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Help me understand the high (reported) cancellation numbers...

Help me understand the high (reported) cancellation numbers...

I'm math guy. It's how I approach everything. Actually, let me back up and first say that I am NOT trying to imply in this post that people shouldn't be negative, have concerns, etc. This is NOT ANOTHER POST to say "You're dumb if you cancel" - it's truly me, trying to ask you, to help me understand what is happening. Because I don't.

It is now being reported that as many as 25% of original (U.S.??) reservation holders have requested cancellation. Let's be conservative and say that is closer to 20%. Because it doesn't really matter for my questions, so we'll low-ball it. I don't understand why. Are there perhaps some people who feel the SR won't ever happen? Sure, but not 20%. Are there people who have decided to get another vehicle or simply never get this one? Sure, but not 20% of the original line. Are there people whose financial situations have changed or feel they can no longer justify the Model 3? Again, yes, of course.. but not 20%. I would totally understand if ULTIMATELY 20% of people decided not to get it... but that's AFTER the car is announced, prices are disclosed, etc.

I placed my deposit, like the vast majority of these 20%, back in April of 2016. I can safely assume the vast majority because we always have glimpses into when orders showed up, and that's honestly when the vast majority were placed. It is hard to imagine that anything more than 2 or 3 percent of that group of people suddenly need their $1000 back urgently... which makes me wonder why you wouldn't just leave it on the line until your invite arrives. THEN you make the decision, but at least you hold your spot.

The ONLY thing that comes to mind is maybe it became an emotional decision for many out of anger on timing, pricing, whatever - so maybe it's just that - but I don't get it. Otherwise, maybe the TIMELINE of drops isn't being accurately reported and the 20% (25%) represents "since day 1" drops? That would make a bit more sense to me, but still not even really.

pulsar2612 | 4 June, 2018

Honestly, I think the $1k reservation was low enough, plenty of people figured they'd jump in line and see what happens. At the time, there was very little competition for viable Plug-In electric cars (basically the Volt and the Leaf), not a lot of information about the car itself etc.

Two years is a long time to wait, people's circumstances change, there are competing electric cars, the wait for the $35k Model 3 is probably going to be more like 3 years and gas prices haven't been too outrageous lately while ICE cars are getting more efficient. There's lots of reasons people would have jumped on without full conviction to see it through and jumped off when their lives changed or when the final product was actually revealed.

PhillyGal | 4 June, 2018

There are A TON of reasons to cancel:

Finances changed
Family size changed
Health/location/needs changed
You got a Model S or X instead
The car has taken too long
The car is missing something you really wanted (eg: hatchback)
Your reservation was just in case you wanted it but you don't
You got another car all together
The car is too expensive at the moment and you don't want to keep waiting for the base

rxlawdude | 4 June, 2018

" it became an emotional decision for many out of anger on timing, pricing, whatever - so maybe it's just that..."

Yep.

aaron.graham | 4 June, 2018

My guess is many people both 1) didn't anticipate what the total cost of the car would be they way they want it configured and 2) they expected to be able to get full $7.5K federal rebate. A combination of those two factors makes the total purchase price of the car much higher than expected. Originally maybe they considered best possible price scenario ($35K less $7.5K rebate = $27.5K) and now they could be facing double that cost - ~$55K without any rebate.

PhillyGal | 4 June, 2018

*potential reasons.

Not to say that I believe that many people actually did cancel. If they did, I don't imagine most of them were serious anyway. It was very easy to plunk down a refundable deposit just in case you wanted one.

Xerogas | 4 June, 2018

@brian: unknown how accurate those estimates are by that 3rd party, but supposing they are: there will be some % of people who cancelled so they could buy Model S and X. I agree that a fully-refundable reservation can be somewhat of an impulse buy, and some folks just realized they wanted their money back.

