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June 22, 2018

Tesla’s Model Y Problem (Hint, it’s Not the Price)

The Tesla Model Y is coming and it’s a big deal. That is, unless the company suffers a financial collapse first, which doomsday prophets keep predicting. Or, another automaker performs a hostile takeover, but they’d probably still go ahead with the Model Y.

Officially, the Model Y hasn’t been named, but company officials have used the name quite a few times now. Tesla and Elon Musk have dropped some interesting hints about the SUV. We’ve even seen shadowy pictures of it, a tactic that’s common when automakers are chumming the waters.

One of the first pics of the Tesla Model Y.

What We Know

Thanks to those picture reveals, we know a little bit about the Model Y. For one, it appears to be a sleeker, smaller version of the Model X. Of course, we’re going off nebulous photos, so that’s a bit of a guess.

Tesla is purposely obscuring the Model Y doors. The big item of speculation is if the company dares to use Falcon Wing doors on the small SUV. Those proved to be quite problematic for the Model X, thanks to part supplier issues and sensors malfunctioning. They’re cool when they work right, but they’d balloon the cost of the Model Y.

Musk has said there won’t be the option of a leather-wrapped steering wheel, “even if it does have a steering wheel.” That’s bold to hint that the Model Y might be fully autonomous, but it’s likely only a joke, so don’t get worked up about that. Still, safety groups concerned about recent Autopilot crashes aren’t laughing. You can’t please everyone.

It appears the Model 3 and Model Y will share options, like how the Model S and Model X are similar. That means a Spartan interior, complete with the controversial single touchscreen.

Finally, Musk has said production of the electric SUV will probably start in 2020. He’s also said it won’t be assembled at the Fremont plant, where the Model 3 is currently made. Considering how maxed-out that facility is, nobody should be shocked. Musk thinks production will scale quickly, thanks to lessons learned from building the Model 3.

Cart Before Horse

If you ask me, and nobody is, Tesla is doing everything backwards. Sure, when the Model S came out sedans were still fairly relevant. But this is 2018 and sedans are passé. After all, Ford is pretty much getting rid of all its cars in North America and Hyundai’s in dire financial straits, thanks to its car-heavy lineup.

Where I’m going with this is Tesla should’ve pivoted and made the Model Y first. Sure, it can brag right now that the Model 3 is outselling the BMW 3 Series, but who’s buying those these days anyway? If the Model Y were out and it was beating up on the X3, that would be something.

Tesla has cashflow problems. SUVs practically print money. I know Tesla apologists will start rationalizing this one away, but the fact is Tesla didn’t pay attention to market trends; it dropped the ball big time. Hopefully this slip up doesn’t cost the company big, but we’ll see.

The Model Y could cement Tesla’s future, if it rolls out soon enough. People were predicting the Model 3 would be the rainmaker, but I’ve always thought the Model Y was where it’s at. After all, car shoppers can’t seem to get enough of SUVs, and that doesn’t look to be changing anytime soon.

Sure, Model Y orders no doubt will eclipse Model 3 orders. But, what would generate more cashflow would’ve been having the Model Y rolling out of factories right now. Musk thinks the Model Y will be a huge hit, predicting the company will sell at least a million units per year.

Battery Costs

The issue of battery production costs could work in Tesla’s factor. Green Car Reports says in late 2018 Tesla should be able to produce batteries at a cost of $100 per kilowatt-hour. That’s key to the California automaker finally turning a profit consistently.

Cheaper batteries would deflate the cost of Teslas. The early adopters don’t get it, because to them buying an $80,000 car is like how the average American looks at having dinner at Chiles. But, trust me, this could only help push Tesla into the mainstream market.

Growing Competition

Putting the Model 3 out first could mean by the time the Model Y hits the market it’s facing several direct competitors. In the minds of Tesla aficionados there are no equals, but for the other 99 percent of the car-buying public that’s not true.

The Jaguar I-Pace is already out and has been racking up all kinds of praise. For example, Wired UK said the SUV is “beautifully made” and noted its range rivals what Tesla has achieved.

BMW is working on the iX3, which is a fully-electric version of its super-popular SUV. Volvo is also going to release a fully-electric version of its runaway compact SUV, the XC40. Both of these will almost assuredly be runaway hits.

The Audi E-Tron could be a promising electric crossover. It shares a platform with the Porsche Taycan, which was called the Mission E in concept form.

Then there’s the Mercedes-Benz EQC, which likely will also hit the market before the Model Y. It should provide good range and plenty of luxurious style, a combination Tesla struggles to deliver.

The Big Reveal

If you’re really looking forward to seeing the Model Y, you’d better be patient. It won’t be revealed until March of next year. Elon Musk dropped that detail during a shareholder meeting in early June. Like other Tesla reveals, it should be in an auditorium packed with diehard fans of the company, and an overall Silicon Valley party atmosphere.

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