Will Too Many Tesla Buyers Make the Switch?

Steph Willems
by Steph Willems

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]

Steph Willems
Steph Willems

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3 of 14 comments
  • Cprescott Cprescott on Feb 13, 2020

    The thing they call "Y" should be called "Model Egg" - because that is egg-zackly what it looks like. If that qualifies for a CUV or SUV then my real name is Edna.

  • SCE to AUX SCE to AUX on Feb 13, 2020

    One reason TSLA recently shot up is because of the production of the Model Y, not in spite of it. This shouldn't be news to anyone, especially investors. Tesla has long predicted that the Model Y would be its best seller, on the heels of its current best seller. Leave it to TTAC to paint this as ominous news, in which a car company delivers another product people want to buy.

    • Hummer Hummer on Feb 13, 2020

      I feel like you could lift the Model 3 by 2 inches, put slightly meatier tires to fill in the wheel well void and change the badge and no one would ever know it wasn’t a Y

  • Bd2 Probably too late to do anything about it for the launch, but Kia should plan on doing an extensive refresh of the front fascia (the earlier, the better) as the design looks really ungainly.
  • Namesakeone Since I include SUVs and minivans as trucks, I really cannot think of a brand that is truly truckless. MG maybe?
  • Sobhuza Trooper Subaru, they were almost there with the BRAT. --On a lighter note, where the hell is my Cooper Works Mini truck?
  • Mike Evs do suck, though. I mean, they really do.
  • Steve Biro I don’t care what brand but it needs to be a compact two-door with an ICE, traditional parallel hybrid or both. A manual transmission option would be nice but I don’t expect it - especially with a hybrid. Don’t show me an EV.