Tesla2018 | 4 June, 2018

A lot of people might have been scalpers who thought they could get the car andxsell it for a quick profit, others probably thought they could get it for $35 K with all the options they showed at the reveal-glass roof, nice rims etc and get a rebate of 10K if they were in certaint states and feel like they have been bait and switched.
I follow Tesla but some people thought that self driving and autopilot was included and not another 8 or 9 grand.
I know a guy that cancelled since he said the wait was too long. My car is dying, so other people like me may have had to buy a new car right away. And people put money down before even seeing the car at the reveal. I was hoping for a hatchback and possible 2 door option, but those people probably cancel once they saw what the car looks like.
And then there are the Fudsters who say thatcTesla will be out of business by the end of the yearand you ate going to be stuck with a 2 ton panel gapped, exploding fire trap paperweight that no one can fix that is made by some crazy guy that wants us all to move to Mars.

jefjes | 4 June, 2018

Each of the things you mention may not in themselves been 20-25% but those plus many other personal reasons may add up to that number. For instance, a lot of life can happen over 2 years, more babies requiring larger vehicles are born over 2 years. Many unforeseen job disruptions could occur over 2 years. That unknown warrant sending you to prison could happen during two years. The marriage ends taking half your possessions and savings with it. Pre-reveal changed minds after actually seeing the car. Need the tow hook and hasn't happened. FSD was needed sooner and hasn't happened. People die all the time. Etc. etc. etc. Life is full of little and big surprises and 2 years bring lots of them to lots of people. I'm actually surprised that the number of cancelations isn't higher and that more reservations kept coming in so that the unfilled orders are still in the hundreds of thousands is a fantastic problem the other car makers only wished they had.

SO | 4 June, 2018

In the article, it stated there are still at least 450,000 reservations.

And there will be many more. Those people probably couldn’t wait that long.

ksalberta | 4 June, 2018

Those numbers are almost certainly right. The price people were expecting was 35K, and many of them were expecting the tax credit on top of that. Now the minimum they can get in for is 49K plus 1K delivery fee - and that is without Autopilot.

Further, the recent announcement about AWD is wonderful for those who had that money and really wanted that option, but it came with the concession that the 35K model is deferred behind those folks, which means many are wincing and realizing that they will get at best a $3,750 tax credit.

So many are looking at close to three years before they can have a chance at the car they wanted. They are not sure if they will be able to get it then.

And let's face it, for most people cars are a utility, not a luxury. They need a reliable car. They may be reaching the end of their lease. They may be looking at an increasingly unreliable car on which they do not wish to spend more money. You know that they waited to get into a new car because they had reserved a Tesla - so an ever-increasing number of people are in this position.

Those who have the money to do so (feel comfortable in borrowing to do so) are moving up to the higher-priced versions (configurations are rising ALSO), and those who don't have the money are increasingly yielding to reality and getting into their next, non-Tesla car. Some of them are going with the other options out there along the EV line.

It really is that simple. What you are seeing is the "Sort'. People are being pushed one way or another. There is nothing at all surprising or unusual about it.

badaman | 4 June, 2018

Most are thinking of buying a dream car for 30% off but then reality hit in the face and no choice but cancelled.

bj | 4 June, 2018

The total reservation pool has remained pretty constant over the last 2 years (based on Telsa’s reported reservation fund holdings), so whatever number of people are cancelling they are roughly being replaced 1:1 with new reservations.

gballant4570 | 4 June, 2018

Plenty of reasons people cancel. I may yet cancel, who knows. If I cancel, it will be because I decided I really need a model S instead of a 3. But if I had reserved two years ago, there could be many more reasons to cancel. The reported figure is 23%. A Tesla spokesperson was said to have disagreed with that number, but declined to correct it. When the same outside source previously estimated 12%, Tesla agreed with that number.

So, if 23% isn't correct, it's likely dam close. There are still a lot of reservation holders, who have a better chance at a larger tax rebate as a result of the cancellations.

Frank99 | 4 June, 2018

When I was in line two years ago, half the people around me were 18-25 year olds, college students, and most of them couldn't afford the Model 3, but were hoping that they would be able to two years later. It wouldn't surprise me if 25% of the reservations nationwide came from people similarly situated.
This isn't a particularly insightful report; arguments have gone back and forth here over the last two years about what percent of reservations would ever get redeemed. Beliefs ranged from 90% to 10%.

Garyeop | 4 June, 2018

I wonder when gas prices will push even more people to electric?

