Would-be Tesla customers grouse as deposit refunds take months

Tamara Tanney got tired of waiting for a new Tesla, so she asked for a refund of her $1,000 deposit. It's been a year since the Toronto digital strategist canceled her fully refundable order, and the money still hasn't shown up in the financial statements she regularly checks.

"If this is the service you get as a new client, I can't imagine the kind of service you would get as a current customer," said Tanney, 23, who is no longer interested in owning a Tesla.

Seventeen people interviewed for this report described months of effort to get Tesla Inc. to refund their deposits. The timing of their experiences overlapped with a chaotic period for the company, which initially struggled to mass-produce cars, then broke through to more than triple deliveries of its electric vehicles last year.

Despite all its progress in 2018, Tesla finished the year with almost $800 million in customer deposits on its books. Legions of would-be customers are still waiting on cheaper Model 3 sedans and a Solar Roof product CEO Elon Musk hyped more than two years ago.

A Tesla spokeswoman said anytime the company gets a refund request, it works to process it as quickly as it can. She declined to say how many refunds the electric-car maker has been processing or how long it's taking on average to resolve requests.

Musk, called improving service in North America the "No. 1" priority for this year during a Jan. 30 earnings call. He didn't specifically speak about deposit-holder repayments.

Tesla doesn't break down how much of the customer deposits on its balance sheet are for its vehicles or for energy products including the Solar Roof. It took in hundreds of millions of dollars in 2016 for the Model 3, a car Musk said would be sold at a starting price of $35,000. Three years later, the cheapest version of the sedan available is $42,900.

Musk also had high hopes for Solar Roof, a product he presented in the lead-up to Tesla's controversial acquisition of SolarCity in the fall of 2016. Development challenges and the prioritizing of Model 3 production has set back plans for production, which should ramp up this year.

Customer deposits are categorized as liabilities on Tesla's balance sheet, meaning it's effectively served as an interest-free form of borrowing.

"Similar to using launches of a car two or three years before it actually hits the road, and using that as a source of crowd funding, they've done that with deposits," said Jeffrey Osborne, an analyst at Cowen & Co. who has the equivalent of a sell rating on Tesla.

Some of Tesla's customers who complained in interviews about how long it took for the company to grant a refund did eventually receive their money back. Raj Armani, a 40-year-old Internet entrepreneur, said he waited 183 days to recoup a deposit he initially made in April 2016.

"It was so hard to get an answer or a status," said Armani, who asked for his deposit back in August. "They always say they'll get back to you but never do." He received an express-mailed check for the full amount in February.

Would-be customers described a process involving unanswered calls and emails to Tesla customer-service representatives. Rich Zeoli, a talk-radio show host in Philadelphia, said he called, emailed and tweeted at the company for information about the status of a refund for six months before finally disputing the charge with PayPal.

"Tesla just stopped communicating with me altogether," Zeoli said.

Some of those who received refunds from Tesla say they weren't good as cash. Mark Allewell, a tech company founder in Cape Town, South Africa, said between emails, phone calls and social media posts, he tried to contact Tesla almost 50 times about the status of a Model 3 deposit refund he requested in August. The 45-year-old received a U.S. check by mail in December that he's been unable to cash or deposit. His bank has told him he'll be charged a transaction fee.

"This is horrible, especially because Elon Musk is South African," Allewell said. "It is frustrating that the marketing for Tesla is shiny and nice, but when it comes to customer service and answering queries, it is shocking."

Gautam Pasupuleti, 43, an architecture manager at a regional bank in Lancaster, Pa., and a Tesla shareholder, said it took him more than six months to get a $1,000 deposit back for his roof preorder placed in 2017.

"I am disappointed by the service, and frankly, that's the part that scares me from buying a Tesla myself," Pasupuleti said.

Two other consumers interviewed for this story complained of unresponsive customer service that irked them even though it turned out they were in the wrong. Doug Smith, an executive for a subscriptions-billing company, said he tried and failed to reach Tesla for nine months. He heard back in January from a representative who pointed out he had been refunded in May 2018, a month after he asked for his deposit back.

While Smith is shopping for a new vehicle again, he plans to look at other brands. "Crappy communication damages customer relationships," he said. "As luck would have it, I'm back in the market for a car, but I'm unwilling to consider a Tesla."