By on February 13, 2020

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]

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14 Comments on “Will Too Many Tesla Buyers Make the Switch?...”


  • avatar
    watersketch

    Umm, which one is the photo – the model 3 or the Y? Maybe you could post the 2 next to each other or the specs…

  • avatar
    Art Vandelay

    I am tempted to say of course it will…that is how the car business works in 2020. In this case I am not so sure as it is so similar to the car it is based on that I think in some cases buyers may not want to pay the premium for the SUV version.

    Haven’t seen it in person though so who knows. Just looks awfully similar in the pictures. Less Carolla to RAV-4 transformation, more akin to the old Outback versions of Subarus maybe?

  • avatar
    Master Baiter

    Companies generally prefer selling their newest models. There are probably cost reductions baked into the Model Y that will improve profit margins vis a vie the Model 3.

  • avatar
    JMII

    So the product mix will change, more Y less 3. As long as the net result is more overall sales why would anyone complain about that? Now if the 3 was more profitable then that would be a worry.

    • 0 avatar
      SlowMyke

      Exactly this. I’m sure Tesla isn’t going to regret customers jumping to the model that’s proceed $5k+ higher. And since the Y is based on the 3, i assume economy of scale is only going to help the profitability of both models anyway.

      The only way i see this becoming a problem is if would-be buyers of higher trim model 3’s jump down to lower trim Y’s. But even then EOS should still help out in the end.

      • 0 avatar
        mcs

        The Y has design improvements in a number of places including the body. It’s cheaper to produce than the 3.

        https://insideevs.com/news/396624/tesla-model-y-frame-casting/

  • avatar
    dal20402

    This will cut Model 3 sales at least in half. The good news is that it should more than make up the difference and be a plus for Tesla overall.

    Nobody wants a sedan anymore.

  • avatar
    28-Cars-Later

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

    Not happening, they are out of the game for 2020 and probably a segment of 2021.

  • avatar
    cprescott

    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.

  • avatar
    SCE to AUX

    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.

    • 0 avatar
      Hummer

      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

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