Tesla's New Model Y Trim Won't Expand Market, Offers 'Zero Incremental Volume,' Says Gary Black
Gary Black, managing director of The Future Fund LLC, criticized Tesla's new affordable Model Y trim, stating it would not increase sales volume and could cannibalize higher-priced models. He attributed a 4% drop in TSLA stock to inflated earnings projections and noted Tesla's revenue fell 12% year-over-year. Black emphasized that without a new vehicle form factor, the affordable Model Y would not expand Tesla's market. Tesla's sales have declined for seven consecutive quarters in California, with a reported 21% drop in sales according to the CNCDA.
The Future Fund LLC's managing director, Gary Black, says Tesla Inc.‘s TSLA affordable Model Y trim level would offer the EV giant no ‘incremental volume.'
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What Happened: The veteran investor took to social media platform X on Wednesday, following the earnings call, to weigh in on Tesla.
"The biggest negative (and as I've warned for months) is that the new affordable vehicle will be nothing more than a stripped-down Model Y at a lower price point," the investor said in his post.
He added that an affordable model in the Tesla lineup, without a new form factor like a hatchback or a pickup truck, would "cannibalize" the higher-priced trim levels. "This is marketing 101, but I'm not sure anyone in senior management gets this," Black said.
He also blamed the 4% decline in Tesla stock during after-hours trading on the adjusted Earnings Per Share being "10-15% too high" despite the "42% YTD reduction," he said.
Black also responded to a post on X that questioned his reasoning behind the cannibalization comments. The post argued that a new Model Y trim would serve different segments. Black, in response, said that he was a huge advocate for the Model Y when it first came out, when people drew comparisons with the Model 3.
“I told everyone who would listen Model Y was a different form factor (CUV) vs the Model 3 (small sedan) and predicted Model Y would be a huge success,” the investor said before adding that the situation is “totally different” for consumers presently.
Why It Matters: The news comes as Tesla shared its second-quarter earnings on Wednesday, reporting a total revenue of $22.5 billion, a 12% YoY decline for Elon Musk‘s EV giant.
The post from the investor echoes his earlier comments about the new Tesla model being an affordable Model Y. Black had said that such a model wouldn't be able to expand Tesla's total addressable market.
Tesla's sales have declined over the past year, with the company's sales slipping for the seventh consecutive quarter in the U.S. state of California. Latest data from the CNCDA, or California New Car Dealers Association, suggests sales were down 21%.
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