With a higher base price and lower reservation costs, Tesla's Cybertruck could see a higher number of cancellations compared to Model 3.
Months after the Tesla Cybertruck was unveiled, pre-orders for the light truck are still on an upward trajectory. Per Wedbush Securities analyst Dan Ives, more than 650,000 Cybertruck reservations have been made so far.
On the surface, it should be exciting news for Tesla (NASDAQ:TSLA) bulls. More reservations mean spectacular sales, right? Not necessarily.
The Cybertruck’s design may be out of this world, but there’s a lot that has happened since it was revealed that could send the dreams of Tesla bulls crashing down to earth. In short, it’s too early to celebrate the impressive pre-orders.
It only costs $100 to reserve the Cybertruck. What’s more, the fee is refundable. For comparison, the Model 3 required a $1,000 refundable reservation price.
A month after going into production, the Model 3 boasted of 518,000 total reservations. About a quarter of the orders were canceled, resulting in net bookings of 455,000.
In the case of the Cybertruck, the reservation fee is ten times lower, and the vehicle’s average price is higher than the Model 3. Expect more cancellations with the bar placed that low. The reservation fee is also indiscriminating enough to attract a wider field, including the half-serious and jokers.
If 25% canceled after paying a reservation fee of $1,000 for a car valued at $39,000 to $56,000, more could out after paying a $100 reservation fee for a vehicle costing $40,000 and $70,000.
In the fourth quarter of 2019, Tesla reduced the reservation fee for the Model 3 but also made it non-refundable. Tesla will thus make money every time a Model 3 is reserved.
But with the Cybertruck, this is not the case. This time the reservation fee is fully refundable. Tesla won’t make any money from the early excitement the Cybertruck generated. Tesla cannot count on any revenues from the Cybertruck until the potential buyers have taken possession of the vehicles.
With its passenger cars, such as the Model 3, Tesla enjoyed a unique position concerning competition. As the electric carmaker ventures into workhorses, that advantage is no longer in play.
The electric light truck niche is a different animal. Already, the niche seems crowded with legacy truck manufacturers moving to protect their turf and startups strategically placing themselves to take advantage of a category that enjoys better margins than sedans.
Ford (NYSE:F), for instance, is set to introduce an all-electric version of America’s best-selling truck the F-150 in 24 months.
Startups such as Rivian and Nikola Corporation (NASDAQ:NKLA) are planning to release trucks at almost the same time. The former’s R1T light truck will go on sale later this year while the latter will open pre-orders for the Badger pickup truck at the end of this month.
Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com. The author holds no investment position in the above-mentioned companies.
Last modified: September 23, 2020 2:01 PM