In the last eleven months, Tesla has sold nearly 115k Model 3s in the United States. Known for its end of the quarter push, Tesla may end up taking Model 3 deliveries past 130,000 units for the year.

That leaves us with a very important question: What happened to Tesla Model 3 backlog?

Public companies are smart – when every move gets scrutinized with a microscope, it’s hard not to be cautious.   

The last time Tesla updated us on Model 3 net reservations was on July 02, 2018, when the company said, “net Model 3 reservations count at the end of Q2 still stood at roughly 420,000.” More details can be found in Tesla’s second quarter 2018 Vehicle production and delivery update.

Since that update, Tesla has delivered 90,700 Model 3s in the United States. December deliveries may easily take that past 115k. That’s nearly a quarter of global order backlog the company had at the end of June. 

As Tesla kept depleting order backlog with deliveries, new orders would have provided some balance. Elon Musk tweeted on July 20th that the company had received “over 2000 S/X and 5000 Model 3 *new* net orders” in one week. 

But Tesla’s cheapest Model 3, the mid-range Rear-Wheel drive Model starts at $46,000. And we have no idea what percentage of new orders went for the yet to be launched $35,000 standard battery Model 3.  

Tesla forum member rscarce says, “I’m waiting for a SR M3 as well. I actually have a long commute, so LR would be great, but I’m with mikey–I can’t see the extra money. $35,000-plus is already 150 percent of the most expensive car I’ve ever owned, one of our Priuses”.

He added, “I don’t agree that we’ll never see the $35K car. It’ll happen, but not for a while. The recent German tear-down was reassuring on that front, and I get what Elon said about needing the dough that comes from pumping out the loaded models now. Our time will come.”

Though Tesla may have teased some customers who were waiting for the standard battery Model 3 to upgrade,  a good portion of Model 3 customers are still waiting for cheaper models.

Tesla may defy industry standards, but it cannot defy the law of demand. Not forever.  

The law of demand states that when other factors are constant, price and quantity demanded are inversely related to each other. When the price of a product decreases, the demand for the same product will increase.

Tesla may have already exhausted higher-end customers within its Model 3 order backlog in the United States.

Tesla is approaching 130k Model 3 sales in the United States and the company has been selling more than 15k units for the past several months. It’s time for new reservations to dictate Tesla’s demand versus supply.

Tesla Model 3 Sales in the United States 2018
Tesla Model 3 Sales in the United States 2018

Hydro 481, a Teslamotorsclub member says that he ordered a performance Model 3 on November 30th, received a VIN four days later and delivery is scheduled for December 11th. Order to Delivery – 12 Days.

Some members even say that Tesla delivered their car within a few days of ordering.  

It’s possible that Tesla may have already built up a small inventory of high-end versions, especially the performance model and fully loaded dual motor AWD and pushing them out of the lot as soon as the order is received. Tesla did help itself by reducing the number of options it offered. To simplify production, says Elon Musk.

Moving 2 of 7 Tesla colors off menu on Wednesday to simplify manufacturing. Obsidian Black & Metallic Silver will still be available as special request, but at higher price.Elon Musk

In June 2018, Tesla had a three to five months timeline for deliveries. If you order now (US), Tesla promises to deliver the car in less than 60 days. 

A few days ago, Tesla invited deposit holders in Europe to configure their Model 3. Deliveries of Performance and Dual Motor editions are expected to begin in early February 2019.

If Tesla was still sitting on a massive backlog of orders (for higher-end versions) in the United States, the electric car maker would have never opened its design studio for EU customers.

Transport costs money and time.

Tesla manufactures cars in California and the car needs to cut across the United States, reach the east coast and then board the ship to cross the Atlantic. All that travel could easily take weeks.

If Tesla wants to deliver Model 3 in Europe in early Feb, then the company may have already started building some of them.

Tesla will certainly prioritize US customers to help them avail the full EV tax credit of $7,500, which is available only for customers who take delivery before January 1, 2019. By opening up configuration invites to deposit holders in Europe, Tesla has made sure that it will continue to have enough demand for its high-profit models. 

If US customers keep ordering higher end models, Tesla will deliver them first.

If US order volume remains lower than production capacity, deliveries can be diverted to Europe.   

My final thoughts: Tesla may soon drop the price of base model 3 or it may even add another variant at the entry point.

Adding a Dual Motor Mid-Range (increases price) to go with Rear-Wheel Drive Mid Range (decrease current price) will help stabilize the average selling price at the entry level while boosting US order volume. 

After all, Tesla still has to drop $11,000 to reach the elusive $35,000 price target it set for Model 3 at the start. 

It helps that demand increases when price decreases

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