Please ensure Javascript is enabled for purposes of website accessibility

2 New Details About Tesla's Forthcoming Model Y Crossover

By Evan Niu, CFA – May 4, 2017 at 4:18PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It might only be a couple more years before launch.

Tesla's (TSLA 0.91%) Model Y is coming -- that much we've known for quite some time. But there haven't been many details about the forthcoming electric crossover SUV, perhaps most importantly when the Model Y may see the light of day. It's an important vehicle, as the categorical popularity of crossovers isn't going anywhere anytime soon. If anything, the trend is only accelerating; crossovers and small SUVs were the only two meaningful vehicle categories that grew in April (crossovers were up 7%).

Even false rumors can send Tesla shares higher. On Tesla's earnings call yesterday, the company teased a few new details about the Model Y, which will complete Tesla's S-3-X-Y vehicle lineup.

Model X on a street with open Falcon Wing Doors

Tesla's current SUV, the Model X. Image source: Tesla.

It could come as early as 2019

Tesla is still targeting 1 million vehicle deliveries by 2020. When asked what it would take to get there, CEO Elon Musk said that the Model Y will be instrumental in hitting those volume targets:

I think we need to come up with the Model Y sometime in 2020 or, aspirationally, late 2019. And then I think that 1 million units is quite likely -- combined, yes. Maybe more.

Historically, Musk has a bad track record with promising timelines, so the temptation will be to automatically assume this will be delayed. But many skeptics have applied that same thinking to Model 3, which is misplaced since none of the underlying reasons why Tesla has had past delays actually apply to Model 3. The affordable sedan remains on track to commence production in July.

How quickly Tesla will or will not be able to ramp production is another question and remains to be seen. The only target that Tesla has articulated is reaching production of 5,000 per week "at some point in 2017."

It will be a whole new platform

For over 50 years, automakers have built numerous vehicles on standardized manufacturing platforms in order to streamline costs and improve production efficiency; Model S and Model X are based on the same platform. Given this, the presumption has been that the Model Y will be built on the Model 3 platform.

Nope. Instead, Tesla plans on creating an entirely new platform for Model Y. Musk has been talking at length over the past year about Tesla's "machine that builds the machine" concept, believing that its engineering resources are better used to innovate on the manufacturing side as opposed to product design. Anyone that follows Tesla (that isn't a science fiction enthusiast) has probably heard the term "alien dreadnought" more in the past year than ever before. Investors probably never thought they'd see that term in official SEC filings, either.

Musk believes that Model Y production will be meaningfully more automated:

Then where things will really be a step change, I think, beyond any other auto manufacturer will be the Model Y factory. And this is both a function of designing the product to be easy to manufacture and easy to automate as well as designing the factory itself. So Model Y is where I think it really becomes a step change.

Subsequently asked to clarify if that meant a new platform, Musk added, "It will be, yes, a different platform." In some ways, Model Y will be just as important as Model 3, as it will dramatically expand Tesla's addressable market once the company reaches the market for mainstream, affordable crossover SUVs.

Evan Niu, CFA owns shares of Tesla. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.