The Model Y will be a test of Tesla’s popularity

Elon Musk often says that the key to Tesla's success is how people talk about the company. "Word of mouth is the reason why model 3 is the best-selling electric car, even though there is no advertising or paid promotions," he wrote in September 2018 . The company also admits it repeatedly: in its most recent 10-K filing with the SEC, Tesla said word of mouth, along with media coverage, that "they have been the main drivers of our vehicle sales," that is how and why The company avoids traditional advertising.

But Tesla, still with a volatile 2018, recently made changes in the name of cost reduction that endangered this basic principle of the company. With Tesla closing many of its stores and changing sales to a single online model, the company will also be more reliable than ever before. If any damage to his reputation has been done, it may soon become obvious, because Tesla is about to reveal, and possibly start taking orders in advance, for his second mass-market car on Thursday, the compact SUV Model Y.

While not expected until 2020, early reactions to Model Y will be crucial, both from clients and investors. And at this moment, even before the event, it is a fairly well-known quantity. The new compact SUV will share approximately 75 percent of the same components as Model 3. It will cost approximately 10 percent more than Model 3, Musk said, and will offer a slightly lower scope and similar performance.

In its first full year of production, Model 3 became the best selling EV in the world and helped save Tesla from death. Because the demand for that car is potentially fading in the US. US, and car sales are expected to have a year of decline, the Model Y could eventually help improve the situation while generating cash for Tesla in the short term. But that only happens if the "great word of mouth" of Tesla is still powerful.


  The Boring Company of Elon Musk presents the test tunnel in California

A Tesla Model X that circulates through the tunnel in Los Angeles that was carved by The Boring Company, one of the other Elon Musk companies.
Photo by Robyn Beck-Pool / Getty Images

2018 was a roller coaster year for Tesla, from Musk, which tries to make the company private, to be sued by the Securities and Exchange Commission for the securities fraud related to that effort, to the marijuana CEO in the Joe Rogan program, all while the company frantically tried to get the Model 3 out the door in large quantities.

But the wild journey is apparently far from over.

Tesla started in 2019 when announcing layoffs and abruptly killed his reference program. For years, Tesla had given customers a reference code that they could then pass on to other potential new buyers. The more people bought Tesla cars with their code, the more benefits they could get, from the free charge at the company's Supercharger stations to a free second-generation Roadster.

. However, the reference program was "adding too much cost to the cars, especially [the] Model 3," Musk said in January. So he killed him.

The decision was mostly received with indifference, even with a little encouragement from the main proponents of Tesla. In any case, it served as an example of how the company's supporters could respond favorably to a surprise change, even if it involved something that many of them directly benefited from.

A more recent decision provoked more passionate responses. Tesla announced in late February that it was finally ready to manufacture and sell the much-anticipated $ 35,000 model 3, an affordable electric car that was part of Musk's original "master plan" for the company, published in 2006. Closing most of The company's stores and the switch to a fully online sales model was the way Musk could finally achieve this goal, and it also allowed Tesla to lower the price of its other cars.

Normally, that could be seen as a good thing. But many customers who bought Teslas before the prices fell felt dejected.

One of the most critical critics was comedian Chris Titus, who complained to his 125,000 followers on Twitter on March 2. about how his wife bought a Tesla two days before the prices went down. "@Elonmusk lost a loyal customer", Titus wrote . "[T] the people who supported you, praised you and cared for you [sic] the dream deboned."

Anger over price cuts was also unleashed in China, which is the world's largest market for electric cars. After Tesla reduced prices on all its models there, several owners protested at the company store in the capital city of Changsa, Hunan province. The angry owners wrapped the store in a banner that apparently translated into "do not buy now, buy tomorrow with a discount".

Meanwhile, another group of owners protested outside of a Supercharger station and a shop / Service center in Taiwan following the price cuts.

Even Fred Lambert, editor in chief of the blog Tesla-boosting Electrek criticized the abrupt change in Tesla prices. "Tesla's pricing structure makes them look amateur," he wrote on March 4.

Then there was a curious situation in February, where Tesla made a call with reporters to discuss the news of Model 3 of $ 35,000. The call was not made public, which irritated investors, because Musk shared the details they said were important for the price of the company's stock. (For example, Musk announced on that call that it was unlikely that Tesla would make a profit in the first quarter of 2019).

