Tesla Motors Inc. launched the Model X just last week. And, the company’s CEO, Elon Musk, is already hinting at the company’s yet-to-be released products. In response to a Twitter user’s question about whether the new Model 3 will have falcon wings, Musk responded that it is likely that falcon wings will be installed on either the upcoming Model 3 or Model Y. That was the first mention of the Model Y.
The Model X was launched after the company had great success with its Model S. Tesla’s earlier models are priced at a premium while the Model 3 is being launched to the masses. It is expected that the price range for the Model 3 will be between $30,000-$40,000 when it launches in 2017.
Despite the company’s launch of its two premium priced models and its high sales growth, Tesla is experiencing profitability and liquidity issues. It simply has not been able to convert the high sales numbers into large profitability. While the sale of the luxury models has generated high gross margins, the number of units actually being sold is declining.
Tesla’s China sales have slumped due to the devaluation of the yuan as well as the slowdown in the Chinese economy. The American-made Tesla models have become comparatively more expensive than China’s low-priced domestic vehicles.
As a result, the launch of a reasonably priced Tesla will provide real competition for China’s local manufacturers.
In his Tweets, Musk linked the low-priced Model Y with the Model 3, fueling speculation that the Model Y will also be low-priced. However, Musk quickly deleted his posts, indicating that plans for the Model Y may not yet be a done deal.
In addition to the problems in China, Tesla is experiencing production complications as well. The company has just one assembling plant to produce the Model X and Model S. Producing the Model 3 and possibly the Model Y will exacerbate Tesla’s issues. Therefore, the company will have to expand its current assembling plant or build a new facility to fulfill the high demand for the Model 3 and likely the Model Y.
Despite the exciting news announced by Tesla (and maybe accidentally released by Musk himself,) investors are a bit skittish. The company’s stock price fell 0.57% and closed at $246.15 on Monday. Analysts assert that the company’s production issues may be outweighing the positive effect of the possible Model Y.
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