TESLA OWES SHASHANK Chitti $1,000.
That’s how much the Bay Area tech consultant paid to reserve a Model 3, the automaker's highly anticipated electric sedan for the masses. Chitti was among tens of thousands of people who waited in line to reserve the car sight unseen, hours before Tesla CEO Elon Musk revealed it to the world on March 31, 2016. In the days following the Model 3's debut, hundreds of thousands more people placed deposits, netting the company what amounts to a humongous interest-free loan. How humongous? According to its latest earnings report, Tesla holds $616 million in customer deposits. Most of that money comes from Model 3 reservation holders.
But not all of those reservations (more than half a million, by the latest count) will translate into sales. Placing a $1,000 deposit is one thing. Throwing down for a car that starts at $35,000 is another matter. And while Tesla may have delivered its first 30 Model 3s on Friday, most reservation holders won't receive their cars until 2018 at the earliest, leaving plenty of time for second thoughts and changed circumstances.
Fortunately, Tesla makes it easy to ask for your money back; the company’s website says deposit holders can cancel at any time. Per the company's Model 3 Reservation FAQ, “Refunds can take up to three weeks depending on your country of delivery.”
At least that's how it's supposed to work.
"Every time, they ask for my address and say that a check will be promptly on its way. The check never comes."
Chitti cancelled his reservation on May 17, 2017. He says he was tired of waiting and frustrated by Tesla's lack of transparency. Yet more than two months later, he hasn't received his refund. "Every time I reach out I get the same explanation: They have a lot of cancellations to process, they'll prioritize my request, and that my refund should go out in the next batch," he says.
His experience is not unique. Many deposit holders have taken to Twitter to complain to Musk directly about their late refunds. In a poll posted to the popular Tesla Motors Forum, a majority of respondents reported waiting more than a month to receive their reimbursement. On other message boards, claims of 5-, 6-, and 7-week waits are common, and many say they’ve held out even longer. “It has been three months,” wrote /r/teslamotors user UnDosTresPescao on Reddit on July 3. “I have called/emailed them several times over the last month and a half asking about status. Every time they ask for my address and say that a check will be promptly on its way. The check never comes.”
This seems as good a place as any to disclose that I, too, was once a Model 3 reservation holder. I cancelled my deposit in April, when an honest evaluation of my transportation needs forced me to concede that the last thing I need in life is a new car. Tesla took just shy of three months to refund my deposit, which I received soon after the company caught wind of me reporting this piece.
What’s taking so long? It depends on who you ask.
In email correspondence between Tesla and deposit-holders that WIRED reviewed, customer service representatives supplied a variety of explanations for late refunds. Two blamed a third-party error. Others said Tesla had received more reimbursement requests than it could see to in a timely fashion. Several stated that a "system failure," "IT issue," or "database error" within Tesla had interfered with the company's ability to process payments.
Here's how it went down for me: I called Tesla's customer service twice after cancelling my reservation on April 23. The first time, in mid-May, the sales rep told me the company was working through a backlog of reimbursement requests, but that I'd receive my refund in the mail within 10 business days.
About two months later, in mid-July, I called again; by this point I'd begun reporting this story, and had spoken with some refund-requesters about their experiences.
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In as unthreatening a tone as I could muster, I told the representative who fielded my call that I was not only a reservation holder, but also a journalist investigating late Model 3 deposit returns. He apologized about my late refund and gave me a familiar explanation: The team tasked with processing refunds had run into an IT issue, he said, delaying payments by two to three weeks. The representative noted how long it had been since I’d cancelled, and told me he’d make my refund a priority (another familiar line from Tesla’s customer service).
My next call was to Tesla's communications team. As I had with the service rep, I made clear that I, too, had been waiting a long time for my refund. Which... maybe I shouldn't have. The morning of July 18, a Tesla spokesperson provided this statement, which, while helpful to me, did not thoroughly address the larger trend:
"The total number of Model 3 reservations has continued to grow, with new reservations far exceeding refund requests. At times, refund processing slows down when additional confirmation is needed to prevent fraud via identity theft. That is what occurred in the case of this journalist."
The next day, I found a FedEx envelope on my doorstep. My refund had arrived — 61 business days after I cancelled my reservation.
