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Tesla’s Model Y is a car Elon Musk hopes will distract from everything else

libadmin March 15, 2019
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The new Tesla Model Y is seen at its unveiling in Hawthorne, Calif. (Frederic J. BROWN / AFP)FREDERIC J. BROWN/AFP/Getty Images

March 15 at 12:28 AM

Besieged on seemingly every front, Tesla is betting that the unveiling of a smaller battery-powered SUV, the Model Y, will reinvigorate the Silicon Valley upstart with the dazzle and fanfare that made it one of America’s most valuable automakers.

But executives also hope it will distract from practically everything else the car company has faced recently, from financial land mines to courtroom brawls to doubts over the survivability of Elon Musk as Tesla’s visionary marketer-in-chief.

Musk revealed the Model Y in Los Angeles Thursday night in what has for him been the friendliest possible territory: before an audience of boosters, inside a Tesla design studio, on the stage that helped make him a star.

The car is expected to launch next fall starting at $47,000, with a lower-ranged version selling for $39,000 debuting the following spring. It will also complete one of the nerdy billionaire’s longest-running gags, in which the cars’ names — S, 3, X and Y — appear to spell out the word “sexy.”

“We are bringing ‘sexy’ back quite literally,” he told the cheering crowd.


Tesla CEO Elon Musk speaks during the unveiling of the new Tesla Model Y. (Frederic J. BROWN / AFP)FREDERIC J. BROWN/AFP/Getty Images

Tesla’s fifth major auto debut in 15 years could prove to be its most important and profitable reveal. Roomier than its Model 3 sedan and more compact than the hulking Model X, it will mark Tesla’s first swing at the “crossover” that has become America’s most popular type of car.

New Tesla unveilings have traditionally been some of the most energizing events in the company’s history. When Musk revealed the Model 3 sedan in 2016, he positioned the electric car as a revolutionary act toward saving the world. An uproarious crowd showered him with praise and a landslide of reservations. “You did it!” one onlooker screamed.

But Tesla now endures a major news event nearly every day — and instead of celebrations, they’re often centered on Musk’s slap-fights with the Securities and Exchange Commission, Tesla’s mass layoffs and store closures, or the company’s stuttering rollouts of hardware and technology, often marred by years of delays.

For Musk, the unveiling is “kind of like going back to your wubby. This is his comfortable place,” said Mike Ramsey, the senior automotive research director for the advisory firm Gartner. But the Model Y is also, he said, “the product they can’t screw up. … There’s only so many times you can hit the adrenaline pump on Tesla and get a reaction.”

The Model Y will cost about 10 percent more than Tesla’s cheapest car, offers a shorter driving range and looks like a beefier Model 3, the sedan with which it will share about three-quarters of its parts. But the event did not go off without a hitch: Visitors redirected to a Tesla website for designing and buying the car said it appeared to be offline.

The unveil followed a winding trip down Tesla’s recent history, in which Musk, dressed in special Tesla-branded Nike sneakers, talked about early doubts about starting an electric-car company (“stupidity squared”), extolled other Tesla vehicles like the Model X (“a Fabergé egg meets a spaceship”), and spoke candidly about his chaotic 2018 (“like aging five years in one”).

The Model 3 sedan, while still a shrimp compared to its much larger gas-powered rivals, has become the best-selling electric car in the world. And some analysts expect the Model Y could be much bigger: Crossover SUVs like the Toyota RAV4 and Honda CR-V dominate the modern car dealership and are rapidly gaining in markets across China and Europe, where Tesla has placed its biggest hopes for long-term profit.

Tesla is hopeful Thursday’s unveiling will trigger a surge of deposits from would-be buyers, giving Tesla an instant bundle of interest-free money that will help it boost its cash supply. It will also signal to investors eyeing its stock price, which has slumped more than 10 percent this year, that the company can still gin up demand.

But that hype cycle could bring its own dangers. Shortly after the Model 3 reveal in 2016, more than 100,000 hopeful buyers plunked down a $1,000 deposit to preorder the $35,000 sedan. Many dropped their reservations or ended up shelling out more for a pricier car in the following years; the Model 3 only went up for sale at that price last month.

The Model Y will be more affordable than Tesla’s high-end Model X, but it will likely sail way over what the average American driver can afford. Years after Musk said his “master plan” was to sell cool electric cars for the middle class, Teslas are still mostly seen as status symbols for the rich and aspirational: Treasury Secretary Steven Mnuchin, for instance, announced he had one Thursday at a Ways and Means hearing.

Some analysts question whether Tesla’s reveal of another upscale car will really help. The company can no longer lure buyers in with a $7,500 tax incentive, which was chopped in half at the start of the year, and Musk himself has acknowledged that Teslas are “still too expensive for most people.” Demand, he said in January, is “insanely high,” but buyers “just don’t have enough money in their bank account.”

That price wall — coupled with America’s shrugging disinterest in electric cars — has served to cage Tesla behind a seemingly shrinking niche. Teslas also remain largely a West Coast fling: More than 40 percent of the company’s sales last year were in California.

Most automakers reveal new cars alongside detailed launch plans, with the implicit guarantee that they’re primed and ready to begin building and selling en masse. With Tesla, it’s not only unclear when Model Ys will hit the road, but where even they’ll get made: Musk has hinted that the car could be produced at its Gigafactory outside Reno, Nevada, though that plant makes batteries and would need an entirely separate assembly line for cars.

Tesla says it wants to launch a factory in China, but nothing’s been built, and making the car there would open the company to a raft of tariff and logistical nightmares. Analysts say the company’s only current car-making factory, in Fremont, Calif., is so tapped out that changing its production lines could damage the company’s bottom line.

The company continues to blow past dire financial milestones, including two mass layoffs in the last year and growing uncertainty about its national footprint. Musk abruptly announced last month that the company would close most of its showrooms — a huge retreat for a company that was celebrating ribbon-cuttings a few months ago — then just as abruptly said it would be keeping many open, following a revolt from investors, landlords and fans. Evercore ISI analyst Arndt Ellinghorst said the double U-turn looked “like amateur hour.”

To save money, Musk also said Tesla will raise prices about 3 percent across the board and sell the cars only online — an unproven model that will force buyers to use a website when committing to one of the most expensive products they’ll probably ever buy.

Tesla will be expected to build more cars even as it endures more public scrutiny than ever before, with regulators, lenders and whistleblowers all breathing down the company’s neck.

A federal judge is currently weighing whether to hold Musk in contempt after the SEC said he violated a settlement deal reached near the end of last year. Musk’s attorneys have argued that the settlement he agreed to — which required he get company preapproval for tweets that could surprise investors — was an “unprecedented overreach” that would trample on his First Amendment rights. The SEC, which Musk has said he does not “respect,” has until Tuesday to give the judge its reply.

The Model Y also faces challenges in the market where it will have to compete with a growing lineup of sleek, electric crossovers from major brands, like Volvo’s Polestar 2.

Tesla boosters say the Model Y will be red meat for the company’s often-rabidly enthusiastic fan base. And they expect, like the Model 3, that it could fuel a buyer-reservation binge that could help propel the company through financial doubts or missed deadlines.

But others aren’t entirely convinced it will be enough — or that the adoration Musk is counting on will last.

“Thanks to the quality issues and scandals over the last year, the brand’s halo has started to dull,” Jessica Caldwell, the executive director of industry analysis at Edmunds, wrote in a note to clients Wednesday. “The Model Y will debut with promises of grandeur, (but) if there are any chinks in Tesla’s brand armor, this vehicle will expose them.”

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