Tesla to Unveil the New Model Y Crossover on March 14, Could Become a Huge Hit

author: Eric Walz   

Tesla CEO Elon Musk made another surprising tweet over the weekend announcing the automaker's next vehicle— the Model Y crossover. It's the second big announcement from Tesla in just the past several days. Last Thursday, Musk said that orders for the long-awaited $35,000 base version of the Model 3 are now open.

Musk said the official unveiling of the Model Y will take place on March 14 and the company's design studio in Los Angeles.

There have been numerous drawings and speculation online of what the mysterious new crossover vehicle might look like, but so far Tesla only released a teaser photo.

We already know the Model Y will be smaller than the Model X, Tesla's SUV that's already on the market. Tesla said the Model Y will share its platform with the current Model 3 to simplify production. It will be the first Tesla model to share a platform.

Sharing vehicle platforms is a common practice in the auto industry, it streamlines production and allows automakers to offer customers a wider model lineup by building several different models on a single chassis.  

For example, in the early 2000's, General Motors built the second generation GMC Envoy on the same platform as the Chevy Trailblazer, Oldsmobile Bravada and GM-branded Isuzu Ascender. All four SUV's were built at the same Oklahoma assembly plant.

The Model Y Joining a Popular Vehicle Segment

Illustration of what Tesla's upcoming Model Y compact SUV might look like. (Photo by Autocar)

Assuming there are no production or quality control problems, the Model Y has the potential to become a huge hit for Tesla, given America's current love affair with SUV's and smaller crossovers.

The Model Y is entering one of the most popular segments in the entire auto industry. The category remains highly profitable for automakers, as consumer preferences have moved away from sedans. Many drivers today want something smaller than a full-size SUV, something easier to maneuver with a softer ride and offering more cargo space and utility.

The fully-electric Model Y will likely compete in the luxury compact SUV and crossover segment, as a more affordable fully-electric premium crossover. Tesla is hoping to lure customers away European imports such as the Audi Q3, BMW X3, Porsche Macan, Mercedes Benz GLA or the upmarket Cadillac XT5.

The space is also crowded with more affordable models including the Toyota RAV4, Honda CR-V, Subaru Forester, Ford Escape and Chevy Traverse.

Is Tesla on a Roll Lately, or Will Competitors Move Into its Territory?

Tesla's Model 3 has managed to become the best selling premium car in the U.S. in 2018, due to a strong fourth quarter last year. Tesla has ironed out most of its production problems with the Model 3 since last summer and has finally achieved a steady output of about 5,000 units of its first mass-market electric car.

Buyers also lined up to take advantage of the expiring $7,500 federal EV tax credit before it was halved for all Tesla vehicles sold after Jan 1, 2019. The federal tax credit of up to $7,500 on the purchase of a qualifying plug-in hybrid or electric vehicle was a way to help promote the adoption of EVs in the U.S.

However, it is limited to just 200,000 vehicles for each manufacturer. Tesla hit that number in the fall, ironically just as it ramped up production. General Motors has also reached sales of 200,000 qualifying vehicles. Buyers of electric models such as the Chevy Bolt will have until the end of March to take delivery in order to claim the full tax credit.

Once an automaker hits the 200,000 vehicle threshold, the tax credit is halved to $3,750 for two quarters and halved again to $1,875 for the following two quarters. The EV tax credit remains at $3,750 for Tesla, but will drop to $1875.00 on July 1, before disappearing entirely at the end of this year.

Combined with California's $2,500 EV tax credit, buyers of Tesla vehicles received a $10,000 tax break in the state. For California residents, Tesla's website advertised the price of its vehicles to include the $10,000 tax savings, which helped to promote sales. The state of California is the biggest EV market in the U.S.

The tax credit was passed by the Bush administration in 2008 and so far there has been little interest from the Trump administration in extending it.

The upcoming fully-electric Audi e-tron is set to compete with Tesla

Now that Tesla is offering the $35,000 Model and will soon built the Model Y crossover, well established global automakers are moving in the fully electric space Tesla once solely occupied.

Auto giants like BMW and Audi are coming out with their own fully electric models to compete directly with Tesla. Audi is about to release the fully-electric the e-tron SUV. The e-tron is built on the Audi Q3 platform and boasts impressive specs, like 30 minute charging and a 248 mile range. It's also priced less than both the Tesla Model S and X.

Having a popular mid-priced crossover model on sale like the Model Y alongside a more affordable Model 3 might push Tesla's profitability upwards, if the company can fight off growing competition from other automakers.

Tesla's valuation is nearly $50 billion, more than General Motors and Ford. Tesla managed to reach this figure in less than a decade since going public in 2010, which is a rapid rise. However, any missteps could cause Tesla's stock to fall just as quickly.

Eric Walz

Originally hailing from New Jersey, Eric is a automotive & technology reporter covering the high-tech industry here in Silicon Valley. He has over 15 years of automotive experience and a bachelors degree in computer science. These skills, combined with technical writing and news reporting, allows him to fully understand and identify new and innovative technologies in the auto industry and beyond. He has worked at Uber on self-driving cars and as a technical writer, helping people to understand and work with technology.