Tesla: Making Model 3 Deposits Count

| About: Tesla Motors (TSLA)

Summary

Tesla reported 325,000 refundable deposits for its new Model 3.

The deposit number is above most estimates. Naysayers are suggesting most of the deposits won't stay put.

Tesla needs to offer other flavors of deposits.

OK I admit it right here on an investment site. I have "invested" $1,000 in a Tesla (NASDAQ:TSLA) Model 3 deposit. As of Thursday morning, it looks like I am one of the 325,000 clever value and growth investors:

Click to enlarge

But I am also a Tesla call option holder. Given the huge success on the deposit front, I'm concerned about the negative thoughts whirling around about dilutive equity offerings and disappearing deposits, which some believe won't stay put until the car is finally produced.

Here are two ideas for Tesla to consider adding on the Deposit front.

First, Tesla should generate some more interest-free money by offering another flavor of refundable deposit. For example, "Put down a refundable deposit of $5,000 now and you will receive a $2,500 discount on the Model 3 and options once the final pricing is established."

I'd hazard a guess maybe a third of depositors might go for this. So then there would be perhaps 100,000 deposits x $5,000 = $500,000,000. And then there would be the balance of the existing deposits or another $225,000,000. Now there would be a 'war chest' of $725 million in interest-free deposits that ought to warm the hearts of bankers and investment bankers and might delay any equity offering.

A second idea would deal with the increasing number of Certified Pre-Owned (CPO) vehicles Tesla is seeing, and which is disturbing some investors. This flavor of deposit/discounts might be offered to the first 100,000 of existing depositors in the Model 3 queue. "For an additional $4,000 plus your Model 3 deposit, we will offer a $7500 discount on any CPO vehicle. This would relinquish your place in the queue for a Model 3."

The logic of this deposit/discount is to stretch the number of $7,500 tax credits for Model 3 buyers. These diminish once a manufacturer has produced 200,000 domestic EVs. The credit isn't available for CPO vehicles. This would clear out the backlog of CPO vehicles and get an S or X into the hands of a loyal depositor.

Conclusion

Play with the discount numbers and post schemes of your own. Tesla needs to demonstrate some "stickiness" with this torrent of deposits. Hopefully, they can offer some incentives to turn this tremendous show of loyalty into revenue before the Model 3's arrival at the end of 2017.

Disclosure: I am/we are long TSLA.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.