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Tesla's introduction to model Y underwhelms and stock falls rapidly

Tesla Inc.'s newly discovered Model Y has failed to excite Wall Street, with some investors stating that the disclosure of the crossover vehicle played out as an infomercial trying to mask weaker model 3 demand and cash.


TSLA, -5.08%

shares fell nearly 4% on Friday, and are down more than 5% from the moment CEO Elon Musk announced the vehicle's disclosure date on Twitter. Crossover starts at $ 47,000 and bookings require $ 2,500 deposits, which is more than what Tesla demanded at the time of Model 3 reveal.

See also: Tesla Elon Musk reveals the Model Y transition with $ 47,000 price tag

At the disclosure late on Thursday, Musk said he expected to sell more model years than Tesla's other cars combined. The production of the car is expected to start in late 2020 and a standard, cheaper car is expected to roll out the factory floor in early 2021[ads1] and cost around $ 39,000.

"We're still worried about the production timeline," said Toni Sacconaghi with Bernstein. The late 2020 target seems like model 3, and ultimately the delay was delayed by 9 to 12 months, he said.

Read more: Tesla's credit rating is still "strained", says Moody's.

The more expensive deposit can also rely on bearish sentiment on Tesla's cash position, Sacconaghi said. Ordering a Model 3 at the time of launch required a $ 1,000 deposit.

Model Y orders could be "muted," said Joseph Spak at RBC Capital Markets. "The vehicle is not available for almost two years, and consumers can realize that putting money down early for Model 3 did not bring many benefits," he said.

The biggest question is how much model Y will cannibalize model 3, which may be significant since crossover SUVs are more popular than sedans, Spak said.

Unlike previous disclosures, it was "no" one more thing, "as many expected," he said. Spak also asked Tesla's strategy to show the vehicle now, against uncovering it closer to the start of production.

Analysts at Roth Capital Partners, led by Craig Irwin, had their own answer to that question: "The model Y launch was likely to be pulled out to distract from weak demand for model 3," they said.

Related: Here's why Tesla's model Y message is "feed to the bears"

"Tesla must now deliver unit growth for the stock to work, in our opinion," said the Roth analysts.

The night "kept no surprises" and played as an infomercial for Tesla without even the more moment, Jeffrey Osborne at Cowen said. There was nothing to confuse anxiety about demand interruptions, no model S and model X update, and no color around the first quarter results.

"We believe the incident was more of a fundraising and branding exercise. We do not see the new model Y that ignites the increased demand or enthusiasm for the Tesla brand," they say.

The Tesla shares have fallen 15% over the last 12 months while S & P 500

SPX, + 0.60%

has increased 2.9% and the Dow Jones Industrial Average

DJIA, + 0.61%

has received 4.1%.

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