Tesla ditches reservations, opens up Model 3 car sales to all customers in North America

A parking lot of predominantly new Tesla Model 3 electric vehicles is seen in Richmond, California, U.S. June 22, 2018.

Stephen Lam | Reuters
A parking lot of predominantly new Tesla Model 3 electric vehicles is seen in Richmond, California, U.S. June 22, 2018.

Tesla is taking orders for its Model 3 electric sedans throughout the U.S. and Canada, no reservations required.

Previously, would-be Model 3 owners had to put down a $1,000 deposit to secure a place in line to buy the car. Now, anyone in North America can order one via Tesla’s website.

Those who reserved a Model 3 early helped Tesla get a sense of the market’s demand for the cars well before the company was manufacturing them. Their Model 3 deposits also gave Tesla something of an interest-free loan.

Reservation holders and new customers alike must pay a $2,500 deposit to move their Model 3 orders forward. The deposits go toward the overall cost of their cars. The $2,500 to $3,500 total deposit becomes nonrefundable once Tesla assigns the customer a vehicle identification number, typically within a few days of their order. Tesla has required $2,500 deposits from people buying its earlier Model S and Model X vehicles.

Customers who sought refunds — both on their $1,000 reservation and $2,500 deposits — in recent weeks shared correspondence with CNBC that showed Tesla repays reservations in about two weeks, but refunds the $2,500 deposits directly to their credit cards within a few days.

The company also said orders for the Model 3 will be fulfilled in priority order based on a mix of factors including: whether or not a customer had a reservation, the date of their order, their selected vehicle configuration and the location of delivery, the company said.

When it makes new Model 3 options available, Tesla intends to give reservation holders priority to buy those cars first. Some reservation holders are waiting for the base version of the Model 3, which Tesla promised to sell for a very accessible price of $35,000. Others are waiting for Dual Motor and Dual Motor Performance versions of the Model 3.

So far, Tesla has produced versions with premium features, such as longer range, a higher top speed and all-wheel drive, which cost between $49,000 and $72,000.

Tesla ended the first quarter with a cash balance of $2.7 billion. It said then that it still expects to spend $3 billion.

Deposits for Model 3 vehicles could give Tesla some of the cash that it needs without having to further dilute earnings through stock sales or by issuing debt. Encouraging customers to commit to higher-priced, premium Model 3s could also help Tesla in its quest to attain profitability this year.

In its most recent quarterly filing, Tesla noted that “Customer deposits are included in current liabilities until refunded or until they are applied towards the customer’s purchase balance.” Tesla recognizes deposits as revenue only once the customer picks up their car and the full purchase is made, or when they cancel their order, if it’s past the point when they’d be able to get a refund.

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