The numbers have gone from unbelievable to almost unfathomable. Tesla now has more than 325,000 preorders
for its Model 3 sedan, a car no one will have on their driveway for at
least 18 months. It also has nearly four hundred million new dollars*
strengthening its somewhat thin balance sheet, interest free, thanks to
the deposits would-be buyers have handed the company to hold a spot in
line. As this remarkable week comes to a close for the company, three
things should stand out (1) nothing like this has ever happened in the
history of any consumer product (2) the backlog is very likely going to get even longer and (3) the task ahead of Tesla is monumental.
What hath Musk wrought?
Tesla titled its blog post on the preorders, “The Week That Electric Vehicles Went Mainstream.” It’s a corporate blog, so the understatement is forgivable: This has been the week an electric vehicle became the subject of the most extraordinary pre-release consumer response the world has ever seen. Tesla believes the Model 3 will sell for an average of $42,000 (it will start at $35,000 so the company is making assumptions about typical option purchases) and that these orders now represent $14 billion worth of potential sales. The company called this “the single biggest one-week launch of any product ever.” Easily.
Still, it’s important to keep it in perspective. No one has bought anything; they’ve put down 2-3% of their purchase price on something many won’t see until late 2019. But if you compare this to, say, the opening weekend sales of a new iPhone (which are extraordinary, but have yet to break $10 billion), the consumer response is unprecedented.
Quite likely, this is just the beginning. Of the 325,000 reservations, 50,000 have come since last Saturday — after the hype had passed from the unveiling of the car. While the torrent has already slowed to a stream and could well slow to a trickle, Tesla’s history indicates the pipeline is unlikely to go completely dry.
Consider the following scenario: The first Model 3s roll off the assembly line in November of next year, with a few thousand delivered by year end. If new reservations were to come in at 10,000 per month in the interim, there would be 500,000 at the end of 2017. No doubt, more than a few would-be owners will cancel due to long waits or some concerns about the car that surface, but think about how many might be out there who would never order a car they haven’t seen in person. Or had a chance to test drive. Model 3 could be the hottest ticket since Hamilton.
The money keeps rollin’ out too: Product
development, production ramp up and the like will tax Tesla’s balance
sheet
Tesla titled its blog post on the preorders, “The Week That Electric Vehicles Went Mainstream.” It’s a corporate blog, so the understatement is forgivable: This has been the week an electric vehicle became the subject of the most extraordinary pre-release consumer response the world has ever seen. Tesla believes the Model 3 will sell for an average of $42,000 (it will start at $35,000 so the company is making assumptions about typical option purchases) and that these orders now represent $14 billion worth of potential sales. The company called this “the single biggest one-week launch of any product ever.” Easily.
Still, it’s important to keep it in perspective. No one has bought anything; they’ve put down 2-3% of their purchase price on something many won’t see until late 2019. But if you compare this to, say, the opening weekend sales of a new iPhone (which are extraordinary, but have yet to break $10 billion), the consumer response is unprecedented.
Quite likely, this is just the beginning. Of the 325,000 reservations, 50,000 have come since last Saturday — after the hype had passed from the unveiling of the car. While the torrent has already slowed to a stream and could well slow to a trickle, Tesla’s history indicates the pipeline is unlikely to go completely dry.
Consider the following scenario: The first Model 3s roll off the assembly line in November of next year, with a few thousand delivered by year end. If new reservations were to come in at 10,000 per month in the interim, there would be 500,000 at the end of 2017. No doubt, more than a few would-be owners will cancel due to long waits or some concerns about the car that surface, but think about how many might be out there who would never order a car they haven’t seen in person. Or had a chance to test drive. Model 3 could be the hottest ticket since Hamilton.
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