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article imageTesla reportedly facing accelerated rate of refunds for Model 3

By Karen Graham     Jun 4, 2018 in Business
Even though production of the Tesla Model 3 is up, a new report alleges that the automaker has refunded 23 percent of deposits for the electric car.
Tesla started accepting deposits for its Model 3 back in April 2016, accounting for about 60 percent of all the Model 3 deposits made to date. However, with production delays, the fully refundable $1000 deposit was no problem for the majority of people waiting for months for their car.
Initially, Tesla received 325,000 reservations for the Model 3, the number quickly rising to over 400,000 within a month. In August 2017, Tesla disclosed the gross and net Model 3 reservations, revealing a refund rate of 12 percent, or about 63,000 cancellations.
And production of the Model 3 has ramped up. According to the company, it's producing more than 2,000 cars a week and continues to target a production rate of 5,000 Model 3 cars per week by the third quarter.
By April this year, after Musk announced Model 3 deliveries would be delayed six to nine months, fully 18 percent of deposits were refunded. This was the largest share out of any month, according to Second Measure.
However, it must also be noted that this was also the time when the largest share of configuration fees — the non-refundable deposit customers put down to customize their vehicle shortly before they receive it — were spent. This is probably tied to the ramp-up in production.
As of April 2018, the configuration fee was $2,500. It should be pointed out that some customers with deposits for the Model 3 have gone ahead and opted for the Model S or X. As of April, eight percent of U.S. Model 3 depositors had configured a Tesla for production.
However, despite all the talk of refunds, Model 3 deposits have remained stable, showing the consumer's confidence in the electric car and the head of the company. But something else could be driving the number of cancellations this year — the federal tax credit of $7,500. It is about to run out as Tesla reaches 200,000 vehicles sold in the U.S.
Then, there is one last thought — With the shareholder meeting taking place tomorrow, it is interesting that this report on alleged increased cancellations of deposits has come out at this time.
More about Tesla, Model 3, Refunds, Deposits, federal tax credits
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