Tesla Crosses One Thing Off Their List Of Many

Tesla Crosses One Thing Off Their List Of Many

The car industry can be hit and miss and Tesla may have just hit one out of the park.

The incredible response to Tesla’s Model 3 is great news for the company. The company has more than doubled the 115,000 pre-orders it had received before unveiling the car last night, with CEO Elon Musk reporting more than 232,000 orders as of late Friday. For a company with just $1.2 billion on its balance sheet, $1,000 deposits on those vehicles represents nearly a quarter billion dollars — a significant boost to working capital. But that’s not the best part of what has happened for Tesla over the past two days.

Most importantly for the company, Tesla has — without spending more than a token amount on an intro event and some extra staffing in its retail stores — found buyers for what likely amounts to the first two years of production for the Model 3. And given that the car won’t ship until the end of 2017 at the earliest, it’s possible the vehicle will be sold out through sometime in 2020 before the first owner receives a set of keys.

Big steps, small footprint

As I wrote 2 years ago, Tesla’s relatively small footprint of dealerships puts it at a major disadvantage versus other luxury automakers like BMW and Mercedes. Musk made a nod to this at the Model 3 event, saying Tesla would expand from 215 showrooms to 441 by the end of next year. But even with that growth it will have far fewer locations than competitors to go see a car, talk to an expert about it, and get comfortable with making a purchase. Thanks to those Model 3 reservations, Tesla now has a lot more breathing room to build out its footprint of dealerships. It also might find a solution to the legal woes that make it unable to sell directly to consumers in a handful of states (e.g. Texas) and restrict the number of stores it can have in several others (including New York.)

Tesla won’t close every sale from those deposits, of course. They are fully refundable and the long lead time will lead to some cancellations. A few would-be buyers will also be disappointed to learn they won’t be receiving the $7,500 federal tax credit for buying a Model 3 as Tesla will cross over the threshold of selling 200,000 cars sometime very soon after the first deliveries occur (More on this in an upcoming post). But it wouldn’t be surprising to find most of those deposits converting into orders.

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