I think I’ve been explicit about it before, but if not: I think I’m even more excited about the Tesla Model Y than the Tesla Model 3.
The Model 3 is hard to beat, since it is something like “the Ford Model T of the 21st century” (which means that it is an even bigger deal than the Model T — since societal evolution is about becoming better, right?). The Model 3 will likely have fully autonomous capability (if not right out of the gate, at some point), it could double as a robotaxi that earns you more money than the car costs you, it is as stylish as a Porsche or Aston Martin, a top-of-the-line Model 3 is likely to knock the socks off of almost every Porsche in existence when leaving a red light, it has all of the benefits of a fully electric drivetrain, and all of that means that, overall, the era of making fire is coming to an end.
But man, the Model Y.
Unless something has changed since Elon tweeted about this last year, the Model Y is going to have falcon-wing doors. (I know these doors have haters, but automatic liftgates don’t have many haters, and these doors offer some of the best advertising in the Tesla toolbox — which is saying a lot — as well as ease of entry, exit, and minion loading.) Furthermore, the Model Y is going to be in the small SUV/CUV category — the hottest car class in the 21st century. The Model Y will, of course, have many of the same benefits as the Model 3, but will be yet another step forward in Tesla’s visionary master plan.
On Tesla’s conference call last night, Elon noted that he expects the Model 3 and the Model Y to each have sales demand of 500,000–1,000,000 per year. That’s a stunning total of 1–2 million cars per year — from just two models. However, I think Elon may yet again be off his rocker (… or, more realistically, absurdly cautious in his public statements). Sure, 1–2 million cars a year, as I just wrote, would be “stunning” from this Silicon Valley startup. However, what in the world could keep demand for the most competitive cars in the world so low?
People were almost universally blown away by the initial reservation numbers of the Model 3. I forget the exact statements, but it seemed from some of Elon’s comments that even he was positively surprised by the high number of reservations. (Let’s recall that >100,000 reservations were made before we even saw the car. We knew the base price, base range, and … well, not much else.)
Recognize that there’s a good chance most people still don’t even know what Tesla is. If you tell them about a Tesla car, they may well ask, “Who makes it?” (As in, what car company produces a Tesla?)
Once we have Model X, Model S, and Model 3 land rockets roaming the streets, do you really think demand for the Model 3 and Model Y will stay under 2 million cars per year?
And that’s before getting to autonomous driving….
Julian Cox made the case at our first Cleantech Revolution Tour conference that a Tesla Model 3 thoroughly outcompetes a BMW 328i, and that it even compares with a (much less compelling) Toyota Corolla on cost if you look at upfront + operational costs. But that’s without taking revenue from a hypothetical “Tesla Robotaxi” service into account, which could make your car a profit center. The idea of making a profit on your car without having to do much of anything may have sounded absurd 3 years ago, or even 3 months ago, but Elon himself recently spelled that out as part of “Tesla Master Plan, Part Deux”:
When true self-driving is approved by regulators, it will mean that you will be able to summon your Tesla from pretty much anywhere. Once it picks you up, you will be able to sleep, read or do anything else enroute to your destination.
You will also be able to add your car to the Tesla shared fleet just by tapping a button on the Tesla phone app and have it generate income for you while you’re at work or on vacation, significantly offsetting and at times potentially exceeding the monthly loan or lease cost. This dramatically lowers the true cost of ownership to the point where almost anyone could own a Tesla. Since most cars are only in use by their owner for 5% to 10% of the day, the fundamental economic utility of a true self-driving car is likely to be several times that of a car which is not.
Getting production up to demand looks like it is going to be a big challenge for Tesla for several years to come. Demand for 1–2 million Model 3 or Model Y affordable, electric supercars per year seems like a hugely conservative estimate to my eyes and brain cells. Maybe I’m the one off my rocker, but I just don’t see anything else on the horizon that competes with these cars — or even that new-tech laggards could avoid. I hesitate to put a precise number on how high demand for the Model 3 and Model Y will climb, but I’m guessing that’s the case for Elon as well, so he chooses to toss out estimates that are conservative enough to not make unvisionaries discount him as insane, but big enough to show that the auto industry is in for a revolution.
At this point, Tesla’s lineup acronym “S-3-X-Y” seems like an understatement. Feel free to criticize my enthusiasm and tell me I’ve drunk too much coffee today, but also be sure to check back in at some point in 2020 to count how many humans want a Tesla self-driving supercar.
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