Tesla is currently busy ramping up production for its mass-market Model 3 to meet massive consumer demand. The company has a challenging task of delivering 400,000 vehicles on schedule. But the rumor mill, consumers, and investors are already looking forward to the next-gen Model Y, which Elon Musk has talked about in the past.

Model Y launch
Blomst / Pixabay

It will be an instant blockbuster

Model Y will be a compact SUV based on the same platform as Model 3. Morgan Stanley analyst Adam Jonas said in a research report to investors that the futuristic compact SUV would become Tesla’s highest selling model when it comes out. Jonas believes that the small SUV segment will eventually become the largest segment in the world, representing huge opportunities for Tesla.

Model Y will feature falcon wing doors similar to Model X. Interestingly, falcon wing doors have received a mixed response from consumers, with many arguing that it is merely an unnecessary addition to the vehicle and a nuisance. A recent report from Autocar claims that Tesla would announce the compact SUV sometime in 2018 and bring it to the market by 2019.

Why Tesla should speed up Model Y launch

There is a strong reason for Tesla to speed up Model Y launch. In September last year, we reported that demand for sedans was consistently declining as consumers preferred crossovers and SUVs. Most automobile companies are already investing to introduce more SUVs and crossovers. Tesla already has a crossover in the form of Model X, but it is not for the masses.

Model Y, which will be much more affordable than Model X, could ride the crossover wave. It will reportedly cost around $37,000. But Tesla believes that actual price could go as high as $45,000 because most buyers often add optional features to their vehicles.

Tesla’s next-gen vehicle would come with fully autonomous driving capabilities. According to Autocar, Model Y will feature eight cameras, 12 ultrasonic sensors, a new forward-facing radar system, and a supercomputer that would process data 40 times faster than previously.

Model Y to be the backbone of Tesla Mobility?

Morgan Stanley analyst Adam Jonas said Model Y would be “at the center of an on-demand ride sharing service” because of its modular seat configuration, larger passenger compartment, and luggage space. Elon Musk has talked about an Uber-like on demand ride-hailing service Tesla Mobility in the past. Tesla Mobility would include a large number of autonomous vehicles that would take you to your final destination rather than just to the nearest bus stop.

Tesla Mobility could turn into a viable business. According to two different studies, a hypothetical fleet of fully autonomous Model 3 could be “highly profitable” and would gain a significant chunk of ride-hailing market share. Though Model 3 and Model Y will have a similar price tag, Jonas argues that Y is more suitable for Tesla Mobility because of its design.

Model 3 to be 10x safer than an average car

Talking about the upcoming Model 3, Morgan Stanley said the vehicle would come with some advanced hardware and software that would make it ten times safer than an average car. The analyst says such a significant spike in safety would boost Model 3 sales. If the Elon Musk-led company can demonstrate that level of safety, it would change the way the auto insurance industry works.

The results of the federal investigation into a deadly accident involving a Tesla car show that the Autopilot feature has made Tesla vehicles 40% safer than other cars. According to the NHTSA, crash rates of Tesla vehicles declined by nearly 40% after the company introduced Autosteer, a part of the Autopilot system. Morgan Stanley has a Buy rating on the stock with $305 price target.

The next-gen Model Y is a key part of the California company’s expansion plans. Elon Musk forecasts that it could sell between 500,000 and one million units per year. The EV maker that last year delivered only 76,000 vehicles plans to ramp up production to 500,000 by 2018 and one million cars by 2020.