Tesla has yet to deliver its highly anticipated Model 3 to its first customers, and already the electric-car maker is teasing plans to put another vehicle on the road. That would be the Model Y.
While Tesla CEO Elon Musk has talked a bit in the past about a crossover SUV electric car similar to the Model 3 -- with the potential title Model Y -- the details are still sparse. In the company’s most recent earnings call in early May, Musk threw out a couple of new tidbits about the Model Y to investors and the media and began talking about the car as a definite product.
The car could “aspirationally” be out in 2019, or more likely in 2020, and would play an important role in helping Tesla manufacture 1 million cars by 2020, said Musk. However, the much bigger shocker is that the Model Y won’t necessarily be built on the Model 3 platform, said Musk.
The Model Y’s factory will be different than (or an upgrade to) the Model 3’s, and Musk characterized the Model Y factory as “a genuine step change” in terms of auto manufacturing. In contrast, he described the Model S’ automated manufacturing in slightly less hyped terms as “probably as fast, or a bit faster than the fastest production line in the world.”
Despite the fact that this information was shared almost as a tangential aside during the company's latest earnings call, it seems unusual and potentially telling in the world of Tesla and Musk’s auto manufacturing strategy. Here are five things that could be happening with the Model Y.
1) Musk’s reach goals: Musk’s rules of marketing and product development have always included at least a few of these types of blue-sky products planned for some vague time down the road. These tend to have the combined effect of stoking media interest, pushing employees and boosting the stock. Other examples are the Tesla automated bus and the Tesla truck.
It also just seems to be the way Musk thinks -- in broad, sweeping, visionary terms. When he started leading the company, he had his Master Plan that laid out everything from the cars in the lineup to solar panels and grid batteries. More recently, Musk unveiled his Master Plan, Part Deux, which discusses automated and shared vehicles. Musk needs to see the endgame to figure out the chess moves to get there.
Now with the development work on the Model 3 getting closer to being completed, it makes sense that Musk -- also Tesla’s Chief Product Officer -- would start to turn his attention to what’s coming next, like Model Y.
2) A hedge against the Model 3?: It seems telling that Musk has already decided that the Model Y would not be built on the Model 3 platform. That raises the question of what issues are coming up with the Model 3 design and manufacturing that would make Tesla want to move away from it and toward another architecture.
Is the production prototyping falling short in terms of automation, speed and low cost? Tesla has decided to skip the traditional auto industry approach of making beta cars, and instead it's moving straight to “early release candidates.” The company doesn’t have a whole lot of time to iterate on the Model 3 design and production in order to get it out before the end of the year.
Musk has said previously that the Model 3 manufacturing line would be like an alien dreadnought, but that at the start, it would be like “version 0.5” of an alien dreadnought. Is Model 3 manufacturing the version 0.5 of the alien dreadnought, while Model Y manufacturing is the later version?
3) Lessons learned from the Model X: Tesla has gone to great lengths to admit its hubris and learn from the lessons of designing the Model X to have too much complexity. The “over-engineering” of the Model X was one of Tesla’s biggest struggles in the past couple of years.
But perhaps Tesla has also learned from developing the Model X that it doesn’t make sense for the company to build cars meant for different purposes and with different attributes on similar platforms. The Model X was meant to be built on the Model S platform, but by the time the Model X got to regular production, it looked far different than the Model S. That was something that wasn’t planned and which Musk said he hadn’t expected.
4) Capital costs to remain high after Model 3?: If Tesla is abandoning the strategy of sharing platforms between cars, does that mean its capital costs for each car are going to be as high as the Model 3's? Tesla has been spending massive amounts of money investing in the Model 3, and the Gigafactory, with an eye toward profitability sometime after the Model 3 comes out.
If the company is making each car and production line that much more advanced, it will need to continue its high spending on R&D. Will shareholders reach a point where enough is enough?
5) Help with those manufacturing targets: Musk’s mention of the Model Y in terms of reaching 1 million cars by 2020, could be seen as way that Tesla is getting ready to hedge on its ultra-aggressive manufacturing goals. Musk has said that Tesla will deliver over 500,000 cars per year, mostly Model 3s, by 2018.
If the Model Y emerges as a candidate in either 2019 or 2020, the Model Y could be a way for Tesla to try to meet any shortfall in the Model 3. Most people expect that Tesla will produce many more cars in 2018 than it is manufacturing in 2017, but most don’t expect the company to hit such an extreme ramp-up within the next year.