Tesla lowers deposit (out of main)

[adiggs]

I see, sorry I misunderstood then. But also: does anyone know if the new fee counts towards the cost of the car? By calling it a "fee" instead of a "deposit", I'm wondering if it is effectively an extra $100 price increase on the car (so another $95-97 for Tesla after fees).

Deposits, refundable or not, are pretty traditionally the first <fee amount> payment towards the thing you're buying. IN this case, the first $100 towards the car you want to buy.

 

[anon]

No, the fee is what the banks charge for using their credit card services. Not Tesla.

Sorry, it's confusing that I was talking about two different fees in my last couple of posts:
1) Tesla saves on credit card processing fees by charging less up front.
2) Tesla has renamed the "deposit" to an "order fee", i.e. they used to charge a $2500 deposit, but now they charge a $100 order fee. This change of wording makes me wonder if the $100 is in addition to the price of the car.

 

[anon]

Deposits, refundable or not, are pretty traditionally the first <fee amount> payment towards the thing you're buying. IN this case, the first $100 towards the car you want to buy.

Absolutely agreed, which is why I am wondering if there is some significance to the change of name - the $100 is no longer called a deposit, but has been renamed to an "order fee".

 

[Fact Checking]

Absolutely agreed, which is why I am wondering if there is some significance to the change of name - the $100 is no longer called a deposit, and is now an "order fee".

To make sure the people ordering have some skin in the game, while lowering Tesla's credit card processing fees by about ~$150 per car.

Perhaps another effect is to also make it harder for data miners to track Tesla orders via anonymized but transaction level credit card transaction data:

https://www.quantcast.com/data-hub/audience-grid/mastercard-audience-data/

"Insight drawn from actual transactions – superior to survey, derived or implied data"​

A "$2,500" credit card payment is a clearer signature of a Tesla order than a "$100" payment which could be anything.

There were a few infamous abuses of such facilities, such as the case last year when demand FUD was created via measuring and misleading about "Model 3 preorder cancellations", which I'm pretty sure were done via credit card transactional data of $1,000 reservations.

Few companies use a round $1,000 price, or a round $2,500 price ...

Using $100 anonymizes Tesla's order flow much better IMHO - and the actual full payment's bank wire or cheque transactional data's privacy is protected much better than credit card transactional data.

 

[KarenRei]

To make sure the people ordering have some skin in the game, while lowering Tesla's credit card processing fees by about ~$150 per car.

Perhaps another effect is to also make it harder for data miners to track Tesla orders via anonymized but transaction level credit card transaction data:

https://www.quantcast.com/data-hub/audience-grid/mastercard-audience-data/

"Insight drawn from actual transactions – superior to survey, derived or implied data"​

A "$2,500" credit card payment is a clearer signature of a Tesla order than a "$100" payment which could be anything.

There were a few infamous abuses of such facilities, such as the case last year when demand FUD was created via measuring and misleading about "Model 3 preorder cancellations", which I'm pretty sure were done via credit card transactional data of $1,000 reservations.

Few companies use a round $1,000 price, or a round $2,500 price ...

Using $100 anonymizes Tesla's order flow much better IMHO - and the actual full payment's bank wire or cheque transactional data's privacy is protected much better than credit card transactional data.

Beyond all this, I think something much simpler is at play:

"Not keeping $2500 on hand" = Tesla's cash position is fine and doesn't need this added bonus shoring it up.
"Making $100 non-refundable" = Tesla is tired of people bailing / changing their minds and thus messing up their order / delivery flow.

 

[EVNow]

Using $100 anonymizes Tesla's order flow much better IMHO - and the actual full payment's bank wire or cheque transactional data's privacy is protected much better than credit card transactional data.

To make it better, Tesla should charge $99.95.

 

[BBone]

I see, sorry I misunderstood then. But also: does anyone know if the new fee counts towards the cost of the car? By calling it a "fee" instead of a "deposit", I'm wondering if it is effectively an extra $100 price increase on the car (so another $95-97 for Tesla after fees).

I think the "fine print wizard" will let us know about fees vs deposits in this case.

 

[davepsilon]

$2500 refundable to $100 non refundable.

I am not sure how to ready this? bullish or bearish?

I think they are experimenting with the financing component of sales. It demonstrates the agility of Tesla but I'm not sure it is bullish or bearish just trying something new. Musk said you need four things for strong sales 1) Convenient Service 2) Convenient charging 3) Consumer financing 4) Good value for price


Tesla, Inc. (TSLA) Q2 2019 Earnings Call Transcript | The Motley Fool

Pierre Ferragu -- New Street Research -- Analyst

Hey, thank you for taking my question. I'd like to ask you, Elon, about distributions. So you may like -- you guys made a big change at the beginning of the year, going from like an almost 100% on line distribution model, you tried to push back on test drive and get people to buy the car, try it and return it if they don't like it. So could you give us an update on how it is progressing? Do you see this start becoming mostly like an online distribution on -- following an online distribution model? And I saw you opened 25 new retail locations in the quarter, so how do you see your retail footprints evolving over time?

Elon Musk -- Chief Executive Officer

Actually, I said, we've opened 25 service locations. I think really what we find is that the word-of-mouth for Tesla is incredibly good. So once there's a new piece of customers in a particular area, they love the cars and they talk to all their friends about it, and that's really what drives sale. So if you think of like retail locations, kind of like a viral seed in an area. It would grow organically by itself, but the retail locations actually is like a viral seed. It's not they aren't needed, they just like an accelerant. What is needed for sales in any given area, I'd say this worldwide, frequent retail like this country is different or that country is different. Like people around the world pretty much want the same thing, so in my experience. They have to have a service location that's convenient so it can be like you've got to drive eight to five hours to a service location. You've got to have service, you have to have the supercharging and charging all sorted out, consumer financing and then the price must makes sense. And any place where those four things are true, our sales are great. So we're rolling out service centers like crazy. Service centers are the key to sales, not the retail location.

