Short interest in Tesla Inc. (NASDAQ: TSLA) for the period ending April 28 totaled 31.46 million shares, down from the 31.58 million shares (0.38%) short reported in the prior period. Some 27% of the company’s shares are short.

Tesla reported first-quarter results a week ago that were short of analysts’ expectations, and the share price plunged by about 7%. Short sellers who didn’t cash in then may be sorry. The stock closed up about 2.3% Tuesday, compared to the closing price before the company announced its results.

Tesla has far outperformed the broad markets, with the stock up about 50% for the year to date and up 49.5% for the past 12 months, compared with a gain of 25% for the Nasdaq Composite and about 15% for the S&P 500.

The electric car maker has a lot riding on a timely and successful introduction of the Model 3, the third member of the company’s lineup. The Model 3 is expected to sell for about $35,000, not including incentives, about the same as General Motors Co.’s (NYSE: GM) Chevy Bolt.

Tesla has said it expects to see 25% gross margins on the Model 3 while investing some $2.0 billion to $2.5 billion in capital expenditures to build the plant that will produce the Model 3. A further issue is that the Model 3 may erode the market for the company’s pricier Model S. First-quarter gross margins on car sales was just over 27%.

With 27% of the company’s shares short, there remains a large number of investors who think that reality has to set in someday and they are betting that someday is at hand. Only 30 Nasdaq-traded stocks have more short shares than Tesla and only 10 of the 50 stocks with the highest number of shares short have a higher percentage of their float that is short.

In addition to the issues the company faces for a smooth introduction of the Model 3, there are several competitors entering the all-electric car market. In addition to the Chevy Bolt, there are the BMW i3, the Fiat 500e, the Hyundai Ioniq, the Mercedes-Benz B250e and the Nissan Leaf, among others. Growth in competitor numbers won’t slacken, and what’s likely is that most new players will target the same market as the Model 3. Things are about to get tougher for Tesla.

Tesla stock closed up about 4.6% on Tuesday, at $321.26 in a 52-week range of $178.19 to $327.66. In the two-week short interest period to April 28, Tesla stock gained about 5.8%.

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