in the short term in light of current expectations.

 

[ckessel]

I'm not sure how to interpret gaps in the Reservation/VIN. How many folks fit into one of these 3 categories? All of them would have been skipped so far:
1) Want the color red
2) Want standard suspension
3) Want 40kwh

It could be that 40kw is far more popular than we expected given we tilt toward zealous early adopters on this forum which means we probably tilt to the higher end battery. Our perception of demand by battery pack may be skewed compared to the public at large. It could be Tesla's "no test drive without a deposit" caused some affluent, but only curious, buyers to drop the 5k, drive, then ask for it back.

We know the initial cancellation rate wasn't that high, just 15%. A big portion of the folks skipped recently put down a reservation less than 6 months ago and I'm not sure why folks that put down deposits so recently would have bailed in large numbers.

 

[Zzzz...]

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.

Yeah, I'm trying to track reservation dynamics for major markets here:
Tesla Model S and X reservations data points/rate

Feel free to take a look, copy over datapoints and play with them or join us and help editing/improve spreadsheet above.

 

[gregincal]

2) A signal of weaker than expected demand for the product.

This is what I disagree with. Demand for the product is directly measured by new reservations. All the old reservations were "early adopters" and Tesla will work it's way through that list faster or slower depending on how many finally decided to buy the car after waiting months. The only real measure of Tesla's viability is the sell rate once they've fulfilled those old reservations, and the current reservation rate is the only metric of that. They could have had 0% cancellations, but it wouldn't matter if new reservations aren't coming in. Conversely, they could have had a 60% cancellation rate on early reservations, but if they're finalizing new reservations at a rate of over 20,000 a year that's good news.

 

[Lloyd]

I don't know of anyone who has canceled their order of 10 I know of personally, and there has been only several on this forum. Does anyone know of any more?

 

[FredTMC]

This is what I disagree with. Demand for the product is directly measured by new reservations. All the old reservations were "early adopters" and Tesla will work it's way through that list faster or slower depending on how many finally decided to buy the car after waiting months. The only real measure of Tesla's viability is the sell rate once they've fulfilled those old reservations, and the current reservation rate is the only metric of that. They could have had 0% cancellations, but it wouldn't matter if new reservations aren't coming in. Conversely, they could have had a 60% cancellation rate on early reservations, but if they're finalizing new reservations at a rate of over 20,000 a year that's good news.

I agree 100%.

 

[gregincal]

Just to be clear on my current belief. I do believe there was a fairly high cancellation rate (or at least deferral rate). However, I don't believe it's because people don't want the car. When Tesla ramped up production, a lot of people were asked to finalize a lot sooner than they expected, and the price increase forced the issue. I can't count the number of posts about people panicking because their current lease had months to run or they hadn't yet gotten the money together. These are all people who are still interested in buying the car, they just weren't ready yet. So yes, the backlog appeared much higher than it really was, but backlogs are generally always deceiving (The Delorean had a huge backlog, and so did the Nissan Leaf, but sales after the backlog were disappointing). The true test has always been what the sales rate would be once the backlog was finished.