Following the recent unveiling of the $35,000 Tesla Model 3 variant, followed by an announcement revealing March 14 as the launch date for the Model Y, there are fears that Tesla is launching both vehicles back-to-back in response to slowing customer demand.
After waiting on ice for nearly two years, the $35,000 Model 3 was expected to herald Tesla’s long-awaited entry into the lower end of the market, which could boost sales significantly. Analysts believe, however, that this has not happened.
Instead, Tesla for the first time ever has decided to announce another Model almost immediately after, fuelling concerns that the relatively low-cost Model 3 failed to gain sufficient market traction. What is particularly alarming to investors is that the Model Y and the recently unveiled Model 3 variant actually appeal to a similar market segment, which means that the Model Y is effectively being allowed to cannibalize the Model 3’s sales.
What exactly this means for Tesla going forward is anybody’s guess at the moment. It is possible that the market has simply accommodated as many expensive Teslas as it can manage and is now in a cooling off period that will take years to get past. It is also possible that the Model Y will impress consumers so much that Tesla will have another six-figure list of preorders by the end of March. No one can say which it is with any certainty.
Is Tesla Alright?
While several predictions about the impending death of Tesla have consistently proven well wide of the mark. the company is not in the greatest shape at the moment, having spent much of the past few years missing several production deadlines, dealing with labour and regulatory issues, and dealing with the problem of creating a hitherto nonexistent supply chain.
News about Tesla vehicles having trouble with defective brakes and violent fire outbreaks have not helped the company in its race against major competitors like GM and Volkswagen to become the most significant carmaker of the future. Amidst all this, the waiting period between pre-ordering a Tesla and getting it shipped is still by far the biggest of any comparable vehicle.
It is also possible to get a lightly used Model 3 for around the same price as the newly introduced variant without having to wait months for it. These and other issues may possibly have contributed to a hopefully temporary pullback in consumer interest, resulting in underwhelming demand for the cut-price Model 3.
Investors, meanwhile, have responded the way they always do – with panic and disappointment – as Tesla shares continue to trade around $295 after recently dropping off a cliff.
The Elon Musk Problem: Lovable Rogue or Loose Cannon?
One significant problem that Tesla will have to deal with regardless of whether or not sales figures rebound significantly is what to do with its maverick founder and CEO Elon Musk. While he is generally loved and popular for his abrasive, down-to-earth, social media-friendly style, Musk’s somewhat erratic behaviour is increasingly becoming more than just a minor irritation and veering into significant financial risk territory for the company.
Already, he has been forced to step aside as Chairman of Tesla for a three-year period in addition to a $20 million fine after being found guilty of manipulating stock prices with his tweets following a prosecution led by the SEC. In response, he fired back in a “60 Minutes” interview:
I want to be clear. I have no respect for the SEC.
Recently, Musk had his latest run-in with authorities after yet again tweeting inaccurate production estimates, leading to a contempt of court charge. In typical style, he hired a battle-hardened prosecutor to dig him out of a completely avoidable mess.
Meant to say annualized production rate at end of 2019 probably around 500k, ie 10k cars/week. Deliveries for year still estimated to be about 400k.
— Elon Musk (@elonmusk) February 20, 2019
This is not to mention the whole “appearing on a podcast and smoking weed” episode which was about as endearing as watching your favorite fat uncle at a party trying to score with a woman half his age.
While Tesla is unlikely to go down the “Remove him!” route suggested by CNN’s Jim Kramer, it would certianly do no harm to furnish Musk with a new set of social media engagement guidelines and possibly a social media intern to delete some of the more problematic tweets as soon as they are sent.
Above all, Musk needs to understand that Tesla is no longer the personal vanity project it once was as a glint in his eye. It now has designs on becoming a bonafide global carmaker, building a gigafactory in China and competing against the might of GM, Chrysler, Chevrolet and Volkswagen, all of whom are investing obscene amounts of money in their electric vehicle development.
It’s already hard enough, Elon. There’s no need to make it harder for yourself.