Tesla (TSLA) shares were downgraded to Sell from Hold by Needham & Co., which says it expects cancellations for Model 3 vehicles to increase.

"Based on our checks, refunds are outpacing deposits as cancellations accelerate," analyst Rajvindra Gill said in a note reported by CNBC. "The reasons are varied: extended wait times, the expiration of the $7,500 credit, and unavailability of the $35k base model."

Tesla shares were down about 2% in premarket trade Thursday, and down about 13% in the past month. (See also: Musk Tweets Hurt Tesla Stock, Again.)

In August of last year, Tesla saw a 12% refund rate, Needham noted.

“Almost a year later, we believe it has doubled and outpaced deposits," Gill said. "Model 3 wait times are currently 4-12 months and with base model not available until mid-2019, consumers could wait until 2020." (See also: Tesla to Refund German Buyers EV Incentive.)

Tesla's Model 3 reservations for Q2 2018 stood at 420,000 net of cancellations. A Tesla spokesperson maintained that delivery times remain between 1 and 3 months depending on the specifications.

Model 3 Production

Earlier this month, Tesla said it would open orders for the Model 3 electric sedan to everyone in the U.S. and Canada, with no reservations required. New customers now pay $2,500 to move production of their car forward. With a base price of $35,000, the Model 3 is more affordable than Tesla’s other luxury models.

(This story has been updated to include comments from Tesla)

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