Reuters/Bobby Yip; Business Insider/Dave Smith
- Tesla is mired in “demand hell” ahead of Thursday’s Model Y unveiling, the most negative Tesla analyst on Wall Street said.
- The electric-car maker is facing waning demand in the US and China, said Vertical Group analyst Gordon Johnson, who has a $72 price target — 75% below where shares were trading Thursday.
- Other analysts have also pointed to demand as a core problem for Tesla.
- Watch Tesla trade in real-time.
Last fall, in the throes of a turbulent stretch for the electric-car maker, Tesla was dragged from “production hell” to “delivery logistics hell,” CEO Elon Musk said at the time.
And ahead of Tesla’s long-awaited Model Y SUV unveiling on Thursday evening, the company finds itself in a different kind of hell, in the eyes of the biggest Tesla bear on Wall Street.
“Tesla has a demand problem,” Gordon Johnson, an analyst at New York-based Vertical Group, told Markets Insider on Wednesday. “The demand problem is the Model 3 is not a mass market car. It’s a luxury car.”
He added: “Elon Musk has talked about production hell, delivery hell. I think what they’re in now is demand hell.”
Specifically, Johnson cited data from Inside EVs, which reflects what Johnson calls a “demand collapse.” Tesla sold 17,750 Model 3s in the US in October, 18,650 in November, and 25,250 in December — a steady rise through the end of last year. But in January, the automaker sold just 6,500 Model 3s in the US, and then 5,750 in February.
“The demand is disappointing in a big way,” he said. “We think they’re going to lose close to $500 to $600 million this quarter due to weak demand and price cuts. We think the reason why you’re seeing all this erratic activity is because we think that they’re literally throwing things against a wall and hoping that they stick.”
Rising competition from the likes of Jaguar, Audi, and Nio’s electric-vehicle offerings, falling demand, and a slowing product pipeline beyond the Model Y all fuel Johnson’s bear Tesla thesis. Jaguar’s I-Pace and Audi’s e-tron have arrived in Europe, and Porsche’s Taycan is expected to arrive by the end of 2019.
“Tesla has been alone in this market — 100% battery electric vehicles with over 200 miles of range,” he said. “They’ve been alone. And the real competition arrives in the second half of this year. So that’s when I think things really start to accelerate downward.”
Read more: Tesla slashed prices for the Model 3 — but took away any incentive for its employees to sell the new version
Johnson’s $72 price target — implies a 75% drop from current levels, and is the lowest on Wall Street.
Other analysts have also pointed to demand as a major pain point for Tesla. On Wednesday, Goldman Sachs analyst David Tamberrino said he expects weak demand and weak margins for Tesla in the first-quarter of this year while reiterating his “sell” rating.
Pointing to InsideEVs data, Tamberinno said Tesla has already seen a 66% sequential sales decline for the Model 3 during the first two months of this year. He added that the Model Y’s unveiling could exacerbate demand issues for the Model 3.
Thursday evening’s Model Y release comes at a chaotic time for the company as the first two and a half months of the year have been anything but quiet.
Tesla has seen several high-level departures after a string of departures last year and a fresh tussle between Musk and the Securities and Exchange Commission. Additionally, the electric-car maker said it no longer plans to shutter all of its physical stores, reversing an earlier announcement.
At the end of February, Tesla said it was unlikely to turn a profit in the first-quarter. Shares have fallen 12% this year.
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