Will Too Many Tesla Buyers Make the Switch?

In a recent earnings report that, unlike Nissan’s, actually pleased investors, Tesla claimed its new Model Y crossover would see its first U.S. deliveries in March of this year. Great news for antsy reservation holders, but some worry the appearance of America’s Favourite Bodystyle will have a harmful impact on the automaker’s current best-seller, the Model 3.

Bernstein analyst Toni Sacconaghi wrote in a note to investors Tuesday that the Model Y could end up cannibalizing Model 3 sales, which is hardly a far-fetched proposition.

Many Tesla intenders will look at what they have to spend, size up their needs, and choose the Model Y over the Model 3, as shelling out nearly double the cash for a Model X surely isn’t in the cards. The question is, just how many will make the switch?

Sacconaghi writes that “any softness in Model 3 sales or orders domestically or in Europe could ultimately spook investors near-to-medium term,” thus sending the company’s stock onto the downhill leg of a recently lofty journey.

While the Model Y boasts more interior volume than its sedan counterpart, Sacconaghi said “a striking physical similarity” exists between the two, blurring the usually well-defined boundary between models.

New Street Research analyst Pierre Ferragu agrees, stating in a research note that, “Currently, 20% of Model 3 trade-ins in the U.S. are SUVs. We expect the launch of Model Y to cannibalize Model 3 sales by that order of magnitude.”

All that said, China could step in to solve the problem before it even materializes.

“The ramp on the domestically manufactured Model 3 in China over the course of 2020 could ultimately neutralize the impact on the global Model 3 volumes,” Sacconaghi wrote.

Tesla recently idled its new Shanghai assembly plant to combat the spread of novel coronavirus, just a month after making the first deliveries of a domestically produced Model 3. The automaker anticipated a delay in deliveries stemming from the shutdown. As of Monday, however, the facility is back up and running.

[Sources: Barron’s, Markets Insider] [Image: Tesla]