Tesla Model 3 sales could be 'cannibalized' by Model Y crossover, Bernstein says

Published Tue, Feb 11 20208:45 AM ESTUpdated Tue, Feb 11 20209:57 AM EST

Michael Sheetz @in/michaeljsheetz @thesheetztweetz

(This story is for CNBC PRO subscribers only.) A top tech analyst worries that Tesla may see a dip in sales soon from "cannibalization," a factor that's plagued other luxury automakers in the past. Bernstein's Toni Sacconaghi wrote in a note to investors on Tuesday that, at the surface level, demand for Tesla's coming Model Y "appears promising." The crossover electric vehicle offers Tesla the opportunity to tap into the high demand SUV market, which sees sales of over 700,000 vehicles in the U.S. per year according to Bernstein. But, despite the massive market potential, Sacconaghi says the key question remains whether Model Y will cannibalize sales of Tesla's most popular Model 3. The former vehicle is essentially an SUV variant of the latter sedan, a tactic other automakers often take. "Based on precedents, we do worry that the introduction of Model Y could ultimately cannibalize some Model 3 sales," Sacconaghi said. "That said, the ramp on the domestically manufactured Model 3 in China over the course of 2020 could ultimately neutralize the impact on global Model 3 volumes, though any softness in Model 3 sales/orders domestically or in Europe could ultimately spook investors near-to-medium term. The analyst gave the historical example of German luxury SUVs – from Mercedes, BMW and Audi – as showing "some initial cannibalization (up to 20%) to their sedan sales." Additionally, Sacconaghi said "there is a striking physical similarity between the Model 3 and Model Y," including "limited functional difference between the two vehicles." The comparable offerings of German luxury automakers had nearly a fifth of their sedan sales cannibalized by the SUV launches, "despite the offerings being physically significantly different," the analyst said. Shares of Tesla were largely unchanged in trading from its previous close of $771.28. Bernstein has a market-perform rating on the stock with a $325 price target – nearly 60% below the stock's current level. Notably, Sacconaghi said Bernstein's price target "is currently under review" given the recent volatility in Tesla's stock. – CNBC's Michael Bloom contributed to this report.

The new Tesla Model Y is introduced. Tesla has expanded its model range to include an SUV based on the current Model 3.

Hannes Breustedt | picture alliance | Getty Images

(This story is for CNBC PRO subscribers only.)

A top tech analyst worries that Tesla may see a dip in sales soon from "cannibalization," a factor that's plagued other luxury automakers in the past.

Bernstein's Toni Sacconaghi wrote in a note to investors on Tuesday that, at the surface level, demand for Tesla's coming Model Y "appears promising." The crossover electric vehicle offers Tesla the opportunity to tap into the high demand SUV market, which sees sales of over 700,000 vehicles in the U.S. per year according to Bernstein.

But, despite the massive market potential, Sacconaghi says the key question remains whether Model Y will cannibalize sales of Tesla's most popular Model 3. The former vehicle is essentially an SUV variant of the latter sedan, a tactic other automakers often take.