Why Model Y in Australia could be cheaper than Model 3, but probably won’t

The guessing game for the Australia retail price of Tesla’s next electric model is on again. Last year, it was for the Model 3, this year it’s for that successful electric sedan’s bigger sibling, the Model Y electric crossover.

And it basically all comes down to currency and conversion rates. Will Tesla base its Model Y around the current exchange rate between the US dollar and the Australian dollar, or on the rates currently applied to the Model 3?

The Model 3 Standard Range Plus arrived with great fanfare and huge demand in August last year at a driveway price around $72,000, depending on which state you live in.

But that price jumped to around $79,000 in April this year, largely because of the slump in the value of the Australian dollar from around US70c to US61c.  The price of the long range and performance versions also rose.

That fall in the currency has since been reversed – the Australian dollar is now worth more than US69c again. But the price of the Model 3 has not yet changed to reflect this.

So, a big question for those interested in buying the Model Y, which according to Tesla boss Elon Musk will be an even bigger seller than the Model 3, is going to be the Australian sticker price, and the currency rate the vehicle is pegged at.

Will it be higher than the current Model 3 price, or will it come in below that price and push down the Model 3 price to reflect  the most recent currency changes?

Model 3 owner and Tesla enthusiast Alexei Watson crunched the numbers for the Model 3 to great interest before its arrival in Australia with his online calculator, and is doing so again for the Model Y.

His numbers show that if introduced in Australia today at the current dollar value, the Model Y Long Range (the cheapest variant currently available in the US) would be priced at less than the current sticker price of the Model 3 Long Range – that’s $89,689 using Watson’s calculator for the Model Y compared to $97,779 (if you live in NSW) for the Long Range Model 3.

There is, however, a major caveat, as Watson tells The Driven:  “The main point is that my calculator is based on the real time exchange rate, while Tesla picks a point in time and they stick with it.

“The real big takeaway is the Model 3 price. The Long Range Model Y is cheaper (in Australia, based on my calculator) than what they’re currently selling the Long Range Model 3 for in Australia,” he adds.

Watson estimates that because of this fluctuation, Australian drivers are paying around $11,300 too much for the Model 3 which is $79,346 drive-away for the Standard Range Plus in NSW, but should be priced at $68,031 if Tesla were to base its price on today’s dollar value.

He adds that this strategy probably makes sense for Tesla’s bottom line. “If I were in Tesla’s shoes I would pick the price when the market was low,” says Watson. Although it’s fair to assume that Tesla, and any other company, would want to protect themselves from currency risk.

But the big question is how will this affect the Model Y pricing when it is introduced? Will the Model Y be pitched at prevailing rates – and if the exchange rates stay around the current level, what does that mean for the price of Model 3s?

“Are they going to price the Model Y higher than that straight conversion [from the calculator] or are they going to lower the cost of the Model 3?” asks Watson.

The Model Y is likely to be more expensive than the Model 3, if for no other reason than despite sharing three-quarters of the components with the Model 3, it will feature more interior space, and high-tech additions such as a single-piece rear casting, and a highly efficient heat pump with octo-valve.

Tesla dropped the pricing of the Model Y last Friday in the US to bring it under $US50,000 (A$71,700 converted), and this has also had follow on effects for the estimated pricing in Australia.

Although it was a minor discount – $US3,000 ($A4,300) discount for the Long Range variant and $US1,000 ($A1,430) for the Performance variant) –  this combined with the rising dollar value means other factors that increase pricing in Australia have also dropped.

While this doesn’t get us any closer to what the Model Y will cost when it is eventually opened up for orders in Australia, it does give us some insight to the various factors that influence Tesla’s pricing.

If you want to check out how the fluctuating dollar affects estimated pricing Watson says you can check his most current calculator here, which now includes both the Model 3 and Model Y on one document and also includes state by state pricing, as well as a nifty graph at right to show the changing price estimates versus fluctuating dollar values.