Tesla Tumbles As Wall Street Is Suddenly Worried About Auto Cannibalization
When we reported on the latest Tesla results last night, which showed the company losing $330 million in the quarter, or about $13,000 per car, while burning over $600 million in cash, one particular statement in Elon Musk's letter to shareholders caught our attention:
"Moving past Q2, particularly as Model 3 becomes available, one of our challenges will be to eliminate any misperception about the differences between Model S and Model 3. We have seen a belief among some that Model 3 is the newest and more advanced generation of Model S. This not correct."
Subsequently, Musk devoted a substantial amount of time to this odd topic - one would think Tesla's rich, sophisticated clients, who spend over $50,000 on a luxury car know how to differentiate between the two - on the conference call, while keeping any discussion of what really concerns investors, the details around the Model 3 launch, to a minimum.
This morning, with the stock tumbling over 6%, Tesla investors are "feeling some disappointment" as Bloomberg kindly puts it, after the company offered few details about the production of its much-hyped Model 3 car. And after listening to CEO Elon Musk speak at length about customer confusion regarding the Model 3 and Model S, some analysts worry there may be some cannibalization of higher-end model demand by Model 3 buyers.