There was simply no downside.
At 8 am on March 31, 2016, I was walking through the Boston Prudential Center and noticed a short line outside the Tesla showroom. I recalled that today was the day Tesla started to accept Model 3 reservation deposits, but thought nothing of it. I didn’t need a new car, but as I went up to the 16th floor and got situated at my desk, the mystique surrounding the Model 3 was beginning to pique my interest.
My manager and I began chatting. He mentioned he had been considering putting down a deposit for some time. I had always admired Telsa, particularly Elon Musk, and wanted to be part of the Tesla family, so began thinking seriously about the Model 3 as an investment decision. The deposit was $1000, not an insignificant amount of money; so I attempted to calculate the opportunity cost of the deposit. With the estimated opening of the Gigafactory and production rate, I figured it would be 18 months to two years before my deposit would become nonrefundable.
Assuming a “potential best” investment return of 20% (for a novice investor like myself), on par with some of the world’s best hedge funds, the $1000 put down for a Model 3 deposit and the additional $39000 for the car could be worth around $50,000 through investing the deposit over two years and the total value over an additional year. Most vehicles instantly depreciate as soon as you drive them off the lot. However, I believed the Model 3 could be different. Market value history for the Model X showed they had been selling on the secondary market between 40-60% above MSRP and similar markups occurred with the Model S when production was not meeting demand.
This could imply a potential value greater than $60,000, higher than my very liberal opportunity cost. I decided to go for it. I took my place at the end of the line, five minutes prior to the showroom’s opening. The line moved efficiently and within 20 minutes, I had placed my order. The experience was professional, enjoyable, and surreal; within the last two hours I'd decided to put down money for a car that had not even been unveiled yet. The keynote that night and reports in the following days increased my confidence in the decision I'd made. Orders were close to surpassing 300,000 (now closer to 400,000); Tesla hadn’t even predicted this much demand.
The higher demand and lead times for deliveries meant an increased markup potential. Inclusion of autopilot and supercharging network hardware made it an even better investment, as retroactive package purchasing meant the upfront capital investment was lesser. I determined that if I decided to keep the deposit and vehicle, I would give the car to my parents or see what the secondary market was offering if they didn’t want it. If I decided to get a refund, being part of the massive excitement and buzz surrounding the Model 3 would be well worth the $1,000 outlay.