Published on December 31st, 2018 | by Paul Fosse0
Should I Buy A Tesla In The Year-End Rush?
December 31st, 2018 by Paul Fosse
The short generic answer to the question in the title is, “Yes.” I bought my Model 3 months ago and love it. You can read more about that in my author archives. But there are other matters to consider and people have different factors to consider. So read on for nuance and some considerations regarding Tesla.
Every week, it seems like we thought Tesla would run out of Model 3 cars that week. But the company kept its production up and apparently worked through its backlog of orders a few weeks ago. The people who still have reservations fall into 3 categories:
- They are waiting for a cheaper car (the $35,000 car) or for leasing to be offered on the current Model 3s.
- They are in part of the world where you can’t get the Model 3. This is everywhere except the US and Canada.
- They changed their minds or had something come up that they can’t buy a car right now.
So, although Tesla still gets a few thousand new orders every week from new people who discover the Model 3, it isn’t enough to sell the automaker out, even though the US federal tax credit being cut in half for Tesla buyers in 2 days is focusing people’s mind.
Availability of Cars
Although I expected Tesla to sell out of its inventory this week, it appears that availability is little changed from what I found last week. The local sales offices tell me that Tesla has a group of cars ready for same-day ordering and delivery, as long as I can be somewhat flexible on the options I want.
I checked with Tesla in Tampa, St. Louis, and Denver. The cars are selling quickly, but not quickly enough to be sold out. Generally, I’ve been having them send me 2 or 3 links for a friend who I’m helping decide on which to purchase, and when I check the links a couple days later, they are usually dead (which I think means the car is sold). When I call the dealer and ask for more links, they find 2 or 3 more cars that meet the specifications that I request.
What I surmise from this is they either have a big inventory they are working through or they are able to restock at least as fast as they are selling. Once the tax credit is reduced on Tuesday, although I know they will start to allocate much of the production to Europe and China, they won’t want sales to drop too much in the US, so I think that means they will pull one or more “demand levers.”
Back in October, we put out an excellent article on all the ways that Tesla can increase demand for its cars. Some of those levers have already been pulled, such as geographic expansion and the new Mid Range battery pack. Others, like tax credit matching, free Supercharging for long periods of time, and free wall chargers are possible but will cut into gross margins at a time they are determined to remain profitable.
Many in the US would be thrilled to see the Standard Range battery come out now (and they did do a good job of keeping the Mid Range battery a secret until release), but the website still says the standard battery is 4 to 6 months away. Note that 4 months ago the site said 6 to 9 months away, so I think it is unlikely they will open up orders for the Standard Range battery this week. In addition, it’s only been a month since Elon Musk sent an email to all employees saying it would cost $38,000 to build the $35,000 car, and asking those employees to help find ways to cut pennies off of each of the 10,000 or so parts and processes needed to put the Model 3 together.
My bet is that leasing and/or subscriptions are the best way for Tesla to lower the total monthly cost to new owners without taking the margin hit some of the other options do. It also is exactly 7 months since Elon predicted we would have Leasing in 6 to 9 months. His reason for not offering it then was cash flow (which was quite negative 6 months ago). Cash flow is greatly improved now, so that should not be a major issue any longer.
So, what is the answer to the question I posed in the title of this article? Should you buy now or should you wait to see what Tesla will announce in 2019?
I can’t tell you that, of course. For the answer, you have to look inside yourself.
If you are a risk taker (I am) and/or are not satisfied with the current choices (I think the current choices are great), waiting makes sense. I don’t know what demand lever Tesla will pull, but I’m sure they will do something to sweeten the deal after the tax credit is lowered on January 1st. My guess is Tesla will either offer leasing or find a way to lower the price a few thousand dollars to the low $40,000s.
On the other hand, if you value security and hate surprises, and you are happy with the cars available now, there is no reason not to lock in a great deal and get the larger tax credit!
You can use my Tesla referral link to get up to 9 months free Supercharging (6 months if you have test driven a car with Tesla) on a Model S, Model X, or Model 3. Here’s the code: https://ts.la/paul92237
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