Why Reserve?

Why Reserve?

Please don't jump on me for asking this question.

I've been following these forums for awhile now. And I see everyone reserving their model s. I just don't know why. As I'm reading over the forums, I'm seeing production starting mid 2012 and deliveries ranging from late 2012 - 2013. I've also heard horror stories from other car makers of their delays in production. So why reserve? Why not just wait til the car actually comes or, then buy it? Is their any benefit to reserving besides the reservation may get you the car a month earlier ? Or is it more drastic of a time frame?

Might be a dumb question, but I've never reserved a car before.

petero | October 29, 2011

Andrew18. I wouldn't now or ever... unless I won the big Lotto. Then maybe.

There are dozens of new cars available today that are over $100K. It is all relative to your salary or net worth.

There was an eccentric computer billionaire that did not want a license plate on his silver, Mercedes, AMG. He got around it by leasing a new, silver, Mercedes, AMG every six months thus avoiding the need for license plates in California.

brianman | October 29, 2011

I wish I could use a similar tactic to avoid getting a front license plate on my S. :(

If the state gov't was smart, they would make a front license plate optional for a vanity-plate-like fee.

Mycroft | October 29, 2011

The front license for the Model S isn't as weird as it is on the Roadster. If I had a Roadster, I'd risk the ticket; but I don't mind a front plate on the S.

Yes, it's probably pretty crazy to spend $100k on a car unless it's pocket change to you, which it isn't for me. But I'm making a big exception for this car. In fact, it's likely to be more than 100k after I pick the performance package. At least I don't have to pay sales tax on it in WA state.

Of course as soon as I have the S paid for, I have to start saving up for the Roadster 3.0! :-)

Klaus | October 30, 2011

Call it a leap of faith. When the Model S was unvieled in March of 2009 I was convinced Tesla had the right formula to make it happen. I had been following Elon and Tesla since the begining of the Roadster. Once the Roadster hit the streets I knew the company would succeed.

I plopped down my deposit in the first week (P#73) and since upgraded to Sig #280. Yeah it's expensive and I may never see a return on my investment, but I don't care. I've waited most of my adult life for something like this. I'm a dreamer and alternative energy has always fascinated me. Now after some 35 years some dreams do come true.

Slindell | October 30, 2011

If the Sig Model S that I want doesnt' cost under $85K, I'll just buy another Prius.

Mycroft | October 30, 2011

Slindell, if you're talking after deducting the $7,500 federal tax rebate, I think you'll be fine. Unless you add things like a pano roof or rear-facing child seats.

Andrew18 | October 30, 2011

I Wonder if we'll be able to remve options from a sig if we do not want them?
Also does anyone know if when you upgrade to a sig you lose your place in line for the production if you change youre mind again after finding out the final price?

Mycroft | October 30, 2011

I think they'll have alternates for most of the features of the Sig, although the exterior paint options are rather limited.

If they have air suspension included, then there won't be an alternate for that, but who would buy a Sig and not want the air suspension?

Nobody knows what'll happen to your place in line if you downgrade to general production.

Robert.Boston | October 30, 2011

The Model S is unusual in the wide range of delivered price: it seems likely that you'll be able to take delivery of a Model S for anywhere between $50k and $90k (or perhaps even more).

viao44 | October 31, 2011

Why reserve?

1 You are sold on the product
2 You want one really bad (early adopter)
3 You dont want an ICE anymore but dont want to sacrafice style or performance
4 You can afford to

That pretty much sums it up for me. 1-3 describe me, 4 is my issue. All I can afford right now is a KIA. I will have to join the EV community when I build one myself or the 'Model T EV' comes out.

Timo | October 31, 2011

I suggest you wait for that "Model T" in that case. It won't take that long, and probably costs less than you converting ICE car to electric. Then take a look at TCO ( and take a loan based on that: calculate difference between electricity and gasoline and probably also maintenance difference (no oil changes) and add that to monthly loan payment. You find out that you can afford quite a lot better car than you would otherwise.

gjunky | November 1, 2011

And there I thought the Model T was going to be a Truck :)

Model S = Sedan
Model C = Convertible or Coupe?
Model X = Cross Over / SUV
Model R = New Roadster?
Model P = Pickup :)
Model T = Truck / Taxi / back to basic model
Model V = Van (Cargo or Passengers)
Model A = Amphibian
Model B = dune Buggy

Just having fun with this. Nothing serious. I think we are set for a few years.

