The Model Y has three quarters in common with the Model 3.
The Model Y has three quarters in common with the Model 3. Source: Tesla

Tesla CEO and founder Elon Musk expects to reach an annual production rate of half a million for the Model 3 version of the company’s electric vehicle range later this year, and predicts that the upcoming all-electric SUV, the Model Y, could be twice as popular as its current best-selling electric sedan.

Speaking during the Tesla Q4 earnings call earnings call on Thursday morning (Australian time), Musk spoke about the highly anticipated all-electric SUV.

“I expect the demand for the Model Y will be maybe 50% higher than the Model 3,” Musk said, adding that he saw annual demand for the existing Model 3 at around 700,000 to 800,000 units a year, and maybe as low as 500,000 if a recession emerges.

“It could be even double. The mid-size SUV segment is worldwide the most popular type of vehicle, so we will probably see higher volume of Y than 3.”

If Musk is right, the success of the Model Y will represent a successful next stage for the EV maker, which still has its sights set quite firmly on its goal of upturning the automotive world to reduce carbon emission levels irrevocably.

Musk noted that after a year that was both challenging, and its most successful, Tesla had grabbed 80 per cent of the EV market in the US, with the Model 3 being the most successful premium car of any type. “I think that’s not bad,” he said.

Tesla also delivered its second consecutive quarterly profit, even if the final figure was slightly below market expectations. But its revenue came in line with forecast, it has more cash and can meet its upcoming bond payment, and Musk says profits, even if small, will continue through each quarter this year.

Musk also confirmed that the EV maker is already tooling up for the production of the Model Y, which the CEO says will begin in small numbers early next year and ramp up to volume by the end of 2020.

With about three quarters of the Model Y components exactly the same as the Model 3, Musk says Model Y production will cost much less to prepare for than say, the difference between the Model S and the Model X.

“The Model S was like the Faberge egg of cars …. probably nothing like it will ever be made again,” Musk said, adding with a laugh, “And maybe it shouldn’t.”

Production of the Model Y will most likely take place at Tesla’s Gigafactory 1 in Nevada (where its batteries are made), allowing the EV maker to make the batteries and put them straight in the new EVs fresh off the production line.

This will reduce the costs of producing the Model Y, says Musk – further working towards the EV maker’s goal to produce EVs at an affordable price.

Whilst definitive plans for Model Y production are still being hatched, the plans for ramping up Model 3 production to 10,000 a week to achieve the goal of 500,000 a year are well underway.

The Model 3 has already achieved outstanding sales in the US, and is set to go on sale very soon also in Europe and China, and Australia in mid-2019.

With 63,359 Model 3s delivered to customers in North America alone in the fourth quarter of 2018 and reports of high demand already in Europe, Tesla says it has improved its assembly line to the point that it will be able to sustain production of 7,000 units a week at its Fremont factory by the end of 2019.

Add to that the Shanghai Gigafactory which is expected to go into full production rolling 3,000 Model 3s off the factory floor a week by the end of 2019.

“Earlier this month we started construction of Gigafactory Shanghai, and by the end of this year we expect to be producing Model 3s using a complete vehicle production – that’s body paint, body assembly, general assembly and module production.”

“This factory is going to go off like lightning,” says Musk.

Read more: Musk says Tesla big battery to pay for itself within a few years, bigger ones on the way

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