Tesla lowers deposit (out of main)

[Shaggy]

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?

Exactly. The refundable deposit cannot be Tesla's cash, it isn't Tesla's money until they deliver. They get to earn the interest whever it is sitting however. The $100 is income as it isn't refundable so it is booked immediately.

 

[frnkblk]

Any chance the Model Y will go to a $100 non-refundable deposit?

 

[SnakesOnAPlane]

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.

Processing fees on $2,500 should never be more than about $87.50 on initial, and then sometimes there’s some to no fee returns on refunds, depending on the processor. Regardless, it adds up. Tesla is smart for doing this.

Are You Paying A Credit Card Refund Fee? | Merchant Maverick

Average fees for the four major networks:

• American Express – 2.5% to 3.5%

• Discover – 1.56% to 2.3%

• Mastercard – 1.55% to 2.6%

• Visa – 1.43% to 2.4%

 

[Doggydogworld]

... the $100 non-refundable "order fee" should be counted as revenue as soon as it's received.

In theory they might be able to do this if they went to the trouble of tracking order processing COGS. They don't seem to have that level of cost accounting granularity, though. Heck, they don't even split SG&A out by segment. I've literally never seen that before.

I see no way they take on the cost accounting hassles for a mere 20m that will count as revenue sooner or later, anyway. It's just not their style. Nor should it be.

 

[Jpot]

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".

Last night I ordered a USED TX on line. Then I thought - I had better check to determine if it has a CA HOV sticker, if so - which one.
Today I went to Tesla in Newport Beach Fashion Island. I got two young smart ass salesmen, no one else in the store at 3 pm today. They could not help me and they did not want to help me find out if this used car had a sticker. If there was a sticker, then I was going to order a NEW car - no luck. I walked out. If they worked for me, I would fire them. This was the same super unprofessional experience I had when i bought my T S.... Elon, you need to hire "mature professionals" - regardless of age.

 

[Thekiwi]

Considering the price rise today on Model 3 ($500 on SR+, $1000 on P).

on 100,000 cars that is at least $50 million in additional gross margin.

not sure why my post above was moved into this thread - it’s about a price increase on model 3, not about the change in deposit amount.

 

[StealthP3D]

In theory they might be able to do this if they went to the trouble of tracking order processing COGS. They don't seem to have that level of cost accounting granularity, though. Heck, they don't even split SG&A out by segment. I've literally never seen that before.

You do realize there is internal accounting and then there are the published results? Just because they don't break it out on the published results doesn't imply they have no idea what it is.

Tesla uses computers to do their accounting. They track all this stuff with spreadsheets and databases. What you're calling troublesome is nothing of the sort.

 

[StealthP3D]

The $20 million would not be deferred revenue because it would be comprised entirely of order fees. Tesla earns the $100 as soon as they take your order and they don't have to give it back if you cancel so it's not deferred revenue.

I've had second thoughts on this. If Tesla can't deliver your vehicle for any reason, then they would need to return the order fee. So they probably do defer the revenue until they have delivered the vehicle.

 

[mongo]

I've had second thoughts on this. If Tesla can't deliver your vehicle for any reason, then they would need to return the order fee. So they probably do defer the revenue until they have delivered the vehicle.

Why wouldn't Tesla be able to deliver a vehicle? (Beyond not making that version any more?)

Seems fully nonrefundable from the order agreement:

Order Process; Cancellation; Changes. After you submit your completed order, we wil begin the process of preparing and coordinating your Vehicle delivery. At this point, you agree that the Order Fee has been earned. If you cancel your order or breach this Agreement and we cancel your order, you agree that we may retain as liquidated damages the Order Fee, to the extent not otherwise prohibited by law. You acknowledge that the Order Fee is a fair and reasonable estimate of the actual damages we have incurred or may incur in transporting, remarketing, and reseling the Vehicle, costs which are otherwise impracticable or extremely difficult to determine. If you make changes to your order, you may be subject to potential price increases for any pricing adjustments made since your original Order Date. Any changes made by you to your Vehicle Configuration, including changes to the delivery location or estimated delivery date, wil be reflected in a subsequent Vehicle Configuration that wil form part of this Agreement. The Order Fee and this Agreement are not made or entered into in anticipation of or pending any conditional sale contract.

 

[StealthP3D]

Why wouldn't Tesla be able to deliver a vehicle? (Beyond not making that version any more?)

Seems fully nonrefundable from the order agreement:

I agree it would be unlikely for Tesla to back out of the purchase/sale agreement. But do you agree that if they did they would need to refund the order fee? In the following sentence, Tesla hinted that even if the customer backs out of the sale, it may be illegal (presumably in states with strong consumer protection laws), for Tesla to keep the fee:

If you cancel your order or breach this Agreement and we cancel your order, you agree that we may retain as liquidated damages the Order Fee, to the extent not otherwise prohibited by law.

But if Tesla backs out of the agreement (without a breach of the agreement by the customer) then I believe consumer protection laws in many (if not most) states would prohibit Tesla from keeping the order fee. And while this situation is not likely to occur, the fact that it could happen probably means the revenue is booked as deferred. However, not being an accountant, I can't say it's impossible that the rules regarding revenue recognition might allow it to be booked immediately if the chance of the revenue being returned is remote enough. I just don't know what the standard is but I expect it's somewhat stringent. that's why deferred revenue exists in the first place.

 

[CorneliusXX]

I've had second thoughts on this. If Tesla can't deliver your vehicle for any reason, then they would need to return the order fee. So they probably do defer the revenue until they have delivered the vehicle.

It would be reasonable enough to assume that Tesla can deliver vehicles to those that have ordered vehicles. It's more likely that they would recognise the fee immediately, and reverse it at the point of refund.

 

[Fact Checking]

It would be reasonable enough to assume that Tesla can deliver vehicles to those that have ordered vehicles. It's more likely that they would recognise the fee immediately, and reverse it at the point of refund.

I'm not sure that's the threshold for revenue recognition: 99% of cars are delivered to customers, yet the revenue of the purchase price is only recognized if the car has been delivered and all paperwork has been completed.

If the "Order Fee" might have to be reimbursed if delivery has not been completed due to Tesla's fault, then they might not immediately recognize the $100.

But there's some wiggle room: if the "performance" by Tesla is the "order processing" at the beginning of manufacturing (VIN allocation, etc.), then they could recognize it early and reverse it in the few cases there's a reimbursement. They could even name this the "VIN Allocation Fee" to stress that.

So both revenue recognition variants are valid I think, it's discretionary to Tesla.

 

[StealthP3D]

It would be reasonable enough to assume that Tesla can deliver vehicles to those that have ordered vehicles. It's more likely that they would recognise the fee immediately, and reverse it at the point of refund.

That makes a lot of sense.

 

[mongo]

But there's some wiggle room: if the "performance" by Tesla is the "order processing" at the beginning of manufacturing (VIN allocation, etc.), then they could recognize it early and reverse it in the few cases there's a reimbursement. They could even name this the "VIN Allocation Fee" to stress that.

That's my take:

At this point, you agree that the Order Fee has been earned. If you cancel your order or breach this Agreement and we cancel your order, you agree that we may retain as liquidated damages the Order Fee, to the extent not otherwise prohibited by law. You acknowledge that the Order Fee is a fair and reasonable estimate of the actual damages we have incurred or may incur in transporting, remarketing, and reseling the Vehicle, costs which are otherwise impracticable or extremely difficult to determine.

Opportunity cost fee?