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Elon Musk rolls out Model Y, completing Tesla's 'S3XY' lineup

The new Tesla comes at a critical time for a company that has been struggling to turn a profit.
Tesla CEO Elon Musk walks beside the new Tesla Model Y at its unveiling in Hawthorne, California, on Thursday night.Frederic J. Brown / AFP - Getty Images

Tesla Chief Executive Officer Elon Musk rolled out the automaker’s latest vehicle, the Model Y, on Thursday night, predicting the new SUV would be the company's best-seller.

Surrounded by a standing-room-only crowd at the company’s Los Angeles design center, Musk said, “I think we’ll do more Model Ys than S, X and 3 combined."

During an earnings conference call in January, Musk told industry analysts the Model Y could double sales of the carmaker’s current leader, the Model 3 sedan, reflecting the overall shift to SUVs in the American market.

The new Tesla comes at a critical time for a company that has been struggling to turn a profit. It was in the black during the second half of 2018 but has cautioned investors it will lose money again during at least the first three months of this year. Complicating matters, a wave of new competition is coming from established automakers such as Volkswagen which, this week said it plans to have more than 50 different all-electric models in production by 2025.

The decision to name the new battery-electric vehicle the Model Y completes an inside joke at Tesla, its four product lines spelling out “S3XY.” The company wanted to name its compact sedan the Model E but discovered that name was registered by one of its Detroit rivals.

“Ford killed ‘SEX,’” Musk told a cheering crowd.

The 47-year-old executive spent half of a nearly hour-long presentation going over Tesla’s history before rolling out the new Model Y. He offered a number of details about the vehicle but left other questions unanswered.

Among the key points:

  • The Model Y can seat up to seven with an optional interior package
  • It will be offered in four different versions, initially starting with a long range version capable of 300 miles “useful range,” an all-wheel-drive model getting 280 miles per charge, and a high-performance version capable of hitting 150 mph and launching from 0 to 60 in 3.5 seconds
  • They will go on sale in autumn 2020
  • A fourth, “standard range model capable of 230 miles per charge and still able to hit 60 mph in 5.9 seconds, will debut in spring 2021
  • Prices will range from $39,000 for the base car to $60,000 for the high performance Model Y. Those prices are before options and like other Tesla products will no longer qualify for federal tax incentives
  • They will be equipped with Tesla’s autopilot technology which, Musk said, will be upgraded over-the-air later this year to allow virtually full hands-free driving.

Among the details Musk didn’t discuss was the size of the battery packs used by the four Model Y variants. But “three-quarters of Model Y parts are common with the Model 3 so (investments in the vehicle) are much lower,” Musk said during that January conference call. That includes the underlying, skateboard-like “architecture,” suggesting the Model Y will share the same spectrum of lithium-ion battery packs which range from 50 to 75 kilowatt-hours.

Musk made a point of comparing the Model Y to the bigger Model X sport-utility vehicle. But the new entry doesn’t feature the unusual “falcon wing” doors found on the early SUV, which have been a technical nightmare for Tesla. They forced the automaker to fire the original door supplier and then caused much of the nearly two-year delay in bringing the Model X to market. Since then, they’ve been the source of ongoing quality and reliability problems, a key reason influential Consumer Reports rates Model X poorly.

The Model Y may be Tesla's most important product yet as it attempts to expand into the mainstream and generate enough cash to repay massive debts that threaten to topple the California company.Jae C. Hong / AP

Musk notably sidestepped where the Model Y will be built in the U.S. He previously said the company was still debating where the new crossover-utility vehicle will be produced, though it was leaning towards adding capacity at the Gigafactory battery-plant in Reno, Nevada, rather than taking the limited remaining space in Fremont, California, where the Models S, 3 and X are produced.

The challenge of going to Nevada is that the company will have to start from scratch and then try to avoid what Musk has called the “production hell” that held back the ramp-up of the Model 3 for nearly a year.

Manufacturing, he said Thursday night, is “insanely difficult. It’s 100 times harder to design the manufacturing system than the car itself.”

Musk did indicate, however, that the Model Y will be one of the products rolling out of the massive new factory Tesla intends to open in Shanghai later this year. That plant will give the automaker a footprint in what has become the world’s biggest market for plug-based vehicles and it also will help Tesla sidestep any escalation in the U.S.-China trade war.

The Thursday night event was something of a love fest for Musk, the audience filled with fans wildly cheering almost everything he had to say. But his smiles might not last long considering all the problems the CEO faces. For one thing, the Securities and Exchange Commission is expected to fire the next shot in an ongoing battle over a tweet Musk posted on Feb. 19. In it, he discussed production plans for the year.

The SEC says the tweet violated terms of a settlement Musk agreed to last year in a case centered around his claims that Tesla was going private, backed by a sovereign Saudi Arabian fund. But for its part, Musk's lawyers contend the agency simply wants to limit his First Amendment rights. If a federal judge rules against Musk, the potential penalties could include his removal as Tesla CEO.

Even if Musk survives that battle there are others facing him, including an ongoing investigation by the U.S. military after he smoked marijuana on a podcast last year. And he is being sued for alleged defamation by a British diver involved in the rescue of a youth soccer team from a flooded Thai cave after Musk referred to him as a pedophile.

The good news for Tesla is that it has become the world’s biggest producer of battery-electric vehicles. But it faces plenty of challengers who’d like to take down the upstart king-of-the-hill. That includes a who’s-who of the auto industry, including Ford, General Motors, Jaguar, Mercedes-Benz, Nissan and Volkswagen.

Beyond the challenge of taking on so many well-funded competitors, Tesla has to worry about a “pile-up of epic proportions,” as Detroit consultancy AlixPartners recently warned, with scores of new products coming to market.

For his part, Musk told his audience on Thursday night that “our goal, all along, has been to try to get the rest of the industry to go electric,” adding that it is “extremely rewarding to see” that begin to happen.