5 Questions Tesla Still Must Answer About Its Model Y Crossover

March 15, 2019 by Ryan ZumMallen, @Zoomy575M

Tesla Inc. made a splash on Thursday with the reveal of its Model Y compact crossover. The newest vehicle in the Tesla lineup will seat up to seven passengers and have a top range of 300 miles on a single charge, said Chief Executive Elon Musk. Deliveries will start in fall 2020.

But the automaker faces a challenge in bringing its latest electric vehicle to public roads. After a rocky start to production of its Model 3 sedan, analysts are waiting to see whether Tesla can deliver on its promise to compete for sales in the largest segment of the auto market.

Among the concerns analysts shared with Trucks.com are how Tesla will equip its factories in time, when customers can expect to take delivery and whether Model Y will siphon sales from the Model 3 sedan and fend off new competitors.

Here are five questions from analysts following the reveal:

GETTING PRODUCTION-READY

Tesla faces an uphill battle in preparing the Model Y for assembly lines, analysts said. The company said vehicles for the U.S. will be built at its Gigafactory battery plant in Nevada, but that site is not currently equipped to build cars. “If they have to build a plant from the ground up, that is a minimum 18-month project,” said Michael Ramsey, senior research director at Gartner Inc. Such a project is also expensive, and it is not immediately clear where the funding would come from, Ramsey said. He predicted Tesla will quickly build a small batch of vehicles to meet initial deadlines before Model Y customers receive their cars in larger numbers down the line.

INCREASED COMPETITION

Tesla spearheaded the push toward mass-market electric vehicles with the Models S, X and 3 at a time when it had few competitors. By contrast, when the Model Y becomes available, other electric crossovers from Audi, Mercedes, BMW, Jaguar and Volkswagen will be on sale, said Sam Abuelsamid, an analyst at Navigant Research. How Tesla will attract customers in a crowded segment is unknown, but it could also be a blessing in disguise, said Tyson Jominy, managing director at JD Power. “You tend to see more interest in a segment when you have new launches,” Jominy said. “They may work together as the Mercedes EQC and Audi e-tron come online.”

Tesla Model Y

Will leasing be available for the Model Y? Tesla hasn’t said. (Photo: Ryan ZumMallen/Trucks.com)

LEASING

Tesla began taking deposits for the Model Y following Thursday’s reveal of the crossover. One thing it did not mention is whether leasing will be available. Leasing is not currently an option for the Model 3, even though it accounts for 55 percent of purchases in the premium compact car segment, Jominy said. “Consumers really like to lease premium vehicles,” he said.

CANNIBALIZING MODEL 3 SALES

The arrival of the Model Y could jeopardize the future of the Model 3, analysts said. Consumer demand for crossovers, SUVs and pickup trucks significantly outweighs smaller passenger cars and sedans. As a result, Tesla could run into trouble, Abuelsamid said. “The Model Y will cannibalize sales of the 3 just as crossovers have done relative to sedans for pretty much every automaker,” Abuelsamid said. “Why should customers that really want a crossover instead buy a sedan now?”

NEW CHARGING DEMAND

The Model Y presents an enormous opportunity for Tesla to grow its volume. With that will come increased demand for electric vehicle infrastructure and charging stations. The automaker has already come under scrutiny from owners who contend Tesla has not built enough of its fast-charging Supercharger stations to meet the increased demand from Model 3 customers. “The pond the Model Y fishes in is five times larger than the one they’ve been in to date,” Jominy said. “The stresses Model 3 put on the system pale in comparison to what Model Y could do.”

Ryan ZumMallen March 15, 2019
The electric Tesla Model Y compact crossover will reach customers in fall 2020 with an initial starting price of $47,000 as SUV demand soars.

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