Tesla has been fighting on many fronts. Photo/Getty Images.
Besieged on seemingly every front, Tesla is betting that the unveiling of a smaller battery-powered SUV, the Model Y, will reinvigorate the Silicon Valley upstart with the dazzle and fanfare that made it one of America's most valuable automakers.
But executives also hope it will distract from practically everything else the car company has faced recently, from financial land mines to courtroom brawls to doubts over the survivability of Elon Musk as Tesla's visionary marketer-in-chief.
Musk was scheduled to reveal the Model Y in Los Angeles Thursday night in what has for him been the friendliest possible territory: before an audience of boosters, inside a Tesla design studio, on the stage that helped make him a star.
Tesla's fifth major auto debut in 15 years could prove to be its most important and profitable reveal. Roomier than its Model 3 sedan and more compact than the hulking Model X, it will mark Tesla's first swing at the so-called "crossover" that has become America's most popular type of car.
New Tesla unveilings have traditionally been some of the most energizing events in the company's history. When Musk revealed the Model 3 sedan in 2016, he positioned the electric car as a revolutionary act toward saving the world. An uproarious crowd showered him with praise and a landslide of reservations. "You did it!" one onlooker screamed.
But Tesla now endures a major news event every day - and instead of celebrations, they're often centred on Musk's slap-fights with the Securities and Exchange Commission, Tesla's mass layoffs and store closures, or the company's stuttering rollouts of hardware and technology, often marred by years of delays.
For Musk, the unveiling is "kind of like going back to your wubby. This is his comfortable place," said Mike Ramsey, the senior automotive research director for the advisory firm Gartner. But the Model Y is also, he said, "the product they can't screw up. . . . There's only so many times you can hit the adrenaline pump on Tesla and get a reaction."
The Model Y will cost about 10 per cent more than Tesla's cheapest car, offers a shorter driving range and shares about three-quarters of its parts with the Model 3. Analysts expect a $47,000 version to be available next year, with a cheaper version ready by the spring of 2021.
The Model 3 sedan, while still a shrimp compared to its much larger gas-powered rivals, has become the best-selling electric car in the world. And some analysts expect the Model Y could be much bigger: Crossover SUVs like the Toyota RAV4 and Honda CR-V dominate the modern car dealership and are rapidly gaining in markets across China and Europe, where Tesla has placed its biggest hopes for long-term profit.
Tesla is hopeful Thursday's unveiling will trigger a surge of deposits from would-be buyers, giving Tesla an instant bundle of interest-free money that will help it boost its cash supply. It will also signal to investors eyeing its stock price, which has slumped more than 10 per cent this year, that the company can still gin up demand.
But that hype cycle could bring its own dangers. Shortly after the Model 3 reveal in 2016, more than 100,000 hopeful buyers plunked down a $1,000 deposit to pre-order the $35,000 sedan. Many dropped their reservations or ended up shelling out more for a pricier car in the following years; the Model 3 only went up for sale at that price last month.
The Model Y will be more affordable than Tesla's high-end Model X, but it will likely sail way over what the average American driver can afford. Years after Musk said his "master plan" was to sell cool electric cars for the middle class, Teslas are still mostly seen as status symbols for the rich and aspirational: Treasury Secretary Steven Mnuchin, for instance, announced he had one Thursday at a Ways and Means hearing.
Some analysts question whether Tesla's reveal of another upscale car will really help. The company can no longer lure buyers in with a $7,500 tax incentive, which was chopped in half at the start of the year, and Musk himself has acknowledged that Teslas are "still too expensive for most people." Demand, he said in January, is "insanely high," but buyers "just don't have enough money in their bank account."
That price wall - coupled with America's shrugging disinterest in electric cars - has served to cage Tesla behind a seemingly shrinking niche. Teslas also remain largely a West Coast fling: More than 40 per cent of the company's sales last year were in California.
Most automakers reveal new cars alongside detailed launch plans, with the implicit guarantee that they're primed and ready to begin building and selling en masse. With Tesla, it's not only unclear when Model Ys will hit the road, but where even they'll get made: Musk has hinted that the car could be produced at its Gigafactory outside Reno, Nevada, though that plant makes batteries and would need an entirely separate assembly line for cars.
Tesla says it wants to launch a factory in China, but nothing's been built, and making the car there would open the company to a raft of tariff and logistical nightmares. Analysts say the company's only current car-making factory, in Fremont, California, is so fully tapped out that changing its production lines could damage the company's bottom line.
Tesla will be expected to build more cars even as it endures more public scrutiny than ever before, with regulators, lenders and whistleblowers all breathing down the company's neck.
"Thanks to the quality issues and scandals over the last year, the brand's halo has started to dull," Jessica Caldwell, the executive director of industry analysis at Edmunds, the automotive research site, wrote in a note to clients Wednesday. "The Model Y will debut with promises of grandeur, (but) if there are any chinks in Tesla's brand armour, this vehicle will expose them."
- Washington Post
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