The One-Year Cutoff
Not every Tesla refund takes this long — or this much work. "It was easy," says Jeff Maggard, a former reservation holder from Ithaca, New York, who cancelled his deposit in February after a career change made it hard to justify buying a new car. His refund showed up on his credit card less than two weeks later. "I did it all online without talking to anyone. There was no number to call so I could be talked out of it by a representative. No dumb tricks to make me stay. It was great," Maggard says. "Very customer-centered."
When I followed up with Tesla PR to ask why some customers get their money back sooner than others, the company declined to comment. But my reporting suggests that Tesla took longer to return deposits to customers who cancelled their reservations more than a year after placing them.
"It's likely they would have a claim against Tesla in court, but unlikely they would be entitled to very much." —Richard Alderman
Jad Limcaco, a user experience designer in San Jose, California, placed his deposit on April 1, 2016 and cancelled it in May 2017. In July, he emailed Tesla in search of his money. A representative called him a few days later. "He mentioned that their system was having trouble refunding to people's cards who ordered over 1 year ago," Limcaco says. "He said I would receive a check in the mail in eight to 10 weeks, which is pretty frustrating, when I live in San Jose and could easily drive to their facility to pick up a check if I needed to."
The numbers back this up. Of the 23 people I spoke to for this piece, six had experiences like Maggard, receiving refunds to their credit cards within three weeks. (Two others were reimbursed within 21 business days.) All but one of them had held their reservation for less than 12 months. Of the remaining 15, 14 cancelled their reservations after more than a year. Seven received their refunds after 6 weeks or more; the rest have been waiting for two months or longer. In late July, several received this message from Tesla:
"We are processing the refund for your Model 3 reservation. In order to do so, we need to confirm the mailing address where you will receive the refund check. Please reply to this email to confirm your address below is correct, or reply with any changes."
Scaling Team Tesla
For some, Tesla's response has been too little too late. "3 mths, 14 emails, 6 support tickets and 4 phone calls later, still no refund from @TeslaMotors on cancelled Model 3 order #scam #lawsuit," one frustrated refund-requester recently tweeted. But there's not much customers can do, other than nag Tesla.
Consumer rights experts say there's little incentive for people to go after the company in court. "It's likely they would have a claim, but unlikely they would be entitled to very much," says Richard Alderman, executive director at the University of Houston's Center for Consumer Law. He estimates refund requesters would be entitled to interest they could have earned on their money between when Tesla said it would return the money and when it actually did — which, assuming a 3-month-late refund and a (generous) 1 percent interest rate, amounts to $2.47, about the price of a gallon of gasoline.
"The dynamics are tricky, especially for a company like Tesla, whose customers' loyalties hinge in large part on the company's extraordinary customer service. When that service starts to flag, you start to feel like the company owes you — and that can be dangerous." — Ethan Mollick
A greater, and more likely, threat to Tesla is the effect late refunds could have on the support of its devotees. For years, Tesla has mostly sold cars to early adopters, technology buffs, and fans of Musk who were willing to tolerate the company's growing pains. The Model 3, which starts at $20,000 less than an entry-level Model S, gives more people than ever the chance to personally invest in Tesla's vision.
But it also gives the company more people than ever to appease — and, potentially, disappoint. "A deposit says, I'm part of your team, I believe in you Tesla, I believe in you Elon," says Ethan Mollick, a Wharton Business School professor who studies customer loyalty and crowdfunding campaigns. "But it also hurts more when Tesla takes two months to return your money, instead of two weeks. It breaks the social contract, as much as it does any financial contract."
Tesla's struggle to refund deposits in a timely fashion adds to existing concerns over the company's ability to dole out quality customer service at scale. "The dynamics are tricky, especially for a company like Tesla, whose customers' loyalties hinge in large part on the company's extraordinary customer service," Mollick says. "When that service starts to flag, you start to feel like the company owes you — and that can be dangerous."
I've asked every refund-requester I've spoken with how their experience has affected their perception of Tesla. Everyone who received their money quickly responded favorably — and so did several who waited. "I think they need to do a better job at customer service," says Limcaco, who after two months of waiting received his refund last week. "But I still think Elon Musk and Tesla are innovating and pushing the boundaries, which is more important in my eyes than one poor customer service experience."
Shashank Chitti, who still has not received his refund, disagrees. "Tesla seems disorganized," he says. "Based on this experience and others that I've read about, it sounds like when things go well, owning a Tesla would be awesome — but they would be a nightmare to deal with otherwise."
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This doesn't surprise me at all coming from Tesla. I really hope other car companies don't do the same type of customer service as Tesla does - disgraceful