It would be the greatest disclosure in Tesla's story (NASDAQ: TSLA) ! The company's new model Y crossover SUV was set to have iconic dimensions and a price tag below $ 40,000! And on March 14, the big revelation came, and the car … had none of these things (at least not yet).
Perhaps it was the disappointment of legions of gold flute door fans or perhaps impatience that no deliveries would begin for a year and a half, but the stock market sent Tesla's shares down about 5% in the wake of the announcement to their lowest level year-round. But here's why Tesla fans – and skeptics – don't worry too much about model Y (at least not yet).
first It's much like model 3
Model Y follows the classic formula for a crossover SUV: A manufacturer takes the frame to one of its sedans that is already in production – in this case Model 3 – and changes the design just to put an SUV body on the sedan frame.
When it comes to model Y, it really looks like a model 3 with hatchback. Model Y will boast an extra cargo space and borrow the model X's additional rear row of folding high chairs, so the car sits up to seven. The trade-off is a slightly shorter interval. It will share about 75% of the parts with model 3.
On the one hand, this should help Model Y to have a smooth (er) rollout: With Tesla who has already solved many of the headaches, it experienced ramping up the model 3 manufacturing at Gigafactory – where model Y is also slated to be manufactured – it should be relatively easy to make small adjustments to the production line and transform it.
On the other hand, with the cars so much alike, model Y sales will simply not eat in the sale of the existing model 3?
2nd Crossover SUV sells, but …
I'm probably the perfect target market for model Y. I'm currently running a Toyota Prius, but now that my kids get older I could use more cargo space and an extra series of places for when grandmother wants to join the taekwondo tournament or ballet record. I have followed Tesla for a while and a generous friend let me take the wheel on his Model 3 a few weeks ago (thank you Mike!) And I thought it was fun to drive.
So I would consider buying a model Y, and there are probably many others like me out there. According to data from J.D. Power is about half of the new car sales SUV or crossovers. And there are limited options for fuel-efficient versions of larger passenger cars. For example, there is only one hybrid minivan available in the United States right now ( Chrysler Pacifica). This means that the potential market for model Y should be huge.
However, the price tag for the premium version of model Y, which was launched to get out of the assembly line since 2020, will be between $ 47,000 and $ 60,000. This makes the vehicle inaccessible to many potential model Y customers (included with myself). The $ 39,000 version of model Y will not be available until at least 2021, so sales to it are likely to be limited. And keep in mind that Tesla has a very mocking record of delivery dates, so it's not unreasonable to believe that the Model Y base price may not be available for three years or more.
Meanwhile, you can bet Tesla's competitors will roll out their own crossover SUVs, possibly in hybrid or electric versions. Just four days after Tesla's announcement, Fisker announced that it would also offer a $ 40,000 electric SUV in 2021. Or you can get the Chrysler Pacifica hybrid today for about the same price as the base model Y – definitely not that cool, but at least it's available.
3rd Bigger fish to fry
In his extension of model Y, Elon Musk did not spend much time on the car. Instead, he continued in length for the manufacturing matches that the company has encountered in recent years. This asserted comments that he made in a letter in January to employees that "the way forward is very difficult". The company recently backtracked on an announcement that it would close most of its Tesla stores to keep vehicle costs down. The company's strong sunroof seems to be associated with technical issues, which means that it is not available.
Tesla has managed to make a profit in the last two quarters – a first for the company – its margins are suffering, as the cheaper base version of model 3 becomes more available. All this happens independently of model Y's rollout and has much more importance for Tesla's investment thesis than model Y.
Musk predicts that Tesla will sell 1 million Model Ys, and it's probably not farfetched. But what is unclear, how long will it take to start production and then ramp up, how much model Y will eat for sale of the more expensive model X and comparable priced model 3, and which competitors and a rapidly developing car landscape will do in the meantime. Oh, and the little question of whether Tesla can actually turn an on-going profit when moving towards more cheaper car deals.
Simply put, Model Y will not necessarily be a game changer for Tesla. And even if it is, we will not know for at least a couple of years. So resist the call to buy or sell the company based on this news.