Tesla bets on Model Y for main street appeal
Tesla CEO Elon Musk is betting the Model Y crossover SUV will help the electric vehicle maker slip into the mainstream. He showed off the prototype to Tesla fans and media Thursday night at the automaker’s design center just south of Los Angeles in Hawthorne, Calif.
Musk claims the new electric vehicle “will have the functionality of an SUV, but ride like a sports car…this thing will be really tight in corners and we expect it will be the safest midsize SUV in the world by far.” He promised it will accelerate from 0 to 60 mph in 3.5 seconds.
Musk did not answer one pressing question, where the EV will be made, nor did he say how many would be produced. He did provide some details: a long-range Model Y, with a battery range of about 300 miles, will be available first and have a starting price of $47,000. Deliveries are expected to begin in fall 2020.
It’ll have a panoramic glass roof with an optional third-row of seats for up to seven passengers. Musk also said the autopilot driver assist feature and the fully self-driving function will be available (both are upgrades on the company’s site).
Tesla’s website began taking orders, and taking refundable deposits of $2,500, for the vehicle immediately after the event ended.
Musk said a cheaper, shorter-range Model Y will be available in spring 2021 for about $39,000.
The Tesla CEO also said the company is on track to produce its one millionth vehicle within the next twelve months.
There was no update on the company’s abrupt sales strategy U-turn in recent days. Musk this month announced Tesla would close most showrooms and sell cars online only. He is now keeping more of the stores open, but is raising prices on vehicles other than the Model 3. A few weeks ago, Tesla announced a $35,000 base Model 3.
The big question now is whether the higher margin Model Y crossover SUV is sexy enough to generate massive deposits. The cash infusion is needed to help cash flow and service the company’s $12 billion in debt, $5.7 billion of which is due between now and 2022.
Gene Munster with Loup Ventures wrote in a note after Thursday’s event, that he expects Tesla to ring up 100,000 reservations for Model Y in the first two weeks. That would add up to $250 million if that forecast proves true.
Munster wrote, “the company appears to have to raise cash to meet the November debt payment and working capital needs.” He said this may be a near-term drag on Tesla’s stock he says the company can raise enough cash to reach long term profitability and be a “winner” in EVs.
Still some investors remain skeptical.
“The Model Y launch reminds me of crowdfunding idea, where they use the launch to raise capital through deposits,” says Alex Chalekian, Founder and CEO of Lake Avenue Financial in Pasadena, Calif. “This cash can help with cash flow as they sell other cars.”
Chalekian manages over $150 Million for clients, and while he drives a Tesla Model S, he says they have sold all of their Tesla shares. Chalekian was especially troubled by Musk’s decision to close most of the showrooms: “These stores are important to drive sales…having these stores in high traffic areas to educate people and let them touch, feel and try out the tech in the car. Sitting in a Tesla helps it sell itself.”
As for a stock edge, Jason Goepfert, CEO, Sentimentrader.com crunched some data for FoxBusiness.com on prior Tesla announcements for the Model X and 3 (the S was announced before the company’s IPO).
The stock tumbled 4 percent in February of 2012 the day after the X was unveiled, but shares rebounded to go up 5 percent after one week with a near-term peak of 10.5 percent after a month.
As for the Model 3 unveil in March 2016, Tesla’s stock rose 3 percent the following day and was up 11.9 percent a week later before a slide that left shares up 4.8 percent a month after the vehicle’s debut.
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With the latest Tesla EV completing a lineup featuring Models S, 3, X, Y, Musk closed the event with a joke about the not-so veiled double entendre, “We are bringing sexy back, quite literally.”
Investors now want to see if that sex appeal drives more sales across the models without cannibalizing orders and whether Tesla can overcome its well-publicized production issues to meet demand for yet another new model.