 

[UncaNed]

Beyond all this, I think something much simpler is at play:

"Not keeping $2500 on hand" = Tesla's cash position is fine and doesn't need this added bonus shoring it up.
"Making $100 non-refundable" = Tesla is tired of people bailing / changing their minds and thus messing up their order / delivery flow.

That's ridiculous. $100 is like a fart in a hurricane compared the the total cost. People will mindlessly back out like crazy. It might be different with a $1,000 deposit.

And credit card processing charges will happen the same with any deposit amount if it's a percent of total price.

 

[Carl Raymond]

That's ridiculous. $100 is like a fart in a hurricane compared the the total cost. People will mindlessly back out like crazy. It might be different with a $1,000 deposit.

And credit card processing charges will happen the same with any deposit amount if it's a percent of total price.

It’s enough to stop ‘flakes’ from ordering with a view to backing out if they no longer feel in the mood for a new car.

I don’t think Tesla care if there are cancellations under the new scheme. They’ve just sold fresh air for $100. Nice markup.

Credit card fee will be a few percent of the transaction amount ($100).

 

[Remus]

That's ridiculous. $100 is like a fart in a hurricane compared the the total cost. People will mindlessly back out like crazy. It might be different with a $1,000 deposit.

And credit card processing charges will happen the same with any deposit amount if it's a percent of total price.

go ask silicon valley programmers paid 300k per year, most of them would think twice before throwing away 100 bucks, seriously.

 

[SOULPEDL]

That's ridiculous. $100 is like a fart in a hurricane compared the the total cost. People will mindlessly back out like crazy. It might be different with a $1,000 deposit.

And credit card processing charges will happen the same with any deposit amount if it's a percent of total price.

FYI, $99 to have a full analysis and proposal for Tesla Solar. Worked for me.

 

[StealthP3D]

That's ridiculous. $100 is like a fart in a hurricane compared the the total cost. People will mindlessly back out like crazy. It might be different with a $1,000 deposit.

And credit card processing charges will happen the same with any deposit amount if it's a percent of total price.

If they really want to back out, they will. The point of the deposit isn't to stop people from backing out, it's to stop dreamers from placing an order because they don't have any skin in the game. That alone will prevent a lot of canceled orders.

 

[Artful Dodger]

This might sound crazy but on 2500 versus 100. Tesla is Pocketing an extra 87 per car so if they deliver 105k cars thats an extra approx 9million in the margins bracket. Nothing wrong with that

It's a deposit, not a price increase... But Tesla can book the revenue immediately, even if the car cyberpunk truck can't be delivered within that financial quarter.... C?

 

[LN1_Casey]

I don't think that's the game, and I don't think that's the benefit:

Tesla Cyberpunk truck reveal is 4-6 wks away. That's the game.

If they get 200K preorders in Q4, that's $100*200,000 = $20 Million. That's the benefit.

If the 'something else' at the reveal is a Plaid Model S you can put a deposit on, then that's another whole wad of cash.

Roll out some Model Ys in the actual daylight, with the hatchback open, and that's another whole wad of cash.

These are all for products that are up to a year from delivery. Its free financing.

Cheers!

And, added to the fact that it's a non-refundable deposit means they can depend on the amount. If the shorties try to pull the "oh, thousands cancel their preorders" bit like they did to the three, Tesla still gets to keep the money.

Not to mention that 1) $100 is a lot easier for the general market to fork over and forget about. It's not going to wreck someone's savings, so a lot more people I feel would place an order for a 'in the future' car, and,

2) It's not $2.5k, which a lot of my generation just doesn't have in savings. We tend to try and finance things, because we're poor as a rule, so when we do purchase the $35k vehicle down the line, it's often times 100% or nearly 100% financed. Having the 2.5k be a part of the whole financed bundle is just easier to get than to firstly save up for the $2.5k, then deposit it, then finance when you get the vehicle later.

 

[jerry33]

And credit card processing charges will happen the same with any deposit amount if it's a percent of total price.

This makes no sense. Credit card fees are based on the amount of the charge on the card (e.g. $100 or $2500). No one would use a credit card for this if it was 2-4% of $109,000.

 

[elasalle]

If this is really traders playing the earnings runup/selloff pattern then TSLA will start falling on Monday when "smart" traders decide it's time to get out ahead of the crowd.

200k pre-orders times $2500 each is $500 million.

$500m > $20m

but deposits cannot be accounted as revenue right? one time $20M non-refundable can?

I think Tesla should use the non-refundable part directly for growing their super-chargers. .....

 

[KarenRei]

but deposits cannot be accounted as revenue right? one time $20M non-refundable can?

I think Tesla should use the non-refundable part directly for growing their super-chargers. .....

Correct, it's not revenue - it's precisely matched by a liability. Also, AFAIK, it's not retroactive. Certainly nobody's contacted me about refunding my $2500.

Come to think of it, though, the $100 deposits, being non-refundable, should be revenue... no?

 

[Doggydogworld]

but deposits cannot be accounted as revenue right? one time $20M non-refundable can?

Neither counts as revenue until they deliver the car.

 

[StealthP3D]

Neither counts as revenue until they deliver the car.

I don't think that's correct. The $2500 refundable deposit would be counted as deferred revenue (not revenue) but the $100 non-refundable "order fee" should be counted as revenue as soon as it's received.