Volker.Berlin | November 1, 2011

In my logic, "T" is the letter alphabetically following "R"(oadster) and "S"(edan). Also it reminds me of Tin Lizzie which comes close to your interpretation as "back to basic model". For those reasons I tend to use it synonymously with "Blue star" (a term which has not been mentioned by either Tesla or the press for years now, I think).

Brian H | November 2, 2011

Ford could file for copyright infringement on the Model T! Model T2?

brianman | November 2, 2011

"Model T2"

Come with me if you want electric.

Volker.Berlin | November 3, 2011

Well, well... Actually, Model T stands for "T"hree series competitor! ;-)

Volker.Berlin | November 3, 2011

Back to the OT: Why Reserve? That's why!

"I think probably a lot of you don’t realize that this is just wearing out and our sales team but I think something that people were interested in buying the Model S should appreciate if that if the model S reservations continue to accelerate that it is very important for them to put down a deposits soon or they will be getting a car in 2014."

Elon Musk in the Q3 2011 earnings call (transcript):

Robert.Boston | November 3, 2011

I thought that was a bit of braggadacio. Combined production for 2012 and 2013 is slated for 25,000 vehicles. With "only" 7,500 or so reserved as of Nov. 1, a reservation today would still be delivered in Q1 2013. Reservations will need to double before we're even into Q3 2013 deliveries.

petero | November 3, 2011

Robert.Boston. “I thought that was a bit of braggadacio. Combined production for 2012 and 2013 is slated for 25,000 vehicles. With "only" 7,500 or so reserved as of Nov. 1, a reservation today would still be delivered in Q1 2013. Reservations will need to double before we're even into Q3 2013 deliveries.”

Robert, are you convinced Tesla can achieve 20K production numbers (January 1,2013 thru December 31,2013) ? I’m not. I think 20K is a goal that will need a 2 years to achieve. Tesla at NUMMI is a new company and it may be unreasonable to expect them to ramp up so quickly. There are a lot of logistics to overcome and $$$$ demands. Also keep in mind, the X is coming and they share the same production line.

Over extending like over promising can create problems. Tesla needs to grow… intelligently and be able to afford its’ growth. The pressure on Tesla to increase production will be overwhelming, especially after the Auto Press starts reviewing the “S”.

The bottom line is, Tesla will be a made to order Auto company for some time because demand will outstrip supply. The only way to get an "S" or "X" for the reasonable future is to reserve. The sooner the better.

Brian H | November 3, 2011

Remember, they can put on extra shifts if needed. The X could be produced on the evening shift, e.g., and not interfere with S output at all.

Volker.Berlin | November 3, 2011

No, no, Model T means "T"hird generation platform! It definitely refers to the project formerly known as Bluestar! :-)

Robert.Boston | November 3, 2011

I should ask an IP lawyer, but I'm guessing that Ford's trademark on "Model T" has lapsed. It's been a while since they sold such a product....

jackhub | November 3, 2011

I too, think it is wise to be conservative in our expectations. There are some formidable hurdles ahead. Nevertheless, the guy running the plant for Tesla is the same guy who ran it for Toyota. Browsing through the executive resumes, they have some other well qualified automotive dudes, too.

michiganmodels | November 3, 2011

@petero - Your post was not clear to me. Are you implying that Tesla does not have the capacity to produce 20K per year? Or are you implying demand might not reach 20K in 2013?

NUMMI has the capacity to produce 6,000 cars per week. Whether or not demand will reach 20K for 2013 is the only question. Tesla plans on producing over 20K units by Q4 2013 (both Model S and Model X).

Timo | November 3, 2011

NUMMI does not have that capability yet. To make 6000 cars / week you need more manufacturing lines than just one. Eventually when that entire factory is in use it will have that capability, but that takes some time. 20k should not be a problem though. 200k is.

petero | November 4, 2011

Michiganmodel. Sorry for being unclear. I understand NUMMI has immense production capacity (far in excess of 20K ‘S’ and 20K “X”). Also, I am confident that the demand for 20K “S” will exist in 2013.

My points are: timing and money. Tesla can and will produce as many cars as they can afford to make. Manufacturing cars is immensely expensive. I am not criticizing Tesla, management, or labor. – In fact I admire what they have accomplished in so little time and with so little money!