Rocky_H | 4 June, 2018

This is based on the vague "It is now being reported..."? I haven't seen anything like that.
And someone mentioned "the article", but I haven't seen a link or this supposed article people are talking about.
Is there any basis to this discussion? I'd like to find out whether there's any reality to it before discussing this "fact".

greg | 4 June, 2018

@ksalberta
For folks who want a SR Model 3 and who may have to wait up to 3 years for it.
For RHD day 1 reservers like me, many of us who will simply take any Model 3 offered, that enforced 3+ year wait is the reality - today.

Its also the truth that even after 2 years of waiting, you still can't buy as good an EV for the same money, with or without the Federal Tax Credit from anyone else either. And that situation won't change much in another year either.
Tesla is still the only real game in town now, and next year.

That is the sad part - for all the "Tesla killers" arriving soon that have been splashed over a thousand headlines and click bait articles, none that have the same set of features in the one package have landed - and even fewer are planned at a price point to the Model 3 SR that most can afford..

Bolt may have been closest so far. But try getting one of those base $35K Bolt models to fast charge [let alone supercharge] or be able to realistically take it on long trips without spending half the extended trip time plugged waiting for recharging, while an endless stream of Model 3 owners and ICE cars constantly drive past.

Yes Model 3's arrival at this EV party is very much later than it should have been, but the competitions arrival is now even later still - that's if it many of them even actually shows up at all.

If you want a Short Range EV, and a Full Tax Credit in the US, your current best option is a Gen 3 LEAF. But taking that option even with 1/3rd off the sticker price thanks to federal and local tax rebates still represents a heck of a lot of compromises over most ICE cars for similar money so most won't take that either.

Still once gas prices start heading up again all EV makers will see demand go even further through the roof as the ICE driving public sees the downsides of assuming the false reality of "forever this low" gas prices become apparent.

When that happens those "mugs" who put down a reservation in 2016 and waited up to 3 years for a SR Model 3 will not look dumb, they will look to be extremely prescient.

As the public scrambles to demand more EVs over time, only Tesla has the capability of actually making and delivering even a million EVs - thanks to their Giga-Factory 1 investments.

All other EV makers - not so much. They're still waiting on the miracle solid state battery that costs $5 a kWhr, recharges from flat in 5 minutes using any wall socket and lasts for 10 years.

wiboater4 | 4 June, 2018

Those cancellation numbers will help a lot of people get their cars sooner and maybe the tax credit. I think the % number is high. As long as more people are ordering who cares. The wait is already getting shorter and the shorter the wait the more people will reserve one. It would be nice if whoever did the survey could give a percentage for each reason, switched to Model S or X, got tired of waiting , etc.

minervo.florida | 4 June, 2018

Too long of a wait, life changes.

There will be so much more demand when people can get them sooner, it will not be funny.
You will not see a car this good or this cheap for about 10 more years.

czamara | 4 June, 2018

When I reserved my Model 3, I was thinking $35k with $10k in tax rebates, wow, what a cheap car! In reality the CA rebate wasn't an option (so only the $7500 federal), and the car was $56k. In my case I was able to still afford it and got the car, but I could easily see the dream being shattered and having to go with something less expensive. Waiting for the short-range version might be too long of a wait, and there is the danger of losing the federal rebate as well. So I can totally see a lot of cancellations for those reasons, then you add up all the others that have been mentioned above and 20% does not seem surprising.

Bighorn | 4 June, 2018

Number is speculation which Tesla has said is not accurate. I'd guess the biggest cohort is folks who decided to get a CPO Model S.

Frank99 | 4 June, 2018

aaand, Ninja'ed.

SO | 4 June, 2018

@Frank - just think of it as a different perspective. :-)

colvinam | 4 June, 2018

I bought an S

dgstan | 4 June, 2018

Did anyone mention the fact that we're now 2 years closer to a Model Y?

I'm sure a lot of people, including me, were hoping for a more utility than a sedan can provide. Sure, the Model 3 might have more space than a Camry, but after driving a Prius since 2004, I'm used to loading the thing up to the roof. I've had everything from a 65" TV to a 400 lbs. tool chest in the back of my poor Prius.

phil | 4 June, 2018

SO | June 4, 2018 "In the article, it stated there are still at least 450,000 reservations."

