Elon Musk said that in late 2020 Tesla will finally jump into the midsize crossover market with the Model Y, an electric SUV that looks a lot like an enlarged version of its top-selling Model 3 sedan and that’s initially priced from $47,000. But unlike in the past, the battery-vehicle pioneer is going to face a range of competing crossovers.
Musk, addressing an audience of loyal fans packed into the carmaker’s Los Angeles design studio, unveiled the new vehicle after a lengthy retelling of Tesla’s history and showing off all its models, from the original Roadster through the Tesla Semi. The addition of the crossover, smaller and cheaper than the current Model X, completes Tesla’s “sexy” themed lineup, he said.
“It has the functionality of an SUV but will ride like a sports car,” Musk said late Thursday. And as for range per charge, “expect true usable range of 300 miles.”
That range estimate appears to apply only to the $47,000 Long Range version of Model Y, while all-wheel-drive and performance versions will go 280 miles per charge and start at $51,000 and $60,000, respectively, based on a lineup chart Tesla showed at the event. A cheaper base version will start at $39,000 and offer 230 miles of range per charge, though it won’t arrive until early 2021, according to the chart.
Although produced from the Model 3 platform, the roomier Model Y has 66-cubic-feet of cabin space and will seat up to seven passengers.
While the pricing and specs are in line with details Musk tweeted earlier this month, he didn’t clarify where the vehicle will initially be built. During the company’s January 30 results call, he indicated that production at Tesla’s Nevada Gigafactory was likely, though more recently Tesla has said that decision isn’t final. Musk’s track record for delivering vehicles on time and at the price promised has been mixed, so getting Model Y to market in about 18 months will be yet another test for the company.
The debut is a brief respite for the colorful billionaire who’s been contending with new legal issues arising from last year’s settlement with the SEC over tweets about privatizing Tesla and a sudden reversal of his plan to shut down all Tesla’s stores as the company shifts to an online-only sales system.
The unveiling, which happened close to midnight East Coast time, didn’t appear to excite Tesla investors. The company’s shares fell 5% to $275.43 on Friday. Garrett Nelson, an equity analyst for CFRA, cut his target price for the shares to $250, in part because the Model Y reveal was a “disappointment.”
There were few surprises in terms of the vehicle itself, and “the timing of first deliveries was later than the what CEO Elon Musk had implied at its annual meeting last June,” Nelson said in a research note on Friday. “At the time, Musk stated that first Model Y deliveries were likely in the first half of 2020.”
Still, if Tesla executes to plan and delivers the Model Y on time, it will significantly benefit a young company that’s yet to post a profitable year. That’s because SUVs account for 49% of U.S. auto sales currently, with more than half of people buying them spending between $30,000 and $50,000, according to J.D. Power. Up to now, having only the bigger Model X with a starting price of about $80,000 and typically selling for more than $90,000, Tesla couldn’t compete for that broader customer base.
“Model Y represents Tesla’s biggest opportunity yet,” said Karl Brauer, executive publisher and analyst at Kelley Blue Book and Autotrader. “It’s price and body style should resonate with the majority of today’s carbuyers. This also makes the Model Y the most important vehicle in Tesla’s history. Every aspect of the Model Y, from design to launch to production, has the potential to improve—or damage–Tesla’s reputation with mainstream consumers.”
Importantly, Model Y will arrive at a time when, unlike with Roadster in 2009 and Model S sedan in 2012, there will be direct competitors in the battery-powered crossover segment. Those range from Hyundai’s new electric Kona hatchback, priced from $36,450, to VW’s ID. Crozz SUV (due in 2022), Daimler EQC, BMW iX3, Jaguar’s $69,500 I-PACE, the $74,700 Audi e-tron and numerous others.
New competing products “will undoubtedly increase consumer acceptance of pure electric vehicles and grow the overall electric vehicle market but pose a major threat to Tesla’s ability to both sustain its market share performance at the top end of the market and replicate it at lower price points,” J.D. Power said. But unlike those rival vehicles, by the time it arrives the new Tesla won’t qualify for U.S. tax credits that helped defray the higher expense of its electric vehicles for years.
“Every other Tesla has some kind of unique ‘wow’ factor, but the Model Y is essentially just a beefier, taller Model 3,” said Jessica Caldwell, executive director of industry analysis for Edmunds. That’s not a bad thing in this case, she said.
“The Model Y is the first Tesla that really feels like something from a mainstream car brand: a vehicle designed to make a company money, not make a statement.”
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