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Tesla CEO Elon Musk Has Found a Smart Way to Get Free Money

The EV maker continues to demand one of the highest down-payments for its Semi even as production of this truck has been pushed back yet again.
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You don't change a formula that wins, says an adage. In this case, the formula is doubly winning. 

The electric vehicle (EV) manufacturer Tesla  (TSLA) - Get Free Report continues to rack up orders and reservations for its Semi, a prototype-stage electric class-8 truck, despite the fact that production and deliveries have been postponed once again. 

Elon Musk, CEO of the Austin, Texas-based group, said on a fourth-quarter earnings conference call in January that the Semi should not be expected before 2023. 

"As the Cybertruck, Semi, Roadster, Optimus, we'll be ready to bring those to production. Hopefully, next year. That is most likely", Musk said on January 26, during the earnings call with analysts.

Given the moving deadlines that this truck has already experienced, it will not be surprising if the schedule changes again, especially since the shortage of chips affecting the global economy and supply chains is far from being resolved.

Besides the reservations and the order book which continues to fill for a vehicle surrounded by many uncertainties, there is another point that is striking: Tesla continues to ask for a deposit and the amount remains as high as ever.

Priority-One Logistics, a company founded in 2004 and which arranges transportation of freight and cargo, and works with Tesla, ordered a Tesla Semi this week, according to Sawyer Merritt, a self-identified Tesla investor and fan of the brand.

Merritt is one of the few people to whom Elon Musk often replies on Twitter when he apostrophes or compliments him on a question relating to Tesla or SpaceX, the other company run by the richest man in the world.

The Tesla Semi.

Elon Musk Sells a Truck That Does Not Exist (Yet)

Merritt also posted a screenshot of the message Priority-One Logistics received after placing its order. "News:Priority One Logistics, who works with Tesla, told me they reserved a Tesla Semi today! They recently opened offices in Fremont & Austin, TX," Merritt posted.

A series of comments ensue, in which the CEO of the company, Mitch Montoya, participates. Moreover, to a user who wondered when the group will take possession of his Semi, while the first customers are still waiting, Mitch Montoya answered.

"Have Pepsi received theirs yet?" asked the user.

"As far as I know they have not. Still waiting on production. I’m happy to invest, stamp our place in line, and be one of the first companies to have a Tesla Semi on the road," responded Montoya.

"And when will they be shipped finally," bounced another.

"Ask@elonmusk lol", replied Montoya.

The embarrassment of the new potential customer of the Semi sums up the somewhat grotesque situation faced by customers of this vehicle who are also de facto money lenders for Tesla.

The Tesla Semi may not even be cool enough to attract truck drivers.

Deposits from potential customers reached $925 million

When Tesla launched the Semi in 2017, it asked interested customers to put down a $5,000 deposit, which the company then increased to $20,000 for the base version. This sum is broken down into two phases: a $5,000 credit card payment at the time of reservation on the Tesla website reserved for the Semi, and then a wire transfer payment of $15,000 dollars within 10 days of the reservation. 

But if you have reserved more than one copy, you must make a $20,000 wire transfer for each additional copy.

For customers interested in the limited "Founders Series" version, they must make a deposit of $200,000, which is the total cost of the truck.

The group has already won orders from many groups, including Walmart  (WMT) - Get Free Report, PepsiCo  (PEP) - Get Free Report and UPS  (UPS) - Get Free Report. Take the case of UPS. The logistics group has placed an order for 125 Semis, given the down payments Tesla has in its accounts just over $3 million of UPS money. The electric vehicle maker is said to have nearly $2.5 million in cash from PepsiCo, which ordered 100 Semis.

The bill would even be salty for Pride Group Enterprises, which has a truck-leasing business in the U.S. and Canada. The company announced at the end of 2020 that it had placed an order for 150 Semis and taken an option for 350 additional units.

"The company has placed a deposit to secure the initial units and build slots," Pride Group Enterprises said in a press release at the time. Basically, Tesla would have more than $3.7 million from the company.

Tesla's reservation deposits aren't counted as revenue until the customer receives the car. But the deposits are added to cash holdings and labeled as liabilities on the balance sheet. Tesla can use the money however it chooses, but it sits on the books as debt until the reserved car is delivered. Such cash could become a good source of funding if Tesla needs to spend more.

"You understand that we will not hold your Reservation Payment separately or in an escrow or trust fund or pay any interest on your Reservation Payment," Tesla warned in its terms & conditions for the Semi reservation.

Basically, potential customers lend money to Tesla at zero interest. Customer deposits amounted to $925 million as of December 31, up 18.7% year-on-year, according to financial documents Tesla issued for its Fourth-quarter earnings. It's a big war chest on which Tesla sits. The company does not give details by vehicle.

If reservations do not automatically translate into purchases, it is a safe bet that things are different for the Semi in view of the high amount of the deposit. For most Tesla cars, this deposit is $100 refundable.

The Tesla Semi is a 100% electric truck that was unveiled in the fall of 2017. The automaker promised to start production in 2019, postponed this deadline to 2021, then 2022 and now 2023.

Thanks to its batteries with a capacity of 500 kWh, made up of Tesla's new "4680" cells, its announced consumption is  less than 2 kWh/mile, for a range ranging from 300 to 500 miles depending on the version. The advertised price is $150,000 and $180,000 respectively.

The Semi has competitors: Nikola Motors  (NKLA) - Get Free Report develops three types of Semi trucks (Tre Bev, Tre Fcev, Two Fcev.)

Tesla, which disbanded its media department last year, did not immediately respond to TheStreet's request.