Tesla and The Osborne Effect

Last night Tesla announced details of the upcoming Model Y. You can read the details in pretty much every automotive news source but here are links to coverage from AutoWeek and Chris Davies’ article at SlashGear. Briefly, it’s a slightly taller version of the Model 3 with a rear hatch and minuscule third row of seats that is being pitched as a crossover. The announced pricing makes it slightly more expensive than the 3. What are we to make of this?

First, it’s hard to look at the Model Y and not think that this is what should have been put into production over a year ago instead of the Model 3. Small crossovers are what sells in huge numbers these days and unless you’re a styling or handling purist it’s not hard to see why. For a relatively small hit to efficiency you get a hugely more practical vehicle with good visibility and, for older customers, easier entry and egress due to a slightly higher seat height.

Second, recent adventures in Model 3 pricing suggest that Tesla might have been better off showing the car and being a bit more vague about what it would cost. On one hand they’re obviously trying to get deposits, which will help their financial situation, but the car isn’t due to be delivered until late 2020, roughly a year and a half from now. They have to making a lot of assumptions about what it will cost to build in a new factory despite the obvious similarity to the Model 3.

Finally, the ghost of Adam Osborne has to be watching with interest. Way back in the early 1980’s, before the Macintosh, before the IBM PC, his company, the Osborne Computer Corporation, had a huge hit with the Osborne-1. It was a suitcase sized transportable computer running the CP/M operating system. When the company announced their next computer, the much improved but not yet available Osborn Executive, sales of the Osborne-1 tanked and, long story short, the company died soon after due to a cash flow crunch. This phenomenon, tanking your current sales by announcing a better product that isn’t yet available, came to be known as the Osborne Effect.

I’m not a financial analyst, and I’m no expert on Tesla as a corporation, but it’s hard to miss reports of Model 3’s piling up in storage yards. If I was in the market for a new car, and I wanted a Tesla, I’d be very tempted to wait for the Model Y and I doubt I’m alone. For the reasons I stated above it seems to be a significantly more appealing vehicle for not a lot more money. Hopefully Adam Osborne’s ghost doesn’t come calling in Palo Alto.