It was 1 a.m. Monday morning when I wrote that Tesla Motors' surprise first-quarter profit was noteworthy in part because it can't count its vehicles as sold until it gives the key fob to its customers. Turns out there was another way for Tesla to make its milestone, as discovered by Bloomberg TV: Asking customers to cough up their payments early in the name of helping Tesla.
To recap: Most automakers count a vehicle as sold — and book the revenue from that transaction — when the car leaves the factory bound for a dealership. (Their finance arms are often paying them that cash in the form of dealer "floorplan" financing, but that's another story). Because Tesla has no dealers, it either delivers the cars to people in person or allows them to pick them up at the Fremont, Calif., factory. While that gives Tesla more control and a more personal experience, it also means the company carries the cost of its vehicle inventory and slows down its cash flow by a couple of weeks until payment from customers arrive, typically when they get their cars.
After the profit revelation, Bloomberg TV's Cory Johnson found the company had emailed some customers who were about to get their cars and asked them for a little boost:
“Tesla is right on the cusp of profitability this quarter for the first time in 10 years since the company started. This is a huge company milestone that will not only be great for the company, but also for our customers. In order for Tesla to be able to count your Model S for the quarter, we simply need to receive payment."
Tesla confirmed the corporate-profit Kickstarter pitch was real.
There's nothing illegal in Tesla asking buyers to pay up early, and we don't know how many buyers Tesla contacted or how many said no thanks. The problems start with next quarter, when Tesla will face another profit check without the revenues it pulled ahead for this period. Old industry types will say automakers constantly "pull ahead" sales with rebates and other incentives until the merry-go-round stops; the difference here was that the buyers didn't get anything extra from Tesla for their generosity except warm feelings. Next time, the right answer for a Tesla customer to an email like this might be "What's in it for me?"
Photo: monsieur paradis via Flickr