The article does not state that. It states that at one time the reservation count had grown to 455,000, but that the number may now have decreased.

https://insideevs.com/23-percent-tesla-model-3-reservations-refunded/

phil | 4 June, 2018

I think the more interesting number is that only 8% of depositors have "purchased a Tesla." So, the large majority of reservations remain, waiting.

Until Tesla manages to ramp up production, we won't really know what portion of reservations will convert to purchases. The ultimate purchase rate will be higher than 8%, and the cancellation rate will be a lot higher than 23%.

cascadiadesign | 4 June, 2018

A lot can happen in peoples lives in a 2 year span - marriage, divorce, home purchase, need a car right now, etc.

I think a major reason is fear that the full Federal Tax incentive won't be available, especially for those wanting the short range version. $7,500 would be a major discount on the base Model 3. And some people will buy anything if for no other reason, the price is too good to pass up.

It's like standing in line on Black Friday to get a major discount on a television. If the store is sold out before you can purchase, do you buy one anyway, or shrug your shoulders and go home? If you really want a TV and have the means, you'll buy one anyway. If you're on the fence and can barely afford it, you'll walk away.

ksalberta | 4 June, 2018

Greg - really, it comes down to affordability and the ability to wait. If you can't afford the current version, and you have to buy a car soon, you are forced to do something else.

That doesn't mean that in three to six years these people won't be buying a Tesla - but there are a limited number of people who can afford a $770-$900 car payment with insurance on top. If Tesla were offering leasing, that would be another story.

It may be a great deal from a value standpoint, but if you can't afford it you can't afford it. And there are some who can afford it but would not be comfortable with it.

I expect that most of the people who were in the market for the SR, (which includes those who want SR + Autopilot) will stay on hold as long as they can, but as time passes, more and more of them will be forced to get into another car.

You can lease either a new Bolt or a new Leaf for under $400 a month - that's a car that many can afford.

vmulla | 4 June, 2018

Where is the car that costs $27500 and can go over 200 miles on a charge? Not happening? What? We need to spend 5K more for it's most exciting feature? Interior appointments are comparable to an budget compact car for the lower end price point?

So what's the advantage of this EV? Such a disappointment!

With a narrative like that, I'm surprised over 300K people still want the car.

It did the trick didn't it? This 'situation' lit a fire under all the car manufacturers to take EVs seriously.

calvin940 | 4 June, 2018

In my case, my minivan was not going to last long enough to transition to my model 3. Sold my minivan privately while it was still running and bought a temporary used CX-5 to keep me going until my Tesla arrives. Some others may do something like that whereas others may decide to cancel and get something else.

Lots of different reasons. Pretty sure there have been more than enough different possible explanations identified here to satisfy the OP.

gregorypierce | 4 June, 2018

Have a friend who ended up canceling recently. During the wait, they ended up trying out a GM Volt and liking it (its ugly but actually not a bad car).

doelcm | 4 June, 2018

@Phil: "I think the more interesting number is that only 8% of depositors have "purchased a Tesla." So, the large majority of reservations remain, waiting."

In context, that number is not very interesting. The highest VIN is in the 30Ks. The number of reservations is around 450K. It's pretty dull math. Tesla hasn't made enough Model 3s for the percentage of purchasers to be higher than around 8%.

It might be interesting to know the percentage of people who were offered the chance to purchase, but deferred (without canceling). Or the number who canceled after being offered the chance to configure. Or a breakdown of the reasons for deferring.

dgstan | 4 June, 2018

For me, it's not about affordability, it's about value. Without the full tax credit, I'm not sure a Model 3 is a better use of my money than a new Prius Prime. At least, for my use case. I drive my cars hard and I keep them a long time. 95% of the miles I put on a car will be within a 25 mile radius (i.e. the electric range of the Prime). Presently, I have a Plug-in Prius and my commute it less than 8 miles, one way. I drive to and from work in electric-only mode.

Having a Tesla is not going to save me much money in fuel costs. I fill my tank every 6 weeks, whether I need to or not. What is appealing about the Tesla is that it's super-high tech, but if they can't get the key right and I can't listen to an iPod, then a lot of the lustre is removed.

