After receiving a humongous 400,000 pre-orders for the mass-market Model 3, Tesla is making all efforts to start Model 3 deliveries by 2H2017. Meanwhile, Elon Musk has confirmed that an SUV crossover called Model Y and an all-electric Minibus are also in the pipeline. Model Y is said to be based on the Model 3 chassis, and will complete Tesla’s “S-3-X-Y” nomenclature.

Tesla Model Y with Flacon Wing Doors
Image Source: Tesla Motors

Demand for sedans is falling

Even though Tesla aims to start delivering Model 3 in 2017, Elon Musk has indicated that the bulk of orders won’t be fulfilled until at least 2018. And Model Y is unlikely to hit the roads before that. Experts believe that Tesla needs to speed up the Model Y launch because consumer demand for sedans is waning as people prefer crossovers and SUVs.

According to Autodata, passenger car sales declined by 12% in August compared to a 2% jump in the sales of SUVs and sales. On top of that, the steep decline in the value of used small cars indicates that the prices of new passenger cars are also falling. Most major automakers are already investing heavily to introduce more SUVs and crossovers to the market.

Model Y may have too many competitors

Tesla already has the Model X SUV crossover, but its price tag puts it way beyond the reach of the masses. Model Y will be an affordable compact SUV for the masses. Cadie Thompson of Business Insider says that by the time Tesla Model Y arrives, it will have too many competitors. General Motors is on track to roll-out its Bolt electric crossover by the end of this year at $37,500.

Hyundai and Audi will launch their electric SUVs by 2018. Volvo plans to bring two electric vehicles by 2019, and at least one of them will be an SUV. Volkswagen is also working on several electric vehicles that will be launched by 2020. Elon Musk recently said that he expected Model Y to sell between 500,000 and 1 million unit per year when it arrives.