Many in the investment community complained about this decision, especially the merchants who are betting against the company, known as "Short sellers". But a famous reinforcement of Tesla also spoke. Gali Russell, the founder of the Internet talk show, HyperChange TV (and the YouTuber that Musk became famous during a quarterly call with Wall Street analysts last year after complaining about "boring questions on the head") said on Twitter that the movement was "very frustrating" and said it "completely [went] against the democratization of information and financial markets". This time, Musk capitulated, telling Russell that it was an "error", and Tesla posted a recording of the call to his website shortly after.

Much of this could be taken as cranks simply by expressing discontent on Twitter. But there is some data that supports the apparent change in the feeling around Tesla. In a survey conducted by Axios-Harris to 18,228 adults conducted between November and January, the Tesla ranking slipped into several categories. It stopped being the 14th most reliable company from 100 to 46. The company's "character" ranking fell from 7 to 57, and its "ethics" ranking slipped from 5 to 56.

The capricious nature of Musk is also weakening with some shareholders. The recent impulsive decisions, and especially the resulting resentment, were enough for Alex Chalekian, executive director of the investment advisory firm Lake Avenue Financial, to sell his shares in Tesla.

"That's not a good RP, you have to remember, this is your whole company, they do not advertise," Chalekian said in a telephone interview with The Verge .

Chalekian, who says he deposited a deposit for the Model S "immediately" when he saw the concept revealed in 2009, says he bought shares in the company when they were still trading at around $ 30.

But in the last months, he was worried about the number of executive departures and erratic announcements. The recent violent reaction made him feel as if Tesla's "aura" was in danger. "I love driving my [Tesla] Do not get me wrong I've loved you for years, but if you start now to get a new generation of car owners who are out there and they're upset, they're not going to help you with your future sales," He says.

Russell agrees that Tesla ruined the communication of store closings and subsequent price drops in an interview with The Verge by calling them "Suddenly, it is not well explained".

Having said that, Russell does not believe that annoying customers have a serious basis for complaints. "Everyone bought the product at the price they paid because they thought it was a good value, and now the company has lowered prices and it's an even better value," he says. "I understand the frustration, but if the biggest problem in which I invest a company is that customers are so frustrated because prices are falling, that is a test of the pace of innovation of the company."

Tesla partially changed the previous course This week when it announced that it would stop the closing of stores. But that, in turn, will also raise prices again. Musk has said that customers have until next week before all Tesla cars (except Model 3 base $ 35,000) cost 3 percent more.


the model y will be a test of teslas popularity

The teaser of the Tesla website for the presentation event of the Model Y
Image: Tesla

A true proof of the impact of all this consumer lash could occur when Tesla presents the Model Y on Thursday. If Tesla follows the same playbook that he used for Model 3, it is likely that the company will start taking pre-orders for the Model Y shortly after the opening.

But while Model 3 quickly accumulated hundreds of thousands of pre-orders (and hundreds of millions of dollars) in the weeks following its launch in 2016, there is no guarantee that Model Y will find the same enthusiasm. There are also indications that the demand for Model 3 has also been reduced in the US. UU., Where Tesla vehicles are no longer eligible for the full federal tax credit for electric vehicles. The Model Y will be a bit more expensive, while competition in the space of the electric SUV is accumulating rapidly. And with fewer stores, it will depend more than ever on Tesla believers to spread the good word.

These factors make some Wall Street analysts skeptical. "An announcement of the Model Y shortly after the $ 35k [Model 3] suggests that the consumer's reaction to Model 3 of $ 35k may not have been as strong as the company expected," the RBC Capital analyst wrote in a note. Joseph Spak, last week.

Adam Jonas, of Morgan Stanley, wrote this week that Tesla is "experiencing multiple transitions with sales momentum, change to online channels, management changes, establishment of a foot in China and the first Model Y reveal, among other novelties ".

That said, SUVs currently account for 49 percent of the US auto market. UU., According to JD Power, and more than half of the customers who bought a vehicle in the $ 30,000 to $ 50,000 price bought an SUV. So even if customers are angry, or just less sure than ever of what Tesla's next moves might be, the numbers could (perhaps should ) continue to work in favor of the Silicon Valley automaker, Something like Ross Gerber, president and CEO of investment advisor Gerber Kawasaki and a shareholder of Tesla, agree with.

"The number of people who can afford a $ 50,000 income-oriented car is exponentially greater than if it only makes cars for people who make $ 120,000," says Gerber The Verge . "So you open a market that is simply huge."

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