Anyway, to the subject at hand: If the current delivery windows we've been given are supposed to be realistic, then there has got to be a metric sh!t-ton of cancellations. According to Tesla, my car should be ready June/Aug. According to that third-party online estimator, it will be ready at the end of October.

I reserved 4/3/16 and figure there are at least 200,000 people in front of me. If even half of those have deferred, that's still 70,000 more cars that need to be built. We're at roughly 10,000/month, so that's 7 months (Dec.). Now, if 25% of those are out of the equation, then Tesla's estimate could be closer, provided there continues to be a healthy ramp.

greg | 4 June, 2018

@doelcm

That 8% number is for 8% of the US Model 3 reservations, which is a percentage of that 450K, not all the 450K.

But from that we could estimate that the maximum total number of US Model 3 reservations is at most 12.5 times (100%/8%) the number of Model 3 VINs issued to date or 12.5 x ~30K = 375K.

Which I find 375K [of 450K] to be quite high as a percentage of total Model 3 reservations.

It will be actually lower for two reasons.

1. Of Total number of VINs not all have been issued/used on a Model 3 or delivered to a US reserver so actual "VINs used" for US Model 3s is lower.

2.. The actual number of depositors [and thus the percentage] who are recorded as subsequent purchasers is skewed lower than it should because Second Measure who came up with the 8% figure state that if a buyer uses a different payment method at configuration time from when they first deposited. They won't capture those numbers accurately. Their actual words "These findings may exclude some customers who used different payment methods for the deposit and configuration."

Given nearly 2 years has elapsed between depositing and configuring for most. The likelihood someone uses the **exact same** "payment method" [aka same Credit Card] to both deposit and configure is going to be less than 100%. But it won't be zero either.
As the credit card transaction matching [using anonymised card numbers] to the deposit and the configuration payment is the only way that Second Measure can accurately determine if these two seperate payments to Tesla are likely related to each other and thus represent a conversion of a [Model 3] deposit into a configured order for a Tesla.

Of course they can't know what kind of Tesla that configuration is for either as the configuration fee is the same for all models.

A Model 3 reservation->Model 3 order looks identical to a Model 3 reservation->Model S or X order.
Hence their hedging on that part too.

So all up actual US model 3 buyer conversion to configuration rates are likely higher than 8%, and VINs actually delivered lower, making the actual number of US buyers a much smaller total part of the overall reservation pool.

And also means that as the "8% of Model 3 reservation holders in the US have bought a Tesla" figure is likely suspect i.e. too low as well. So Second Measures findings overall probably don't match Teslas internal numbers that well hence why Tesla is not confirming or countering the numbers - yet.

greg | 4 June, 2018

@dgstan
Your metric sh!t ton of cancellations is actually a figure which is currently at the absolute worst in reality no more than 1.8 times the number Desposits made for a Model 3 in May 2017 .

We don't know that actual level of deposits made in May 2017, but that 1.8 times figure is what the "net effect" of the numbers is when you cut through the FUD and analyse the actual data behind that headline.

Given May 2017 was not the highest number of deposits recorded by Tesla, before or even since May 2017, the absolute number of additional cancellations received - since the 450K net figure Tesla reported for Q1 is going to be at most 4 weeks of production at 5K per week.

So your Model 3 is still quite some distance away. Especially if the number of deferrals to configure for AWD or other reasons is as high as we all suspect it is.

So all up you might get your car 1 month earlier. But for now I'd leave your reservation in place. You may get an early surprise.

I definitely suggest there will be a July delivery surprise for all non AWD folks who have configured prior to 1 July.
And it almost certainly comes with a 7.5K tax credit as well for any orders delivered prior to 31 December 2018.

MKM3 | 4 June, 2018

"dgstan | June 4, 2018
Did anyone mention the fact that we're now 2 years closer to a Model Y?

I'm sure a lot of people, including me, were hoping for a more utility than a sedan can provide. Sure, the Model 3 might have more space than a Camry, but after driving a Prius since 2004, I'm used to loading the thing up to the roof. I've had everything from a 65" TV to a 400 lbs. tool chest in the back of my poor Prius."