In my opinion, the profits from ‘S’ sales will not be enough to expand production, pay off loans, and pay dividends. When Tesla is ready to ramp up production for ‘S’ and later ‘X’ they will need a large infusion of capital. Tesla will need more equipment, more production line labor, afford inventory, etc. A second shift won’t accomplish anything if you can afford the parts. Tesla should not have to live hand to mouth, paycheck to paycheck. They need a lot more capital to the job they want to do.

There is no car company on the planet that can match what Tesla has accomplished. Tesla is amazing. By the way, Nissan spent something like $6 Billion developing the Leaf and getting it to production.

Michiganmodel. I appreciate your reservation forum. Could you give us an idea of reservations by state or region? Thanks.

Mycroft | November 4, 2011

petero, I disagree. I think if they can sell out of Model S's (and even more likely Model X's), then capitalization will be the last of their worries.

Mycroft | November 4, 2011

Oh, and michiganmodels can't provide more granular statistics on reservations because he simply doesn't have them. He's merely gathering numbers that people report on various websites and consolidating them into what you see here.

Robert.Boston | November 4, 2011

@petero: I wouldn't expect to see Tesla pay a dividend any time soon, and Tesla doesn't need to start paying back the loan until a year after production of the Model S begins (as I understand the loan terms from public reports). So, I don't think there will be a "cash crunch". Even if there were, if orders are flowing in faster than Tesla can make cars, I'm sure that a new equity issuance would be well received on Wall Street.

petero | November 4, 2011

Mycroft. “I disagree. I think if they can sell out of Model S's (and even more likely Model X's), then capitalization will be the last of their worries.”

Nothing would make me happier than Tesla funding capitalization from sales. Let’s say Tesla manufacturers 7,000 cars in 2012 and the average price is $80K. How much gross profit do you anticipate? My guess is $10K if they are lucky. Setting up production, working out logistics, arranging suppliers, purchasing inventory, staffing, salaries, etc. These are expensive times for our friends at Tesla. While $70 Million is a lot of money it is a fraction of what they need to do the job right.

Thank you for the clarification on my request from Michiganmodel on the statistics.

Volker.Berlin | November 4, 2011

In the Q3 2011 Shareholder Letter Tesla claims to be targeting a gross margin of 25% (twice your assumption) and Elon reinforced in the earnings call that this seems to be a realistic target. This is certainly not achievable while production is still being ramped up, but Tesla wants to get there with the planned-for 20k units/y sold. A gross margin like that should provide a solid basis for further investments in R&D as well as manufacturing (and for opening up further funding one way or the other).

michiganmodels | November 4, 2011

@petero - Mycroft is correct. I did not record states specific information for the reservations.

ckessel | November 4, 2011

As Volker.Berlin noted, Tesla has stated a 25% profit margin. At 20k a year, they're looking at 375 million in profit per year just on the Model S (given an average price of 75k).

Robert.Boston | November 4, 2011

Though that 25% margin is once the scale economies of manufacture and sales are realized. The lack of those economies initially will reduce the margin, which Tesla seeks to counterbalance by selling only heavily optioned-up cars initially (because it's widely known that options have higher margins than the base vehicle).

jackhub | November 4, 2011

In the 3Q conference call, didn't Elon say they had over $300 M cash equivalent on hand and that they needed no more money to produce the Model S and the Model X?

Robert.Boston | November 5, 2011

Yes, but "produce" means "begin delivery of cars". There will be significant cost-of-goods-sold expenses (labor, materials, parts, etc.) and inventory costs; clearly Tesla needs cash simply to run the business. I don't see this as a problem, though, particularly because Tesla will carry no finished inventory to speak of. I also expect that we will be asked to write another check to confirm our order.

jackhub | November 5, 2011

According to Elon, I believe on the 3Q earnings conference call, accounting rules require that all expenditures for production, before production begins, are shown as R&D. When production/deliveries actually begin those expenditures will be moved from the R&D account to expenditures for production. Does that mean that a significant pportion of cost-of-goods-sold are already on the books as R&D? That additional cost-of-goods-sold will be minimal?

Mycroft | November 5, 2011

Building all the alphas, the betas, and the RC's will count as R&D. Beginning with the Founder's series that are actually sold, the material expenses will shift over to cost-of-goods-sold.

jackhub | November 7, 2011

That suggests most of the costs of production are already on the books but in R&D accounts. At the time of first production, those costs will be moved to new accounts, but not increase the total costs. If that is the case, additional costs as production begins will be variable costs, proportional to the actual quantity sold.

