(Reuters) - 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.
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