Can Tesla Turbo-Charge Cybertruck Orders with Contractual Threats?
Thanks to Professor Benjamin Davis of the University of Toledo for sharing Tinsae Aregay’s reporting for Torque News on the latest developments in the world of Cybertruck sales. According to the account, as we entered the holiday season, 2024, Tesla gave potential buyers a deadline: buy your $100,000 vehicle by year’s end or lose your $2500 deposit.
The protagonist of the story is one Brok Butcher, identified as a a Cybertruck buyer from Rancho Palos Verdes, California. Aside, I love the name. That man deserves a Cybertruck. However, Brok miscalculated his means. He’s had some “unforeseen financial difficulties.” But the Cybertruck is not for people who make excuses. Its for tough, rugged, financially independent, and environmentally conscious people who need, for some reason, to drive around in a bulletproof (or at least bullet-resistant) vehicle. Tough luck, says Tesla. We told you your deposit was non-refundable.
Brok wants to know why Tesla can’t just hold onto his deposit and apply it to some later purchase. Tesla is polite but firm: “Please let us know if you intend on taking delivery by 12/30. If we do not hear from you, we will assume you are no longer interested, and your order will be automatically canceled.” An enterprising ContractsProf dug up the Tesla contract itself, although we cannot say whether Brok entered into this particular contract. It provides:
Order Process; Cancellation; Changes. After you submit your completed order, we will begin the process of preparing and coordinating your Vehicle delivery. At this point, you agree that any paid Order Fee, Order Deposit and Transportation fee have been earned. If you cancel your order or breach this Agreement and we cancel your order, you agree that we may retain as liquidated damages the Order Fee, Order Deposit and Transportaion Fee, to the extent not otherwise prohibited by law. You acknowledge that the Order Fee, Order Deposit and Transportation Fee are a fair and reasonable estimate of the actual damages we have incurred or may incur in transporting, remarketing, and reselling the Vehicle, costs which are otherwise impracticable or extremely difficult to determine.
Seems like a rather harsh way to handle customers, especially early adopters like Brok who helped Tesla build hype for its new product. As Tinsae Aregay also reported here, while Tesla boasted that one million people had reserved Cybertrucks, apparently only 2.5% of the people on the waiting list actually bought the vehicle. People like Brok paid to wait in line for their trucks, but now buyers are boasting that they are ordering their trucks and getting them within weeks, suggesting that Tesla’s ability to manufacture the trucks is far outstripping demand.
Back in October, Jameson Dow reported on Electrek that Tesla’s backlog was depleted, and one could now order a Cybertruck without paying a deposit. I remain puzzled by the $2500 figure. I’ve seen reporting about required non-refundable deposits as high as $1000. I’ve also seen reporting that Tesla lowered the deposit to $100 and made it refundable. Tesla may have done so in order to be able to boast about the long line to get the vehicle. But then the price went up, the roll-out was not entirely smooth, and some people were turned off by the company’s CEO’s antics.
In short, Tesla seems like it has a strong legal right to hold onto the $2500, but it also seems a poor strategy for building brand loyalty. The Cybertruck is sui generis, so perhaps Tesla has a captive audience. Car and Driver rates four electric trucks higher than the Cybertruck, and all are less costly, but the heart wants what it wants.