The Tesla Model Y could be an even bigger deal than the Model 3, if Tesla can pull it off.
The Tesla Model Y is a compact SUV built on top of the model 3 platform offering similar capacity and range as the Model X but for a more economical price. Before I go further I need to state that everything so far is a rumor or tweet from Elon, so a lot of this may change. What we do know is that the Model Y is scheduled to arrive in Late 2019 or early 2020. Before this can happen, Tesla has a lot of hills to climb, however.
Currently, Tesla only has one facility making cars, and that’s in Fremont California just outside San Francisco. The Tesla Factory as it’s known today, or by enthusiast just the Fremont Plant, has two manufacturing lines. One of the lines makes the Model S and X while the other produces the Model 3. The Fremont Plan runs 3 shifts to try and maximize efficiency and meet the huge customer demand for their cars. Elon has famously called these next few months as the Model 3 rolls out “production hell” due to the intense schedule they’re trying to meet.
This is great for Tesla, but when it comes to the Model Y poses a serious challenge, where are they going to build it?
Likely they’ll go with the state offering the most incentives. This can be another boon for Tesla as states will be competing for their new plant by providing significant tax incentives. Nevada, for example, gave Tesla nearly 1.5B in tax abatements and other incentives to win the bid for their new Gigafactory. The reason states would consider this is because of the highly paid jobs that it brings. The Auto industry in the US has been struggling for years, and a plant like this would likely win big favor with voters for politicians and revitalize the local economy.
My guess is they’ll keep the factory close to the Gigafactory, presumably where Tesla will likely make the batteries for the Model Y. All of this seems to make sense, but I think it’s important also to understand why Tesla would do this?
In the US the Crossover has quickly become the family car of choice. Already in 2017 through August over 3.4M people bought crossovers which is up 7% from the previous year making it the fastest-growing category of vehicles sold. This all adds up to a significant opportunity for Tesla. If they can make the safest, best looking, and affordable cross-over the then they could potentially sell millions per year.
Elon Musk also stated on an earnings call that “the priority vehicle development after the Model 3 would be the Model Y, the compact SUV, because that’s also a car that we expect to see demand in the 500,000 to 1,000,000 unit per year level.”
How is Tesla going to do this?
Tesla has made a couple of advancements in their manufacturing process that could lead to dramatic improvements in the Model Y.
Most notably the flexible circuit technology.
The Flex circuit is a system to connect different components in the car which can be molded and changed into different shapes. This may significantly reduce the amount of wiring needed in the car. Already the Model 3 has half as much wiring as the S and X but with these flex circuits the Model Y could have an additional 95% reduction from there.
With a simplified manufacturing process and growing demand in this vehicle segment, the Tesla Model Y could become their most successful car in the next few years.
Check out this artist rendering of the Tesla Model Y – https://www.youtube.com/watch?v=fjA2MgnZm3c