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Tesla's SUV Launch Overshadowed By Concerns Over Demand And Cash Burn

Tesla's SUV Launch Overshadowed By Concerns Over Demand And Cash Burn
While experts and analysts were concerned about the US electric car market Tesla not having addressed the issue of a slowdown of demand for some of its models, investors were apparently worried about whether the company would be burning more cash as the company unveiled an electric sports utility vehicle. The shares of the company fell by about 4 per cent on Friday.
The “Model Y” compact SUV – designed on the same platform as the Model 3, was unveiled by Tesla on Thursday. The company had rolled out its cheapest model – the $35000 version of its Model 3 sedan last month. However the company is finding it hard to convince its investors about the functionality of its business model. 
“It seems to be another distraction tactic presenting a new model and (to) divert from the problems with the other cars, the production and the profitability,” NORD/LB analyst Frank Schwope said in an interview to the media.
While there was no suggestions for a cuts on the price target or recommendations for the shares of the company by any one of the 30 analysts who cover Tesla, the ambivalence of a section of analysts on Wall Street about the company following legal issues that have stretched on for months and the outbursts by Chief Executive Officer Elon Musk on social media was underscored by the slightly subdued response to the new launch.
There have been some concerns raised by some Wall Street analysts about the slowing down of the demand for the higher priced Model 3 of Tesla – accentuated by the waning down of the tax benefit for customers given by the US government later this year.
Moreover, analysts and investors were also left worried over the need for Tesla to raise cash sooner than later because of the launch of the Model Y.
The company would likely need to raise money later this year, said Gene Munster from Loup Ventures and Ivan Fienseth from Tigress Financial Partners, both of whom are known to be backers of Tesla as its analysts. 
Cowen’s Jeffrey Osborne, who has an “underperform” rating on the stock, agreed.
“We believe the event was more of a capital raising effort and branding exercise,” Osborne said. “We do not see the new Model Y igniting elevated demand or enthusiasm for the Tesla brand.”
A long-range Model Y with a range of 300 miles (482 km), would be launched by it next year, Tesla also announced and that it would be priced at $47,000. The company also plans to roll out a standard version of the same in 2021 which would be priced at $39,000.
“The biggest surprise was Model Y initial shipments will begin in the fall of 2020, a year later than we had anticipated. This timing likely implies the company is postponing the costly Model Y ramp in 2019 to conserve cash,” Munster wrote in a note.
With the aim of reducing costs and making profits, there have been job cuts at Tesla and it has also closed some stores. It expects a loss in the first quarter of the current year.

Christopher J. Mitchell

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