Tesla is asking for just $100 for a Cybertruck reservation after initially making Model 3 reservation-holders pay $1,000. Here are possible 3 reasons why the Cybertruck deposit is lower. (TSLA)
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- The $100 deposit required to reserve a TeslaCybertruck is much lower than those the electric-car maker previously set for its Model 3 sedan ($1,000) and Model Y SUV ($2,500).
- Tesla has not yet explained why it set the Cybertruck deposit at $100, but there are a number of possible reasons why.
- The electric-car maker may have wanted to boost future sales by maximizing the number of people who would make some kind of financial commitment to the Cybertruck.
- And a large number of reservations could reinforce investor optimism about Tesla’s ability to generate demand for its vehicles.
- Tesla may also have predicted that a $100 reservation price would generate more cash than any other price point.
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Tesla’s November 22 unveiling of its Cybertruck pickup truck contained a number of surprises, including the truck’s unusual design, an unsuccessful attempt to demonstrate the strength of its window glass, and the $100 refundable deposit required to make a reservation.
The Cybertruck deposit is much lower than those Tesla initially required for its Model 3 sedan ($1,000) and the current deposit amount for the Model Y SUV ($2,500), both of which have starting prices that are similar to the Cybertruck’s ($39,900). Tesla has not yet explained why it set the Cybertruck deposit at $100, but there are a number of possible reasons it did so.
Tesla did not immediately respond to a request for comment on the reason it chose $100 as the deposit price.
Boosting future sales
Turning a potential customer’s excitement about the Cybertruck into even a small financial commitment could have a disproportionately large impact on that person’s decision to buy the truck once production begins in late 2021. Making any kind of meaningful step toward purchasing the truck now could increase a potential customer’s level of excitement and encourage more rigorous planning, like beginning to save money or declining to buy a competing vehicle over the next two years. That could make that person more likely to a buy a Cybertruck when it becomes available, relative to if they had just followed its development through Tesla’s announcements or media reports.
Maximizing the number of people who make any kind of financial commitment toward buying a Cybertruck could boost sales in the long run.
Increasing investor confidence
Tesla may have decided that it wanted to maximize the total number of reservations it would receive for the Cybertruck, which could increase the confidence investors have in its ability to generate demand for new vehicles. Tesla’s stock price (around $338, as of Monday afternoon) is significantly higher than those of General Motors (around $36), Ford (around $9), or Fiat Chrysler (around $15), despite the fact that all three of those companies make more money than Tesla does. Tesla’s stock-price premium indicates that investors are much more optimistic about the electric-car maker’s future prospects than those of its rivals. Showing investors that hundreds of thousands of people are willing to pay to reserve a vehicle that won’t be released for another two years could reinforce their optimism.
“Tesla absolutely needs to maintain excitement and hype among the investment community,” Ed Kim, the vice president of industry analysis at the automotive research firm AutoPacific, told Business Insider via email. “A low deposit amount certainly helps to increase the potential reservation count and demonstrate the sales potential of the Cybertruck to investors.”
Tesla has promoted its reservation numbers for the Model 3 and Cybertruck but declined to do so for the Model Y, which has the highest reservation price of the three.
On Sunday, Tesla CEO Elon Musk indicated that the company had received at least 200,000 Cybertruck reservations. But during an earnings call in April, Musk declined to disclose the number of deposits the company had received for the Model Y, saying people “read too much into” deposit numbers.
Maximizing near-term cash
Tesla may have predicted that a $100 reservation price would generate more cash than any other price point. While the Cybertruck deposits are refundable, Tesla can spend them before deliveries begin, which could help defray the costs of the Cybertruck’s development. Even if a reservation-holder ultimately decides not to buy the vehicle and asks for a refund on their deposit, that money will have amounted to an interest-free loan for Tesla.
But Tesla has more cash now than it did when it opened deposits for the Model 3 in 2016, so the company may have chosen a lower reservation price specifically because it doesn’t have an urgent need for new funding, said Gene Munster, a managing partner at the venture-capital firm Loup Ventures.
“They didn’t need the money like they did with Model 3,” he said.
Tesla said in its most recent earnings report that it had $5.3 billion in cash at the end of September. In the last earnings report before Tesla opened Model 3 reservations in March 2016, the company said it had $1.2 billion in cash.
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