The Y model will be a test of the popularity of Tesla

Elon Musk often says that the key to Tesla's success lies in the way people talk about society. "Word of mouth is excellent, that's why Model 3 is the best-selling electric car, despite the lack of advertising or paid advertising" written in September 2018. The company repeatedly admits this too – in its last 10-K filing with the SEC, Tesla said that word of mouth, as well as media coverage, "were the main drivers of our vehicle sales", which which explains why and how society avoids traditional advertising.

But Tesla, which still has a volatile 2018 year, has recently changed the name to cost-cutting, thus jeopardizing this fundamental principle of society. With Tesla closing many of its stores and moving sales to an online model only, the company will also rely more than ever on word-of-mouth. If his reputation is tainted, it will soon become clear, as Tesla is about to unveil – and could eventually start taking orders – its second mainstream car on Thursday, the Model Y compact SUV.

Although this is not expected until 2020, the first reactions to the Y model will be crucial, from both clients and investors. And for the moment, even before the event, it's a pretty well-known quantity. The new compact SUV will share about 75% of the same components as the Model 3. It will cost about 10% more than the Model 3, said Musk, and will offer slightly lower battery life and similar performance.

In its first full year of production, the Model 3 became the world's best-selling electric vehicle and helped save Tesla from death. In the United States, as the demand for this car tends to fade and car sales are expected to slow down a year, the Y model could eventually help fill the gap while generating liquidity for Tesla in the near future. term. But this only happens if Tesla's "big word-of-mouth" is still powerful.

Photo by Robyn Beck-Pool / Getty Images

In 2018, Tesla, of Musk who was trying to privatize the company, was sued by the Securities and Exchange Commission for securities fraud related to this effort, until the CEO smoked marihuana on Joe Rogan's show – while the company was trying frantically. to get the model 3 to the door in huge quantities.

But the crazy race is apparently far from over.

Tesla began the year 2019 by announcing layoffs and abruptly removing its sponsorship program. For years, Tesla had provided its customers with a referral code that they could then pbad on to other new potential buyers. The more Tesla cars you buy with your code, the more benefits you'll get, from free charging at the company's Supercharger stations to a free second-generation Roadster.

The sponsorship program "added too much cost to cars, especially [the] Model 3, "said Musk in January, so he killed him.

The decision was generally met with indifference, even with slight encouragement from Tesla's main boosters. Rather, it served as an example of how supporters of society could respond favorably to a surprise change, even if it involved something that many of them benefited directly from.

A more recent decision has provoked more pbadionate reactions. Tesla announced in late February that it was finally ready to manufacture and sell the highly anticipated Model 3 of $ 35,000, an affordable electric car as part of Musk's original "blueprint" for the company, released in 2006. Most of the company's stores and the move to a fully online sales model have been the means by which Musk has finally been able to achieve this goal. It also allowed Tesla to lower the price of its other cars.

Normally this can be considered a good thing. But many customers who bought Teslas before the price cuts felt upset.

Chris Titus, one of the most outspoken critics, complained on March 2 to his 125,000 followers on Twitter about how his wife had bought a Tesla two days before the price collapsed. "@Elonmusk lost a loyal customer," Titus wrote. "[T]The people who supported you, praised and cared for you [sic] the dream is boned.

China and the United States, the world's largest market for electric cars, have also expressed anger. After Tesla cut prices for all his models, a number of homeowners protested at the company store in the capital of Hunan Province, Changsa. The disgruntled owners have wrapped the store in a banner that seems to translate to "do not buy now, buy tomorrow at a discount."

Meanwhile, another group of owners protested in front of a Supercharger station and a store / service center in Taiwan following the price cuts.

Even Fred Lambert, editor of Tesla's stimulating blog ELECTrek, criticized the sudden price change of Tesla. "Tesla's pricing structure makes them look like amateurs," he wrote on March 4.

In February, Tesla had a phone conversation with reporters to discuss the news of Model 3, worth $ 35,000. The appeal was not made public, which put investors in disagreement, because Musk disclosed details that they believed were essential to the company's stock price. (For example, Musk announced on this call that it was unlikely Tesla would make a profit in the first quarter of 2019.)

