Tesla unveiled Model Y last night and we were fairly impressed by what the automaker was able to do to transform Model 3 into a crossover with 7-seats and still up to 300 miles of range.
That said, the accomplishment is now being overshadowed by a questionable rush to order from Tesla in what appears to be an attempt to bring in more cash.
This is clearly a departure from Tesla’s previous reservation process during which the company has taken a $1,000 refundable deposit until the vehicle is closer to production. At that point, it converted reservations to orders and accepted the $2,500 deposit.
Unlike that process, Tesla actually writes in the Model Y order agreement that it is not a deposit but a “pre-order payment” to cover “processing costs”:
“Pre-Order Process; Cancellation; Changes. After you submit your completed pre-order and the options you selected become available in production, which we expect to begin in the fourth quarter of 2020, we will begin the process of matching your pre-order to a vehicle and coordinating your Vehicle delivery. Your Pre-Order Payment covers the cost of these activities and other processing costs and is not a deposit for the Vehicle. Until your Vehicle is delivered to you, you may cancel your pre-order at any time, in which case you will receive a full refund of your Pre-Order Payment. Until your pre-order is matched to a vehicle, you may make changes to your Vehicle Configuration. If you make changes to your Vehicle Configuration, you may be subject to potential price increases for any pricing adjustments made since your original Pre-Order Date. Any changes made by you to your Vehicle Configuration, including changes to the delivery location or estimated delivery date, will be reflected in a subsequent Vehicle Configuration that will form part of this Agreement. When you take delivery of the Vehicle, we will provide a credit to the final pre-order price of your Vehicle equivalent to the amount of the Pre-Order Payment you paid. This Pre-Order Payment and this Agreement are not made or entered into in anticipation of or pending any conditional sale contract.”
The automaker still notes that the $2,500 “pre-order payment” is refundable.
Normally, this part of Tesla’s buying process is nonrefundable. Here’s Tesla’s Model 3 order agreement:
But this part normally only comes a month or two before the planned delivery. In this case, Tesla is starting the process over a year before they plan on delivering the vehicles.
We contacted Tesla about the change and a spokesperson said that Tesla wouldn’t declare revenue from those “pre-order payments” until the vehicles are delivered.
They explain the reason for the change in the reservation/ordering process as an attempt at making it more “straightforward”.
Here’s the full Model Y order agreement:
First off, I know some people are underwhelmed by Model Y, but I actually like it a lot.
I agree that it does look like a slightly higher version of Model 3, but if you already have such a successful sedan it makes sense to make a crossover version of it and it’s not that easy to convert a vehicle like that and fit those new capabilities, like 7-seats and a hatch, while still making the car look good.
When it comes to the actual Model Y launch, the only thing I was disappointed about is that Tesla didn’t show the hatch opening.
I think the Model Y’s hatch is the vehicle’s most important feature compared to Model 3 and yet, they decide not to show it?
Same goes with the third-row backseat, which was folded down during the test rides.
But now let’s talk about this weird pre-ordering process that replaces Tesla’s usual reservation process.
After Tesla made several puzzling moves lately, like significantly cutting employee compensation and virtually offering short-term discounts on vehicles and features, we have been suspecting that Tesla is under a significant cash crunch this quarter.
I think this might be further evidence of that.
Tesla has never taken orders like this over a year before the actual planned deliveries.
It looks like a way to bring in more cash during a difficult time for Tesla financially this quarter.
I get that it’s still refundable and therefore, buyers might not care, but how is it refundable if it’s a fee for processing your pre-order and not a deposit? The exact same payment for Model 3 is not refundable.
I am curious to see if Tesla will disclose pre-order numbers this time. In our pre-launch show, Seth and I discussed how the experience of Model 3 reservation holders may result in a lower number of reservations for Model Y even though we think the demand for the crossover is higher than for Model 3:
Maybe Tesla opening orders like that right away is a way to counter this feeling that it isn’t really an advantage to place a reservation.
I tend to think that it’s more of a way to increase their cash position at the end of the third quarter.
What do you think? Let us know in the comment section below.