Bernstein's Toni Sacconaghi Had a Bad Tesla (TSLA) Customer Experience, and is Worried Before Model 3 Launch

Bernstein analyst Toni Sacconaghi discussed his personal customer service experience with Tesla (NASDAQ: TSLA) and was not too happy about it. He thinks this could matter as the Model 3 launches to a different and far greater consumer population.

Sacconaghi, whose family put a deposit down on a Tesla Model X on July 2014 and took delivery July, 2016, notes: "On net, our customer experience (ordering, communication, delivery and service) was not good, particularly versus luxury OEMs (BMW, Mercedes) that we had purchased from previously. Overall, we felt like we were dealing with a start-up company in hypergrowth mode (which arguably is what TSLA is) – operationally, nothing was tight, inconsistencies were prevalent, and the customer experience ultimately felt much less intimate."

Below are the issues he cited:

• ISSUE 1: Customers have little to no visibility into when they might get their vehicle, and the priority/reservation system appears to mean little/nothing.
  • TSLA's ordering system for new cars is such that a customer places a deposit, but then has little idea when his or her car might arrive.
  • Even when we were informed that we were eligible to configure and place a finalized order for our Model X, we still couldn't get an answer from Tesla about how long it might take for delivery.
  • We also discovered that the timing of a customer's deposit has no impact on delivery time. This could be a big deal for Model 3 reservation holders given the US Federal tax credit will expire over time/
• ISSUE 2: We found TSLA's direct sales model to be far less intimate (and more fragmented) than the traditional dealer model
• ISSUE 3: Operationally, things were just not "tight".

While Sacconaghi's admits that while his experience represents a sample of one, he has two key concerns: (1) Model 3 buyers will likely be very different than Model X and S buyers and may not be as tolerant of shortfalls in customer experiences such as no visibility on timing of delivery; long wait times for service appointments and inconsistent availability of loaners; and (2) Our experience suggests that TSLA's sales and service network is already strained, with processes not fully in place, and that Tesla will be challenged to ramp its service and delivery capabilities by potentially 3 to 5-fold in the next 2 years, without potentially significant shortfalls.

The firm maintained a Market Perform rating and $250 price target on Tesla.

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