While there are only a handful of long-range battery-electric vehicles in U.S. showrooms right now, over a dozen different offerings are set to come to market by 2021.
- More and more automakers are taking “advance reservations” to help gauge consumer reaction and build buzz.
- Consumer can get an early in for when production finally begins.
- Deposits are generally put into an escrow account so they’re protected, even if a company goes bust.
With BEV sales still barely an asterisk on the sales charts, manufacturers want to drum up interest by reaching out directly to potential buyers, offering a chance to get in line with an advance reservation.
Tesla, one of the first to use that strategy, is taking its second-generation Roadster, the Model Y SUV, and the Cybertruck. Other manufacturers are catching on, not only start-ups like Lucid and Fisker, but established manufacturers such as Ford and VW.
“There are a number of reasons why they’re taking advance reservations,” said analyst Joe Phillippi, of AutoTrends Consulting. “There’s a bit of marketing hype to be able to say you’ve got thousands of buyers waiting for your new product,” while you also get potential buyers from going to a competitor.
Lucid Air prototypes at the company’s California HQ. It’s asking for $2,500 for an advanced reservation. (Photo: Lucid)
Who was the first automaker to take advance orders is lost in the fog of automotive history. Experts say it likely dates back to the earliest days of the horseless carriage. In more modern times, Chrysler dealers logged thousands of deposits for the little K-Car models that helped the automaker survive near death back in the early 1980s. GM claims its first year of production for the eighth-generation Corvette is completely accounted for. And Ferrari has long had lines of buyers lining up with cash before new models officially go on sale.
But Tesla changed the way the process was done when it prepared to launch its then-new Model 3 battery-car mid-decade. Rather than allowing individual dealers to take advance orders, the factory itself set up a special reservation website. And it made clear customers could cancel out at any time and get a quick refund.
That generated a “stunning consumer response,” according to a study by the Boston Consulting Group. “Within two weeks, Tesla received nearly 400,000 advance orders…on a car (buyers) had never seen,” the authors noted, adding that “it could well mark the day that electric vehicles went from being niche to mainstream products.”
Ford wants $550 down for a Mustang Mach-E reservation. (Photo: Ford)
Not surprisingly, Tesla is going the same route again with three other products now in the pipeline. According to the automaker’s website, “Founders Series Roadster reservations require an initial $5,000 credit card payment, plus a $245,000 wire transfer payment due in 10 days. Reservations are not final until the wire transfer payment is received.”
The reservation for the Cybertruck is a much more modest $100 and, within less than a week of its November unveiling, Tesla claimed to have over 200,000 deposits in hand. As with the Model 3, Phillippi stressed not all deposits will translate into actual purchases once the truck goes into production. But the hefty number, experts suggest, helps offset the spate of criticism for Cybertruck’s brutish design.
Taking advance orders rapidly is becoming the EV market norm, though deposits vary widely. Fisker wants $250 for the Ocean SUV debuting at the Consumer Electronics Show next month. Lucid, another BEV start-up, is asking 10 times as much, $2,500, for its Air sports sedan. And Ford is in the middle, with a required $500 down on the Mustang Mach-E that debuted at the Los Angeles Auto Show last month – and which will reach showrooms during the second half of 2020.
The Fisker Ocean, shown here charging, carries a $250 advance reservation. (Photo: Fisker)
Unlike Tesla, most manufacturers aren’t revealing specific numbers about how many deposits they’re taking. One exception is Volkswagen which said it quickly logged over 30,000 reservations for the ID.3 hatchback scheduled to be delivered in the spring.
If you’re ready to put your money down on an upcoming model it pays to read the fine print to see what that gets you. Generally, automakers say a reservation gives you a fixed place in line – but those looking for the promised base version of the Tesla Model 3 had to wait for quite a while, the automaker initially producing only high-line variants of the battery sedan.
One frequent question is what happens if a product doesn’t wind up making it into production or, worse, if a company goes out of business. Analyst Phillippi noted that, “The risk of losing your money is relatively small… because the money goes into an escrow account, and cannot be used by the automaker as working capital.” But you might then have to wait a while before refunds are sorted out.
WHY THIS MATTERS
For an automaker, advance reservations help build buzz and line-up likely customers. For motorists, it can give them an early slot in line after production begins on an exciting new product. But potential buyers should check the fine print closely.