New Zealand Markets closed

Tesla's Big Event: What to Expect

Daniel Sparks, The Motley Fool

Now that Tesla (NASDAQ: TSLA) is finally selling its Model 3 in mass-market volumes and at its long-awaited $35,000 starting price, the company is moving on to its next big product: its Model Y SUV. Tesla CEO Elon Musk said last week that the company would unveil the vehicle on March 14, a day earlier than a date the CEO provided investors in May of last year. 

Tesla impressively expects Model Y production and demand to trend higher than the Model 3 -- and the Model 3 is the electric-car maker's highest-volume vehicle yet. Investors, therefore, will be watching the event closely.

A teaser photo of Tesla's Model Y

Model Y. Image source: Tesla.

Tesla's Model Y unveiling

"Model Y unveil event on March 14 at LA Design Studio," Musk announced on Twitter last week. On the company's website, Tesla says it will livestream the unveiling at 8 p.m. PDT.

Ahead of the event, details are scant. But Musk did provide a few tidbits in a tweet last week. "Model Y, being an SUV, is about 10% bigger than Model 3, so will cost about 10% more & have slightly less range for same battery," the CEO said.

In other words, this will be meaningfully smaller and cheaper than Tesla's current SUV: the Model X.

With the Model 3 priced at $35,000, the Model Y's starting price will likely be about $38,500. But Tesla will likely introduce higher-priced versions of the vehicle before it brings to market the base model, just as it did with the Model 3.

Can the Model Y live up to the hype?

Tesla has enormous expectations for its Model Y. Citing the fact that the midsized SUV segment is the most popular vehicle type in many of the major markets Tesla operates in, Musk believes the Model Y will be produced in higher volumes than the Model 3, he said during the company's fourth-quarter earnings call.

In addition, Musk expects significant synergies from building the Model Y on the Model 3 platform. "Since Model Y will be built on the Model 3 platform and is designed to share about 75% of its components with Model 3," Tesla explained in its fourth-quarter shareholder letter, "the cost of the Model Y production line should be substantially lower than the Model 3 line in Fremont, and the production ramp should also be faster."

In the meantime, investors still have doubts about Tesla's ability to increase Model 3 production and demand to its target 500,000-units-per-year level. Recent price cuts have prompted concerns about demand for Tesla's vehicles. While the electric-car maker has always planned to lower Model 3 prices in order to hit its target $35,000 starting price for the vehicle, aggressive price cuts to all of its models and a workforce reduction announced earlier this year have some investors worried that demand isn't living up to the company's expectations.

As of Tesla's last update on its timeline for the Model Y, the company wants to bring the vehicle to market in low volumes early next year and hit volume production by the end of next year.

Tune in to the event on Tesla's website on Thursday to find out details about the new vehicle.

More From The Motley Fool

Daniel Sparks owns shares of Tesla. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.