Howes: Would-be Tesla customers wait, wait for their cash back
How long could Detroit’s automakers get away with sitting on $1,000 deposits from customers tired of waiting, waiting, waiting for their new electric car?
Not very long. The likes of General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles NV would be accused of using the cash as interest-free financing to fuel their operations. And the allegations would be directionally, if not literally, correct.
They would be pilloried — by investors, by regulators, by the news media, especially by would-be customers. Any constituency accustomed to calling BS on sketchy tactics would smell more of a money grab by a financially stressed startup than the defensible actions of a crisply run company.
But not Tesla Inc.
The Silicon Valley-based automaker controlled by Elon Musk is slow-walking requests for refunds, Bloomberg News reports. Customers tired of waiting for the company to deliver a legit $35,000 Model 3 compact as promised several years ago say they are being forced to wait as long as six months to get their cash back.
Starting in 2016, Tesla booked hundreds of millions in individual $1,000 deposits eager to get their hands on an affordable Tesla intended for the masses. But the folks who can't afford the upscale versions of the Model 3, much less the flagship Model S, mostly are left to wait, wait, wait because Tesla needed the cash, cash, cash it could book from building higher-priced Model 3s first.
The double standard is stunning, if entirely predictable by now. Flouting common business sense is a core principle of Musk, whose iconoclasm attracts investors, boosts the company's market value and raises a simple question: How long can this kind of stuff go on in one of the country's most regulated industries?
It's yet another example showing how the rules are different for the global auto industry's pre-eminent startup. Its CEO regularly spurns industry convention; its senior management churns repeatedly; its manufacturing quality evokes more Detroit circa 1980 than Silicon Valley 2019. And Tesla mostly gets away with it.
Old industry veterans certainly wouldn't. Bucking industry conventions doesn't play well on Wall Street, as Ford CEO Jim Hackett is learning. The Blue Oval's slow-to-unspool global restructuring, coupled with a hard-to-discern strategy for the biggest changes in the auto industry since Henry Ford introduced the moving assembly line, continues to weigh heavily on Ford shares.
A whirring revolving door in executive suites generally is a cause for alarm, however normal it has become for Musk's Tesla, because it demonstrates instability at the top. And a reputation for dodgy quality is a metaphoric wall that can take years to climb — as Detroit learned the hard way, courtesy of its Japanese rivals.
That so many Tesla fan-folks tolerate such serial abuse is a testament to Musk's vision, their own short-sightedness, the lure of torquey electric cars, or all three. I mean, shipping your Tesla to another state for service, or waiting months for parts, or seeing the rear bumper lying on your driveway takes the kind of commitment only Old Detroit loyalists of a generation ago could truly understand.
But here's the deal: when iconoclasm clashes with regulation, what yields? The evidence so far suggests the iconoclast loses, because today's auto industry produces arguably the most regulated consumer product in the American market. And when it's a self-driving vehicle, the rules will multiply.
When Musk tweeted that the Saudis were prepared to finance a transaction to take Tesla private — "financing secured" — who won that round? The regulators, in the people of the Securities and Exchange Commission. When Musk toked a joint on a podcast, did investors say, "Oh, that's just Elon?" Nope.
When Tesla sits on nearly $800 million in customer deposits at the end of last year, according to Bloomberg, and continues to assemble a record of customer-service complaints, how long before regulators start asking about what's going on? Customers already are.
Like him or not, Musk is a visionary. His Tesla — and it pretty much is "his," considering his commanding stake in the company — accelerated the electrification of the industry, forced rivals to adopt some of his innovations, and showed what mistakes not to make.
Less appreciated is the competition looming. Global rivals with manufacturing excellence and extensive sales and service networks are poised to flood both the mainstream and luxury segments with EVs poised to outperform Tesla in range, quality and reliability.
What they may lack in brand cachet could be offset by the quaint notions of dependability, the ability to more easily get parts and timely service, and the assurance that it wouldn't take six months to get a customer deposit returned because the automaker couldn't keep its end of the bargain.
Doing what you say you're gonna do still matters — and it should.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.