GREEN TRUCKIN & # 39; Tesla & # 39; s Model Y launches the next phase of electrification: SUVsQuartz

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If there is any doubt as to whether the future of transportation is electric, Model Y must dispel it. So far, Tesla and other car manufacturers have offered expensive luxury vehicles, or sedans and hatchbacks in economy format. With the release today (March 14) of Model Y, Tesla & # 39; s first mass market SUV, the electric autocaraker is entering one of America & # 39; s most lucrative car segments. You can watch Tesla's live stream from the official fashion event here at 8 p.m. Pacific Time / 11 p.m. Eastern Time.

It marks the next milestone for electric vehicles, regardless of whether the Model Y achieves the same remarkable success as Model 3, which took 455,000 pre-orders before even one was built.

In the American car market, sedans are steadily being replaced by SUVs (sport utility vehicles), crossovers and hatchbacks. According to marketing information company JD Power and Associates: the share of total retail sales by SUV & # 39; s increased from 36% to 49% between 2014 and 2018. Automakers have no choice but to follow buyers' preferences, and American automakers have already ceded most of the sedan segment to their Asian and European competitors. In 2018, Ford stopped all non-truck cars & # 39; s except the Mustang coupe and a small crossover SUV. Morgan Stanley estimates that the profit of GM and Ford in 2018 will come entirely from large pick-up trucks.

So far, the pillars of Tesla, the Model S and Model 3, have made the sale of the company possible. With around 140,000 units sold in 2018, the Model 3 was the best-selling electric car in the US last year (and sold more than four times that of the second Toyota Prius Prime) and the fifth best-selling sedan in general. Model 3 represented 20% of the 700,000 medium-priced sedans (categorized as those costing $ 30,000 to $ 50,000) that were sold in the US in 2018.

Nevertheless, Tesla cannot survive without expanding to the lucrative markets for SUVs and trucks. That is why the next three releases are Model Y, the Heavy-Duty Semi-truck and a pick-up truck that will be unveiled in 2019. (Musk said he "most excited"About the futuristic Blade Runner-like pickup truck).

Tesla

Tesla & # 39; s 2017 concept sketch of a future pick-up truck.

That seems an uncomfortable situation. American truck owners have occasionally had a hostile relationship with the electric car manufacturer, for example by making Tesla owners "ICE-ing" by blocking charging points and by covering "rolling coal" on electric vehicles, that is, covering them in exhaust soot . But even Ford recognizes the new reality on the road. The first American pickup manufacturer said it will make a fully electric version of its hugely popular (and profitable) F-150, as well as a hybrid version that will be released in 2020. "We're all working on this and we're taking our mainstream vehicles, our most iconic vehicles, and we're electrifying them," said President Bill Ford at the Detroit Motor Show in January of 2018.

Model Y & # 39; s price and place on the market

Tesla already has a luxury SUV in the market, the $ 88,000 Model X, and luxury car makers such as Porsche and Jaguar have their own EV participants in that race. But there are not many affordable medium-sized electric SUVs at the moment (crossovers are SUVs that are attached to a car chassis, in this case the Model 3 frame). Fisker has one planned for production in 2021 and there are also EV hatchbacks such as the Ford Focus and Kia Soul, although these may not satisfy customers looking for a small SUV. A crossover SUV should, in theory, offer superior performance for suburbanites (with strong acceleration and a range of over 200 miles) and for construction workers (more torque for towing, lower fleet costs and juice for power tools at work sites).

Model Y should meet those needs, and it will have enough way to itself when it arrives, as planned, by the end of 2020. So far, Americans have become accustomed to diminutive, hyper-efficient EVs such as Nissan & # 39; s Leaf , but electrification actually fits larger gas pistons, because they offer the space to cram into much more energy into large batteries. In addition, historically broad profit margins should help Tesla, which is under financial pressure due to the low margins on the $ 35,000 Model 3.

We don't know much about the Model Y yet, but Musk tweeted the cost should only be about 10% higher than the Model 3, with slightly less range when using the same battery. The Model Y is expected to share about 75% of its parts with Model 3. That should help keep the price low, which is a good omen for the sale. Tesla & # 39; s pool of Model 3 buyers grew by a factor of five after the price dropped to $ 35,000, Estimates from JD Power. Tesla also has the advantage of a strong brand that buyers seem willing to spend more on. The trade-in data from Tesla shows at least half of the customers who have traded in their car to buy a new model 3 that was collected at a price of less than $ 35,000, suggesting that many open their wallets to buy a model of own the electric car manufacturer.

Tesla had slightly less than 2% of the total US market in the last quarter of 2018, but a 14% share for vehicles over $ 50,000. "[It’s] a remarkable achievement for Tesla, especially given that many new car buyers are not considering a purely electric vehicle because of concerns about driving range and charging infrastructure, "JD Power said in an analyst letter." One certainty is that Tesla sales will grow in 2019 and that growth will be at the expense of other car manufacturers. "

The way forward will not go smoothly. At the moment, Tesla seems to succeed despite Musk. Although the CEO has generated excitement around his company, his erratic behavior has eliminated investors, employees and many customers. In February, the US Securities and Exchange Commission asked a judge to hold Musk in contempt for violating an agreement it mediated months ago and tried to curb Tesla's CEO. Musk announced that Tesla would close its stores and only sell online (and then be sent back, saying it would keep them open), in addition to multiple price adjustments this month, which irritated some customers.

Can Model Y solve Tesla's financial problems?

The financial picture of Tesla is also less rosy than expected. Investment bank UBS estimates that Tesla will need at least $ 25 billion in new funding in the coming decade to support the production of its Semi-, Roadster, Model Y and future models and to expand services. While Tesla challenged predictions, it had to raise more money for production last year, but UBS still insists on a capital increase. Even if Model puts billions of dollars in Tesla's treasury, the tax credits that EV & # 39; s keep affordable for customers are being phased out and competition is increasing.

The federal tax benefit for Tesla vehicles fell by half in January to $ 3,750 per vehicle and will halve again this summer. Musk also had to decline promises of long-term profits. On a January 31 income gain, the CEO said he was optimistic about Tesla's ability to stay in the black. "Last year was the most challenging year in Tesla's history, but also the most successful," said Musk. "I am optimistic about profitability in the first quarter and for all quarters in the future." However, on February 28, the executive admitted that Tesla was likely to lose money in the first quarter of 2019.

This is in addition to the increasing competition. Around a dozen new EV models will arrive in 2020. Although the demand for Tesla is high, the most attractive car market, China, will not be easy to crack. & # 39; The world's largest car market already has several Model Y rivals available for sale at a fraction of the expected price. Between China's approximately 80 electric passenger car manufacturers (paywall), there are at least 16 compact electric SUVs that can compete with Tesla's latest offering (as well as 32 other non-compact electric SUVs). # 39; s; link in Chinese). In addition, the rates on US imports brought Teslas further out of reach for most buyers in China.

Automotive information company Edmunds suggests that Tesla's winning series is "virtually impossible" to maintain. It will certainly be a monumental challenge for Tesla & # 39; s newly installed chief financial officer, 34-year-old Zachary Kirkhorn. "Tesla is in a difficult purgatorium between a startup and a regular car manufacturer," says Jessica Caldwell, Edmunds industry analysis executive director, "and the biggest open-ended question in 2019 is where the company really comes from."

Correction: Model 3 accounted for 20% of the 700,000 average-priced sedans sold in the US last year, instead of the total number of sedans.