Many investors have complained about this decision, especially traders who are betting against the company, known as "short sellers". But one of the recalled Tesla also took the floor. Gali Russell, founder of Internet TV show HyperChange TV (and the YouTuber whom Musk sadly alluded to in a quarterly call with Wall Street badysts last year, after complaining about "boring questions ") said on Twitter that the move was "super frustrating", and said "completely [went] against the democratization of information and financial markets. This time, Musk capitulated, explaining to Russell that it was a "mistake", and Tesla posted a recording of the call on his website shortly thereafter.

Much of this could be likened to cranks expressing just their discontent on Twitter. However, some data corroborate the apparent change of sentiment around Tesla. In an Axios-Harris survey of 18,228 adults between November and January, Tesla's ranking slipped into several categories. It went from the 14th company out of 100 in 46th. The ranking of the "characters" of society fell from 7th to 57th place and that of "ethics" from 5th to 56th.

The capricious nature of Musk is also used by some shareholders. Recent impulse decisions, and in particular the resulting backlash, have been enough for Alex Chalekian, CEO of investment advisory firm Lake Avenue Financial, to sell his shares in Tesla.

"It's not a good relationship You must remember, it's all their business. They do not advertise, "Chalekian said in a phone interview with The edge.

Chalekian, who claims to have filed a deposit for Model S "right now" when he saw the concept unveiled in 2009, claims to have bought shares of the company while they were still trading around $ 30. .

But in recent months, he has worried about the number of executives leaving and erratic announcements. The recent feedback made him feel that Tesla's "aura" was in danger. "I like to drive my [Tesla]. Do not mistake yourself. I have loved him for years. But if now you start having a new generation of car owners who are on the market and are upset, they will not help you in your future sales, "he says.

Russell agrees that Tesla botched the communication about store closures and subsequent price cuts in an interview with The edgecalling them "suddenly and not well explained."

That said, Russell does not think dissatisfied customers have a serious basis for complaints. "They all bought the product at the price they paid because they thought it was good value. Now, the company has lowered prices and it's even better, "he says. "I understand the frustration, but if the main problem of a company in which I invest is that customers are so frustrated by falling prices, it is proof of its pace of innovation."

Tesla partially reversed the trend earlier this week when he announced that it would end the closing of the stores. But that will increase prices again. Musk said customers have until next week that all Tesla cars (except the $ 35,000 basic model 3) will cost 3% more.

Picture: Tesla

A real test of the impact of all that badlash consumers could be when Tesla unveil the Y model on Thursday. If Tesla follows the same booklet as the one used for Model 3, the company will likely start taking pre-orders for Model Y shortly after the unveiling.

But although Model 3 has quickly accumulated hundreds of thousands of pre-orders (and hundreds of millions of dollars) in the weeks following its unveiling in 2016, there is no guarantee that Model Y will meet the same enthusiasm. There are already signs that demand for Model 3 has also declined in the United States, where Tesla vehicles are no longer eligible for the full federal electric vehicle tax credit. The Y model will be slightly more expensive, while competition in the space of electric SUVs will intensify rapidly. And with fewer stores, Tesla's believers will need more than ever to spread the good news.

Some Wall Street badysts are skeptical of these factors. "A Model Y ad so soon after the $ 35k [Model 3] suggests that the consumer response to Model 3, worth $ 35,000, may not have been as strong as the company expected, "he said. commented RBC Capital badyst Joseph Spak last week.

Morgan Jon's Adam Jonas wrote this week that Tesla "is undergoing multiple transitions with a slowdown in sales dynamics, a shift to online channels, changes of direction, a footprint in China and the first model Y unveiled, among others. developments. "

That said, sport utility vehicles currently account for 49% of the US automotive market, according to JD Power, and more than half of customers who bought a vehicle in the $ 30,000 to $ 50,000 price range bought a SUV. . So, even if customers are angry, or simply less sure than ever of what Tesla's next moves might be, the numbers could (maybe even should) remains in agreement with the automakers of Silicon Valley – a point endorsed by Ross Gerber, president and CEO of investment advisor Gerber Kawasaki and shareholder of Tesla.

"The number of people who can afford a car with an income of $ 50,000 is exponentially larger than if you only make cars for people earning $ 120,000," Gerber said. The edge. "So you open a market that is just huge."