Exactly the same here. With Tesla having a great track record for building amazing, fast, beautiful hatchbacks / 5 door sedans, I was simply expecting to see one, especially after reports about the trunk / hatch being changed after the initial reveal.
I also have to lug around elderly people so the seating of my current car already is low, I guess I'd have to pull them out of the 3.
Not offering an AWD Model without the performance boost and no towing options did the rest.

There are no incentives for buying an EV in my country, so I fixed my 15 year old clunker to prolong it's life until it'll hit 20 years, bought an additional small hybrid that I can run for about the same as the cost of electricity for the 3 (without the driving pleasure of course) and just wait for the Y - or any other EV model that suits my needs.

Middledawg | 5 June, 2018

If you can swing it for the high price, MKM3, the MX is your best bet for hauling around elderly relatives. The FWD opens up and they slide right in. It's perfect for carting around octogenarians.

phil | 5 June, 2018

doelcm | June 4, 2018 "Tesla hasn't made enough Model 3s for the percentage of purchasers to be higher than around 8%."

Yes, that was my point.

MKM3 | 5 June, 2018

@dmm1240
Absolutely! The Model X would be nice, but a nightmare to park around here. The parking spots have been sized somewhere around the 80ies or 90ies, when cars were pretty tiny. It's already hard to park my bigger car (about the size of a Camry), a behemoth the size of a Model X would be dinged up in a matter of days (not necessarily by me, but by other careless people), also I don't drive enough to compensate for depreciation.
For me personally, considering the size, a Jaguar i-Pace would fit perfectly... if it would only charge faster (only 7kW on AC), there would be a supercharger like network around and cost €30k less.

To me a car is a tool, if it offers creature comforts: nice. I could afford a loaded X or S, but I can't justify spending that much money for a car. My personal limit for an EV is around €50k. That's still more than what both of my cars cost me new (Toyota Avensis and Yaris Hybrid).

dd.micsol | 5 June, 2018

The majority of cancellations are of international not domestic. The cancellations accelerated when Elon announced the delay to 2019 for international orders. I'm not worried. When Tesla can put cars on service center lots they'll sell faster than fireworks right now.

greg | 5 June, 2018

@dd
The cancelation numbers cited by Second Measure specifically state they are for US Model 3 reservations.
So international reservations are presumably not included.

brian | 5 June, 2018

Wow, didn't expect this kind of interaction. Some great comments above. Will read all of them later. Right now, clients are being annoying and hitting me with work requests bright and early. :(

hpn | 5 June, 2018

Question...For the number of reservations that cancelled, does it include people that cancelled to buy a model S or X?

Like my friend...reserved a model 3 but decided to buy a new Model S.

bpaul | 5 June, 2018

The numbers given by Second Measure are consistent with the approximately 30% conversion rate I've seen reported on the S and X when they were first reserved. That's a 7-to-3 cancellation-to-order ratio. Second Measure is reporting a 23-to-8 cancellation-to-order ratio for US M3s reservations currently. Since we can cancel anytime, but we can only order when invited, I'd expect the current ratio to be an overestimate of cancellations. If Vegas asked me to set an over-under line on the M3 take rate on US orders, I'd set it at 38% and tell them they were crazy for asking me.

hokiegir1 | 5 June, 2018

I do believe the 23% was a "all time" cancellation number, and I think that's reasonable for all the reasons mentioned above. Life happens. Things change.

But I also think as more people see, ride in, and hear from owners, there will be more reservations added. We regularly go to a local froyo place, and 3 out of 5 times since we picked up the car, we've noticed someone looking at it and let them sit in it and told them about it. Last night was a guy in an Audi A6. He loved it.

LostInTx | 5 June, 2018

As Frank mentioned, a whole lot of fellow line-waiters were 20something's who looked like they just crawled out of bed, perhaps thinking they were in a line for Starbucks. If they were serious about buying a Tesla, the magical and mythical $27.500 version was what they almost certainly had in mind. It just didn't look like a $55K kinda crowd.

jjgunn | 5 June, 2018

Even if 30% of original reservation holders cancelled.

Are we including people that have reserved after April 2016?

I was in the Tesla showroom & a couple came in to put a reservation down.

They're receiving 100's every week.

I reserved in Feb 2017. Decided to buy an MX. Still have M3 reservation. Don't see a reason to cancel

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