A 7 percent drop in Tesla Inc's (TSLA.O) customer deposits in its latest quarter raised concerns about future sales at the U.S. luxury electric-car maker.
The company's shares were down nearly 5 percent at $295.55 in afternoon trading on Thursday, on track for their third straight day of decline.
Customer deposits fell to $616.4 million at the end of the first quarter, from $663.9 million in the preceding quarter.
Tesla Chief Executive Officer Elon Musk repeatedly emphasized the difference between the Model 3 and the Model S, in an earnings call on Thursday.
The company had seen orders of the Model S hurt by confusion among customers, who were under the impression that the $35,000 Model 3 was an upgrade from the Model S, Musk said.
The Model S lists at about double the starting price of the Model 3.
Tesla, which has faced production challenges in the past, is banking on the mass-market Model 3, which could finally allow the company to stem its free-wheeling cash burn and turn a profit.
Pacific Crest Securities analyst Brad Erickson termed Tesla's communication regarding the misconception between the two cars confusing.
"Either Model S demand is getting hit by a pause in front of the Model 3 (less negative) or the Model 3 reservation list is inflated with orders that will not convert when the true identity of the car is discovered (more negative)," Erickson wrote in a note.
Some analysts were also worried about the prospect of Tesla hindering the sales of the higher-margin Model S.
Barclays analyst Brian Johnson said the drop off in customer deposits, along with the commentary around the Model S, might indicate an Osborne Effect in Model S and Model X orders.
Johnson was referring to the Osborne Computer Corp that went bankrupt in 1985, after the company damaged its own sales by announcing a new computer before it was ready.
"We continue to be cautious relative to the potential for a slower-than-guided start to Model 3 assembly, and newly believe that the potential for Model 3 pre-orders cancellations may increasingly become a point of investor concern," J.P. Morgan Securities analyst Ryan Brinkman said.
As of Wednesday's close, Tesla was the most valuable U.S. carmaker ahead of Detroit heavyweights General Motors Co (GM.N) and Ford Motor Co (F.N).
Through Wednesday's close, Tesla's stock had risen more than 45 percent this year.
(Reporting by Narottam Medhora in Bengaluru; Editing by Sriraj Kalluvila)