Mycroft | November 7, 2011

"That suggests most of the costs of production are already on the books but in R&D accounts."

You may be confusing capital assets and production costs. Production expenses are things like labor, paint, plastic, aluminum, etc. etc.

So the labor and materials used to create the alphas, betas, and RC's would be charged to R&D. While those items used to create the founders series, the signature series, and general production would be charged as cost of goods sold, outside of R&D.

Plant equipment like the stamping machines and sprayers would be charged to capital equipment and expensed off in depreciation.

jackhub | November 8, 2011

Yes, that was my reference to variable costs- those costs that vary with production quantities when production begins. Under GAAP, until there is actual manufacturing output, plant and equipment for manufacturering are actually charged to R&D accounts. There are no capital equipment accounts until manufacturing begins. When actual production begins, those assets charged to R&D accounts that become production assets are then transferred from the R&D accounts to capital accounts and depreciat5ion and amortization begins. That's a net zero on the books. Sounds silly, but I believe that is the way it is done. I believe Elon commented on this during the 3Q conference call when he was saying that Tesla did not need any more funds to begin producing the Model S and the Model X, that most of the investment was already on the books as R&D.

AlexSV | November 9, 2011

I reserved only to be in the line. Just in case that I will like this trolleybus when they start a real production. To be onest I wasn't impressed with the roadster too much. It's fast. O.K. I've seen fast cars before. Cars are not about acceleration. Or at least, not only. Model S is a totally different animal. It's reasonably fast for sedan. It pretends to be luxurious. Well... At least it is possible to get in and get out and do not break the spine.
But at this point it's absolutely irrelevant. No matter what they say I am not going to sign any contract with Tesla before I have a real test-drive. I need to feel the ride, handling, breakers, seats and many other things. And it takes time. I don't care how people look at me, I don't care if they like my car, hate it, admire it. To be onest I don't even care how good EV for environment. I just want to make sure then I can feel and drive a trolley as a car. If I can I'll buy it. Despite the fact that I'm not sure that this start-up will even exist in six month.

Mycroft | November 9, 2011

I'm not even sure what the hell you're saying there AlexSV.

Are you saying that you won't buy the car if you don't like it?

sarge7359 | November 9, 2011

I think what he's saying is that he reserved so he'd have a spot in line once the test drives are available. He'll decide to buy after he test drives and figures out if it is worth it to buy. Nothing else about the car matters.

So he answered his "Why Reserve?" =)

Not sure why he keeps referring to it as a trolley tho. Might be a reference to the electrical drives for those vehicles?

Personally I think the car would need to suck wind for me to cancel my reservation. So many things about it just speak to me as a techie and buy local kind of guy.

Brian H | November 10, 2011

He must be British. He doesn't know there's an "h" in "honest".

michiganmodels | November 10, 2011

I don't understand his comment: "Despite the fact that I'm not sure that this start-up will even exist in six month."

If he believes this "fact," why pay $5,000 and get excited for a car that won't exist beyond a test drive?


petero | November 10, 2011

As painful as AlexSV’s comments seem, we did reserve, so we can get the car sooner. All of us will test drive an “S” as soon as they are available. And...if we do not fit in the car, don’t like the way it looks, feels, or drives we can and will bail.

Not everyone shares the passion. In a world of boring cars, Tesla is the most interesting new car. My only concern? High expectation, heightened by tons of anticipation. Seldom does a reality equal or exceed a fantasy. However, after driving a Roadster and Riding at Fremont I can hardly wait to get my hands on my “S.”

I am particularly fascinated by the Tesla team and how much they have accomplished. As I understand it Nissan spent $6 Billion designing and building the leaf and this did not include buying a factory...Just to build an ordinary looking EV with inadequate range.

Whether AlexSV buys or doesn’t is up to him. Be easy on him, he is being cautious, honest, and has begun the journey to enlightenment.

jackhub | November 10, 2011


Brian H | November 10, 2011

It's a fact that he's not sure, not that he believes it's a fact. Report back to Grade 8 for grammar parsing re-education!


Brian H | June 7, 2012

AlexSV | November 9, 2011

I reserved only to be in the line. Just in case that I will like this trolleybus when they start a real production.
Despite the fact that I'm not sure that this start-up will even exist in six month[s].

Six-months later update:
It exists! And beat the production prediction timeline.