Half a year after Elon Musk said, in July 2020, that Tesla would not launch an under-250-mile-range Model Y Standard Range, the company did just that, rolling out the cheaper Model Y on its website on Thursday, January 6.
In the US, this means that the popular Model Y crossover is now available in three variations and at significantly different price points and range combinations:
- Standard Range: $41,990 | 244 miles of EPA range | $172/kWh
- Long Range: $49,990| 326 miles of EPA range | $153/kWh
- Performance: $59,990 | 303 miles of EPA range | $198/kWh
At $8,000 more and with 82 more miles of range, the Long Range version of the Model Y actually has the lowest cost per kWh. But at a starting price of roughly $42,000 versus $50,000, the Standard Range becomes very attractive and more affordable to a lot more US households.
Why Did Tesla and Elon Musk Have a Change of Heart?
I’ll be honest, I did a little celebration dance at the dinner table when I discovered this news Thursday night. In July 2020, my CleanTechnica article “Is Elon Musk Wrong About An Under-250-Mile Range Model Y?“ ran and the reaction both in the comments and on Twitter were overwhelmingly negative toward my suggestion that Elon was wrong and Tesla should offer a Model Y Standard Range at or near 250 miles of EPA range.
When I shared this news on Twitter Thursday night, Tesla and Elon Musk fans shrugged and said things like: “That’s Elon, he changes his mind” and “So what, they lowered their costs.”
I will let others delve into the details of what enabled Tesla to now, 6 months later, offer a Model Y for $42,000. But my assumption is is that: 1) As the company has increased production volume of both the Model 3 and Model Y (which shares a reported 73% of the same parts as the Model 3), that has led to lower per-unit costs; and 2) continued improvement in efficiency of the battery packs.
But my focus of this article is on the “why?” Musk, and presumably Tesla leadership, clearly changed their minds about a Model Y just under 250 miles of range not being acceptable to US consumers, and about releasing a Model Y Standard Range (which Musk clearly stated would not be made). Again, cost efficiencies may have made a lower-cost and lower-range Model Y more acceptable from a margin perspective, but what caused a change of heart around less than 250 miles of range not being acceptable?
In the above July 12, 2020 tweet, in response to a question about the Standard Range Model Y, Musk responded: “No, as range would be unacceptably low (<250 mile EPA).” In my July 25, 2020 article I wrote:
“Musk didn’t share what the EPA range of a Standard Range Model Y would come in at, but I’m going to pick an arbitrary 235 miles as my assumption for this article. If the Standard Range version was actually rated at literally just under 250 — let’s say 245 or 247 miles — I would assume that with software adjustments, battery improvements, and tire combinations, Tesla could easily bump that range up to the magic number of 250 within 3–6 months. And everyone would forget the initial range, just like no one cares about the initial range of the Model S.”
So, the Standard Range actually arrives at 244 miles (although the site says “estimated”), a bit higher than my assumption of 235 miles. But in the past 6 months, Tesla could have easily found an additional ~10 miles through various efficiencies compared to what was expected then.
On the Q2 2020 earnings call, Musk stated:
“With regard to passenger vehicles, I think the new normal for range is going to be, just in U.S. EPA terms, approximately 300 miles. So I think people will really come to expect that as some number close to 300 miles as normal.”
So, six months ago, Musk was arguing that US households basically now expect close to 300 miles of range as the new normal for EVs. And in his earlier Tweet, he exclaimed that “<250 miles of EPA range was ‘unacceptably low.'”
At one level. Musk is right about the 300 mile number. Almost every survey of prospective BEV buyers puts 300 miles as the most common response for the number of miles needed to make an EV acceptable. And by my own analysis, BEVs available in the US will reach close to 300 miles of range by 2023. My analysis also puts the current average range of BEVs at 255 miles.
So, what would cause Musk and Tesla leadership to now in essence say that a bit less than 250 miles of range is perfectly acceptable to American auto buyers?
Three Likely Reasons for Under 250 Miles of Range Now Being Acceptable
There are likely three core market-facing reasons why Musk and Tesla decided to launch the 244-mile range Standard Range Model Y now:
Slowing demand: Before all the Tesla fans start reaching for the arrows in their quiver, I’m not suggesting for one moment that there isn’t demand for Tesla models. (For the record, I drive a Model S — our second — have Tesla solar and am not anti Tesla.) What I am suggesting is that there is a larger market opportunity for EVs in the $40,000+/- range. And with several electric SUVs and CUVs either now available or coming this year in this price range, Tesla should expect many buyers to opt for EVs in this lower price range. And without the benefit of the $7,500 federal EV tax credit, Tesla is already at a significant disadvantage in this segment with the Model Y Long Range.
US market acceptance of less range: While 300 miles of range continues to be the magic number that US consumers seek in an EV, many, especially those in two- or three-car households, recognize that 200 to 250 miles of range is adequate for probably 95% to 98% of their annual driving needs. If you need to take your child to college, visit grandma, or take the kids to Disneyland 500 miles away, you can pile the family in the Chevy Tahoe or a longer-range EV. (For the record, we drove our first Tesla Model S, the 60 model with 210 miles of range, 3 times on 900 mile round trips — so I can attest to even less than 250 miles of range being “OK” for long trips.)
Lots of new competition: By my analysis, in 2021, a potential 30 new EVs (BEV and PHEV) are expected to be available to buyers in the US by year end. I do, however, assume that at least a few of these will either be delayed until 2022 or at least we won’t see any significant deliveries until then.
Data and Table: Loren McDonald / EVAdoption.com
And of these 30 new EVs, 10 of them are direct competitors to the Model Y to some extent. These include:
- Ford Mustang Mach-E
- Volkswagen ID.4
- Nissan Ariya
- Audi Q4 e-tron
- Volvo XC40 Recharge
- Chevy Bolt EUV
- Ford Escape PHEV
- Lincoln Corsair PHEV
- Toyota RAV-4 Prime (PHEV)
- Hyundai IONIQ 5
None of the above BEVs have the range of the Model Y Long Range or access to Tesla’s charging networks. But all of the above vehicles (except the Chevrolet Bolt EUV) do/will qualify for the federal EV tax credit. And of those that do, all qualify for the $7,500 credit except the Ford Escape and Lincoln Corsair PHEVs, which get up to $6,843.
And in addition to the above 10 new SUVs/CUVs, the Chevrolet Bolt EV, Kia Niro EV, and Hyundai Kona EV remain options for buyers who want an affordable electric crossover with around 250 miles of range.
Maybe Tesla and Musk had always planned to offer a ~250 mile range Model Y in the low $40,000 range but were just waiting until the competition warranted it. Regardless, the Standard Range is here and I have no doubt it will be a big seller in the US.
The great news for America consumers is that for the first time ever, there are several compelling electric SUVs/CUVs in the $35,000 to $50,000 range to choose from. This is a great thing and will do a lot to increase EV adoption in the US.
(Disclosure: I own all of 1 share of Tesla stock.)