Tesla announced the Model Y on Thursday evening and investors are clearly not impressed since the stock closed down over $14 or 5% to $275 on Friday. The shares are now down over $44 or 14% since Elon Musk announced the $35,000 Model 3 version and that the company would be closing almost all of its stores (which it has now halfway reversed). The stock did stage a mini-rally over the past six trading sessions but has fallen back to its recent low, so it looks like the short-term move up was a dead cat bounce.
Did Tesla announce its latest “vaporware”?
Over the decades technology companies have announced new products or features that would be available in the future. At times the these are called “vaporware” due to not being fully formed with first shipment dates months, if sometimes years, in the future. This may be part of Tesla’s overall grand strategy or another Hail Mary move.
While one reason to declare new or upgraded offerings is to give customers a roadmap and comfort about buying current solutions, another is to get customers to not buy a competing product and wait for what is shown on a PowerPoint slide or on a stage. While I fully expect the Model Y to be made, and in volume, presenting it now is a way to create uncertainty with consumers about buying a competitor’s vehicle.
As Alan Ohnsman from Forbes wrote, there will be multiple competitive vehicles to the Y in 2020 and the Federal tax credit for Tesla will be exhausted. Buyers of other electric cars will be able to take advantage of the $7,500 tax credit, putting even more pressure on Tesla.
Tesla’s Semi and second generation Roadster announcements are similar in that they were unveiled on November 16, 2017, with production planned for 2020, at least two years before anyone can buy the truck or car. By announcing multiple years early, the company is able to take in hundred’s of millions of dollars in deposits and get what is essentially zero percent loans.
It was interesting to notice in the 36-minute video of the Model Y announcement that Musk didn’t get around to bringing out the car until the 29th minute. And only spent 4 minutes talking about it.
Tesla Model Y Specifications and PricingTesla
Craig Irwin at Roth Capital Partners also speculates that the timing of the announcement is to help distract from disappointing Model 3 demand. There have been multiple reports of weak U.S. demand for not just the 3 but for the S and X due to the halving of the Federal tax rebate to $3,750. By generating some buzz and incremental deposits for the balance sheet, it may help to overcome what could be a poor earnings (in reality loss) announcement in about six weeks.
When will Model Y volume production start to ramp?
As seems to be the norm with Tesla, don’t be surprised if volume production doesn’t hit until 2021 . While 75% of the Y’s bill of material is common with the 3’s, when you go to Tesla’s website there seems to be a caveat at the bottom of the ordering page that says, “Production is expected to begin late next year.” This is in contrast to the slide shown at the announcement last night that says Fall 2020. Technically fall doesn’t end until December 20, 2020, but I suspect most people think of Fall as October and no later than November.
Toni Sacconaghi at Bernstein wrote, “Last night’s unveiling essentially reaffirmed Tesla’s target of “volume” production by the end of 2020. This timeline appears similar to the original timeline for the Model 3 ramp, which was ultimately delayed by 9-12 months. That said, Model Y could enjoy a smoother ramp due to its shared platform.”
Spring of 2021 starts on March 20 and goes until June 21. I would expect the Standard version to ship later in this timeframe vs. earlier. This would put the $39,000 configuration at least two years away and possibly farther as Sacconaghi observes.
Could cannibalize Model 3 demand
Tesla has historically announced vehicles a few years before they were available. While this previously didn’t cannibalize sales since it wasn’t selling current models around the same price point, the Model Y could create a lull between Model 3 early adaptors and Tesla fans demand being satisfied and the Model Y entering full production in 2021.
Tesla Models S, 3, X and YTesla
Morgan Stanley’s Adam Jonas believes the Y is likely to hurt the Model 3 since the Y has a third row of seats. Note that in the announcement video 6 people got out of the Y when it came on stage, but it looked like two of the passengers were quite short. I expect the last row to be quite cramped for a large portion of the adult population.
Tesla price chartStockCharts.com