Elon Musk is undoubtedly one of the greatest innovators of our time; his ability to transfer fantasy into reality catalyzed Tesla (NASDAQ:TSLA). He’s the reason why, in prior years, I’ve supported the bull case for Tesla stock despite headwinds — such as the ubiquitous cash burn — recommending a cautious approach.
But recently, Elon Musk is the reason why I’ve turned skeptical on TSLA stock.
Of course, he remains a brilliant mind, accomplishing scientific feats of which mere mortals can only dream. But as I argued last month, Tesla doesn’t need more science; they have plenty of that! Instead, they need business smarts.
Obviously, Musk has to stop shooting himself in the foot. Making legally questionable comments on Twitter (NYSE:TWTR) that later aroused the Securities and Exchange Commission is an unforced error. So is smoking pot for a public interview, especially if it jeopardizes a vital security clearance.
Enough challenges already stymie Tesla stock. Stakeholders don’t need the CEO to add to their problems.
Fortunately, the tech firm has a viable opportunity to positively change the narrative. Scheduled for a world debut on Mar. 14, management will unveil the Tesla Model Y. In order to generate buzz before the launch, the company released a teaser photo. From the looks of it, the Model Y is a stunner.
A crossover based off the ultra-popular Model 3 sedan, management hopes the new vehicle can right TSLA stock. On paper, it should.
For starters, the Tesla Model Y will almost surely carry the same sleek design as previous models. Moreover, Musk disclosed that the Model Y will have 76% of the same parts as the Model 3. Plus, it should hit a pricing sweet spot.
But will it be enough to save Tesla stock?
Tesla Model Y Fires on All Cylinders
When you look at the Tesla Model Y as purely an automotive asset, you can’t help but think this is the gamechanger that TSLA stock needs. It hits all the right notes you’re looking for as a car manufacturer.
Looks are subjective, but I’m likely not a contrarian when I say their cars are drop-dead gorgeous. Not only that, Tesla, in its short lifespan, has a distinctive image. Just like the layperson recognizes BMW’s kidney grilles or Mercedes-Benz’s three-pointed emblem, a Tesla commands our attention.
Furthermore, on a relative scale, the Model Y wins the design department by a wide margin. Toyota (NYSE:TM) has its Prius, and Nissan (OTCMKTS:NSANY) has its Leaf. However, the former is painfully boring, while the latter is an automotive atrocity.
Performance-wise, drivers will enjoy the immediate torque native to electric vehicles (EVs). According to Car And Driver, the Model X can go from zero to 60 miles per hour in 4.5 seconds. A hotrod-version of the Model 3 does it in a blistering 3.5 seconds. You can probably expect the base Model Y to hit close to these numbers, perhaps around 5 seconds.
Finally, sales trends indicate that the sedan is a dying platform. A painful example is Ford Motor (NYSE:F), which essentially gave up on its sedans. Today, they’re largely focusing on their trucks, the still-popular Mustang and the international market.
But with an SUV and a crossover under its belt, Tesla can jumpstart its revenue stream. If all goes well, we should see a correlating bump up in TSLA stock.
Model Y Is Not a Fix-All for Tesla stock
As much as I’m a fan of Tesla EVs, I’ve distanced myself from Tesla stock. While the automotive experience tugs at my heartstrings, I can’t let emotions dictate my investments.
One of the things that I worry about is the core product: these are of course EVs, and that’s the problem. Only 56% of Americans have access to electrical charging, which dramatically limits this automotive platform’s potential.
Not only that, EVs take a while to charge. Even a Tesla car using a 150-kilowatt rapid charger will require sitting at a charging station for at least half-an-hour. I’m sorry but that’s a big killjoy, especially for multiple generations growing up in fill-‘er-up culture.
Another surprising headwind for Tesla stock is that the underlying vehicles don’t have the greatest quality. Car And Driver’s Kevin A. Wilson had this to say about the performance-version Model 3:
“Whatever you think of the Model 3’s exterior design (some among us have called it “not pretty” while those with the warmest regard for the shape get no more impassioned than to suggest it’s “not bad”), we’ve also noted that Teslas in general are not assembled to the high standards of the luxury automakers with which they compete.”
That’s hardly what I call a glowing review. It also opens the door to the competition. At the price range at which the Tesla Model Y will fit in, multiple options exist. We’re talking vaunted names like Mercedes-Benz, BMW, Lexus, Infiniti, Audi and even Porsche.
While the Model Y will make things interesting for gearheads, it doesn’t do anything for TSLA stock. Simply put, there’s no compelling reason to own one.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.