KeyBanc: Mixed Responses From Tesla Salespeople 'Do Not Bode Well' For Long-Term Demand

Is demand stronger or weaker for Tesla Inc TSLA's vehicles? Checks and conversations point to a concerning demand outlook for Model S, Model X and Model 3 vehicles, according to KeyBanc Capital Markets. 

The Analyst

KeyBanc's Brad Erickson maintains a Sector Weight rating on Tesla's stock with no assigned price target.

The Thesis

Feedback from 25 Tesla sales centers across the U.S. found the Model S and Model X backlog increased from a historical norm of six to eight weeks to three months, Erickson said in a Monday note. The analyst found "evident salesperson confusion" in their responses, with the four most common answers being:

• Tax credit scarcity.
• A resource shift toward the Model 3.
• A mix shift to inventory models.
• A mix shift to right-hand drive cars.

A "confusion in responses" from Model S and Model X salespeople "does not bode well" from a longer-term demand perspective, the analyst said. 

A "small but pronounced" market for used Model 3 vehicles is popping up on Autotrader, eBay Inc EBAY and other secondary market vendors, the analyst said. While conversations with 12 sellers isn't a large enough sample size to "draw any final conclusions," the fact a used market exists could serve as the "first proxy into the real underlying strength" of the new car, Erickson said. 

"Of the 12 we talked to, seven were essentially flipping the car solely to gain the tax credit." 

Price Action

Shares of Tesla were trading lower by 1.83 percent midday Tuesday at $339.20. 

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Photo courtesy of Tesla.