If the 2020 Tesla Model Y Is a Success, How Will Tesla Handle Production?
And where does the Y leave Model 3 buyers?by Jonathan Lopez, on LISTEN 05:24
When Tesla debuted the Model 3 compact sedan back in 2016, it managed to accumulate some 400,000 pre-orders in just a matter of weeks. And while most automakers would salivate at the mere thought of generating that kind of demand, Tesla struggled to ramp up production to fill all those orders. Now, with the imminent arrival of the 2020 Tesla Model Y, the brand’s new high-volume compact crossover, it looks as though Tesla might have a much easier time keeping its promises.
Model 3 Production Woes
|Note: Tesla Model 3 pictured here.|
Tesla took a top-down approach to its model lineup, which means that it started by offering low-volume, high-cost models like the Model S and the Model X before the more-accessible Model 3. This strategy provided the cash needed to offer the follow-up Model 3, which was intended as a high-volume, lower-cost sedan “for the masses.”
As such, by the time Tesla was ready to debut the Model 3, it was already at full steam on the ‘ole hype train.
Customers flocked to plunk down a $1,000 deposit to get theirs, with hundreds of thousands signing up without even so much as an expected delivery date.
Production of the Model 3 didn’t start until several months after the sedan’s debut in April of 2016, and the first 30 units were delivered in a “handover party” in July of 2017.
|Note: Tesla Model 3 handover party pictured here.|
By that time, many of those who had reserved a Model 3 of their own were growing impatient, but Tesla calmed nerves by promising a major ramp-up in production capabilities; something Musk referred to as “production hell.” The goal was to reach upwards of 5,000 units per week, rather than the few hundred Tesla was pushing off the line at that time.
However, due to a number of setbacks and delays that would follow, as well as a number of quality control issues, enthusiasm for the 3 started to wane. Some waited for more than a year to get their car, if not longer. Pricing also became an issue, as the most “affordable” Tesla in the lineup suddenly became ineligible for the promised electric vehicle federal tax credit, which began to phase down for those customers who would receive their car after January 1st, 2019.
Nevertheless, Tesla slogged through it all and buyers kept picking up the 3. Now, it’s one of the most popular sedans in America.
How Will The Public React To The Y?
|Note: TopSpeed’s rendering of the 2020 Tesla Model Y pictured here.|
Despite the production delays, delivery bottleneck, quality control issues, and loss of the federal tax credit, we expect the 2020 Tesla Model Y to be just as popular as the 3, if not more so.
For starters, let’s consider just how popular the compact crossover segment is these days. While the sedan segment shrinks smaller and smaller, crossovers are booming, growing by 12.6 percent in 2018 according to a report by carsalesbase.com. The same report also says the compact crossover segment is an incredible 50-percent larger than the next largest segment (large pickups), and despite its ridiculous size, it’s still the fourth fastest-growing segment in the industry.
By comparison, the compact car segment fell by 12.3 percent according to carsalesbase.com.
|Note: 2020 Tesla Model Y pictured here.|
Now imagine this - take that exploding segment demand, then amp it up with the kind of buyer enthusiasm typically associated with a new Tesla product. See where we’re going here?
Of course, it’s possible Tesla has lost some of its momentum. Perhaps consumers will be a bit wary of the Y now that the 3’s production delays, quality control issues, and vanishing tax credit are still fresh in their mind. Maybe.
However, if I were a betting man, I’d venture the Y will be every bit as popular as the 3.
And now with Tesla’s expanded production capabilities officially in place, it should be smoother sailing for the company, right?
How Will Tesla Balance Demand For The Model 3 And Model Y?
|Note: 2020 Tesla Model Y pictured here.|
With both the Model 3 and Model Y now on offer, will Tesla need more of that Musk-branded “production hell” to meet demand?
Perhaps not, as it looks as though customer tastes may shift wildly towards the new compact crossover.
According to a recent report from Business Insider, Goldman Sachs is predicting that Model 3 demand will fall this quarter and that the Model Y will weaken that demand even further.
The report also points to recent data from InsideEVs that indicate Model 3 sales are down for the first two months of the year.
The Same Tesla Song And Dance
If Model 3 demand falls, the Y could actually be an easy out for the company.
The 3 was like a learning experience for the company, something to help it grow towards its stated goal of providing all-electric personal transportation to the world.
If Model 3 demand falls, all Tesla will need to do is shift the production tooling to its new crossover, then apply the lessons learned with the 3 towards the Y. That includes delivery and quality control issues.
Indeed, Tesla is a far cry from the niche company it was all those years ago when it offered the original Roadster. As a leader in the electric vehicle segment, the new 2020 Model Y will no doubt blaze a path that the other automakers will follow, copying Tesla’s successes and avoiding its failures. And that’s not necessarily a bad thing for consumers like you and me.
Read our full speculative review on the 2020 Tesla Model Y.