Everything You Need To Know About Tesla's Model Y

Tesla Inc TSLA traded lower Friday after unveiling its hyped Model Y.

“The Model Y is to the Model X as the Model 3 is to the Model S. A more economical and presumably higher-volume version of Tesla’s X,” Canaccord Genuity analyst Jed Dorsheimer wrote in a note.

What We Know About The Model Y

The Model Y boasts a range of 300 miles with a 15-minute re-charge earning 168 more miles. Dorsheimer expects the Y’s cell to share the Model 3’s on-board Si- base inverter and Gigafactory configuration.

The car seats seven, has a panoramic glass roof, and comes in rear-wheel drive or dual-motor all-wheel drive. Its performance version sees 2.5-second zero-to-60 acceleration and reaches speeds up to 150 miles per hour.

To Morgan Stanley, it's pretty close to the Model 3, which bodes well for the firm from a production and purchasing perspective but will "likely" result in sales cannibalization.

"The Model Y offers substantially greater space, nearly identical performance, and nearly as much range as a Model 3… and it has two extra seats in a third row which is a very big deal, especially for the U.S. market," analysts Adam Jonas and Armintas Sinkevicius wrote. "This partially explains why Tesla pulled forward the intro of the lower priced Model 3 to provide some more pricing room vs. the early versions of the Model Y."

Loup Ventures compared the Model Y to the Audi Q5 and expects it to compete among crossovers — a market Wedbush said it's poised to win.

"As we had the opportunity to test drive the car, we were very impressed with the interior and feel of the Model Y on the road as it did not drive like a crossover SUV and will be a major competitive advantage when this it hits the road in our opinion," analysts Daniel Ives and Strecker Backe wrote.

What The Sales Strategy Looks Like

CEO Elon Musk said Tesla will have about 1 million Model Ys made within the next year, and Tesla will begin deliveries in fall 2020 at a range between $47,000 and $60,000.

"These price points were music to the ears of Tesla bulls as the digestible prices for a SUV crossover coming out of Tesla could be the 1-2 punch that makes Model Y a potential game changer for the company over the coming years in our opinion," Ives and Backe wrote.

As with the Model 3 rollout, Tesla will release a standard version of the Model Y at $39,000 only after producing the more expensive performance, dual-motor and long-range versions. The high-end will debut next year with the low end following in 2021.

“We suspect the strategy with the Y will follow a similar trajectory to the 3, skimming the high end of the market with more profitable sales, as the company works to bring costs down and then in 2021 introduce more mainstream price points to drive further competitive lead over traditional internal-combustion-based vehicles,” Dorsheimer wrote.

Loup Ventures, which had anticipated shipments in fall 2019, attributed the schedule to the Tesla's financial plan.

“This timing likely implies the company is postponing the costly Model Y ramp in 2019 to conserve cash; it would be infeasible to do a $35k Model 3 and a Model Y ramp at the same time,” said Loup's managing partner Gene Munster. “We now believe it’s more likely Tesla will raise money in 2019.”

What The Model Y News Implies About Tesla

The timeline led Munster to forecast some “bumps” in 2019, including a break-even third quarter “at best” and a near-term cash raise to pay a $566 million note due in November.

“While this raise would fuel concerns around the company’s prospects and would be negative for shares of TSLA in the near-term, it would put the company on track to bridge the gap between meeting its debt requirements and volume production of Model Y early in 2021,” Munster wrote. “Based on our conversations with the buy side investors, we believe the company can successfully raise enough cash ($1-2 billion) to reach long term profitability."

Tesla hasn't clarified its financial plans, but Musk forecasted eventual Model Y sales beyond Model S and X sales combined. Still, Dorsheimer expects the product to take time to become a meaningful income contributor, and some doubt it will live up to its hype.

“[We remain] somewhat concerned by @elonmusk's May 2018 commentary that the #ModelY will be a 'manufacturing revolution' compared to the Model 3. We can't help but wonder whether we've seen this movie before," Bernstein's Toni Sacconaghi said.

We remain "somewhat concerned by @elonmusk's May 2018 commentary that the #ModelY will be a 'manufacturing revolution' compared to the Model 3. We can't help but wonder whether we've seen this movie before." - Bernstein's Sacconaghi on $TSLA
— Carl Quintanilla (@carlquintanilla) March 15, 2019

Still, some bulls refuse to validate the stock's pullback.

“We continue to believe that the EV disruption is nearing an inflection higher and view Tesla as the primary beneficiary within the auto industry,” Dorsheimer wrote. He expects more information on Tesla’s pipeline at a March 29 investor tour.

Canaccord Genuity maintained a Buy rating on the stock with a $450 price target;
Morgan Stanley maintained an Equal-Weight rating with a $260 target; and
Wedbush maintained an Outperform with a $290 target.

Tesla's stock traded around $276.51 per share at time of publication, down 4.6 percent.

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