What led to the surprising launch of the Tesla Model Y standard range?

January 10, 2021 in Loren McDonald

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Half a year after Elon Musk said in July 2020 that Tesla would not launch a Model Y Standard Range below 250 miles, the company did just that, launching the cheapest Model Y on its website on Thursday, 6 of January .

In the US, this means that the popular Model Y crossover is now available in three variations and with significantly different price ranges and range combinations:

• Standard range: $ 41,990 | 244 miles EPA range | $ 172 / kWh
• Long reach: $ 49,990 | 326 miles from EPA range | $ 153 / kWh
• Performance: $ 59,990 | 303 miles EPA range | $ 198 / kWh

With $ 8,000 more and 82 miles more, the long-range version of the Model Y has the lowest cost per kWh. But with a starting price of around $ 42,000 versus $ 50,000, the Standard Range becomes very attractive and more affordable for many more families in the United States.

Why did Tesla and Elon Musk change their minds?

I’ll be honest, I did a party dance at the dinner table when I discovered this news on Thursday night. In July 2020, my CleanTechnica article “Is Elon Musk wrong about a Y model with a range below 250 miles? it ran and the reaction in both the comments and on Twitter was overwhelmingly negative regarding my suggestion that Elon was wrong and Tesla should offer a Model Y of standard range equal to or close to 250 miles of EPA range.

When I shared this news on Twitter Thursday night, Tesla and Elon Musk fans shrugged and said things like, “This is Elon, he changed his mind” and “So, they cut their costs.”

I will let others investigate the details of what enabled Tesla now, 6 months later, to offer a Model Y for $ 42,000. But my assumption is that: 1) As the company increased the production volume of Model 3 and Model Y (which shares 73% of the same parts as Model 3), this led to lower costs per unit; and 2) continuous improvement in battery efficiency.

But my focus in this article is the “because?” Musk, and presumably Tesla’s leadership, clearly changed his mind about a Model Y with just under 250 miles of range being unacceptable to consumers in the United States, and about the launch of a Model Y Standard Range (which Musk clearly stated that wouldn’t be done). Again, cost efficiencies may have made a lower-cost, shorter-range Model Y more acceptable from the margin point of view, but what caused a change of opinion around less than 250 miles to be unacceptable?
250 miles EPA unacceptable” srcset =”https://cleantechnica.com/files/2021/01/Elon-Musk-Tweet-Model-Y-SR-250-mile-EPA-unacceptable.png 1546w, https://cleantechnica.com/files/2021/01 /Elon-Musk-Tweet-Model-Y-SR-250-mile-EPA-unacceptable-270×161.png 270w, https://cleantechnica.com/files/2021/01/Elon-Musk-Tweet-Model-Y- SR-250-mile-EPA-unacceptable-570×339.png 570w, https://cleantechnica.com/files/2021/01/Elon-Musk-Tweet-Model-Y-SR-250-mile-EPA-unacceptable-768×457 .png 768w, https://cleantechnica.com/files/2021/01/Elon-Musk-Tweet-Model-Y-SR-250-mile-EPA-unacceptable-1536×914.png 1536w” sizes =”(maximum width: 1546px) 100vw, 1546px”/>

In the tweet above July 12, 2020, in response to a question about the Standard Range Model Y, Musk replied, “No, as the range would be unacceptably low (<250 EPA miles)." In my July 25, 2020 article, I wrote:

“Musk didn’t share what the EPA’s range would be for a standard Y-range model, but I will choose 235 arbitrary miles as my guess for this article. What if the Standard Range version was rated at literally just under 250 – say 245 or 247 miles – I would assume that with software tweaks, battery improvements and tire combinations, Tesla could easily increase that range to a magic number of 250 in 3 -6 months. And everyone would forget the initial reach, just as no one cares about the initial reach of the Model S. ”

Therefore, the standard range reaches 244 miles (although the site says “estimated”), slightly higher than my assumption of 235 miles. But in the past 6 months, Tesla could easily have found about 10 additional miles through various efficiencies compared to what was then expected.

In the second quarter of 2020 earnings conference call, Musk stated:

“With regard to passenger vehicles, I think the new normal range will be, under the US EPA alone, approximately 300 miles. So, I think people really expect this to be a number close to 300 miles normally. “

So, six months ago, Musk was arguing that American families basically now expect about 300 miles of range as the new normal for EVs. And in his previous tweet, he exclaimed that “<250 miles of EPA range was 'unacceptably low'".

On one level. Musk is right about the 300 mile number. Almost all surveys of potential BEV buyers place 300 miles as the most common answer to the number of miles needed to make an EV acceptable. And, by my own analysis, the BEVs available in the United States will reach about 300 miles in 2023. My analysis also puts the current average range of BEVs at 255 miles.

So what would Musk and Tesla’s leadership now essentially say that just under 250 miles of range is perfectly acceptable to American car buyers?

Three likely reasons why less than 250 miles of reach are now acceptable

There are probably three main market-driven reasons why Musk and Tesla decided to launch the standard 244-mile range model now:

Decreasing demand: BBefore all Tesla fans start picking up arrows in their quiver, I’m not suggesting for a moment that there is no demand for Tesla models. (For the record, I drive a Model S – our second – I have Tesla solar and I’m not anti Tesla.) What I’m suggesting is that there is a bigger market opportunity for EVs in the $ 40,000 +/- range. And with several electric SUVs and CUVs now available or coming this year in this price range, Tesla should expect many buyers to choose EVs in this lower price range. And without the benefit of the $ 7,500 federal EV tax credit, Tesla is already at a significant disadvantage in this segment with the long-range Model Y.

Smaller US market acceptance: While 300 miles of range remain the magic number that US consumers look for in an EV, many, especially those in two or three-car homes, recognize that 200 to 250 miles of range is suitable for probably 95% to 98% your annual driving needs. If you need to take your child to college, visit grandma, or take the kids to Disneyland 500 miles away, you can stack the family on the Chevy Tahoe or a longer-range EV. (For the record, we drove our first Tesla Model S, the 60 model with 210 miles range, 3 times on round trip 900 miles – so I can attest that even less than 250 miles range is “OK” for travel long.)

Lots of new competition: From my analysis, in 2021, 30 potential new EVs (BEV and PHEV) are expected to be available to buyers in the US by the end of the year. However, I assume that at least some of them will be delayed until 2022 or at least we will not see any significant deliveries until then.

Data and table: Loren McDonald / EVAdoption.com

And of these 30 new EVs, 10 of them are direct competitors of the Model Y to some extent. These include:

• Ford Mustang Mach-E
• Volkswagen ID.4
• Nissan Ariya
• Audi Q4 e-tron
• Volvo XC40 Recharge
• Chevy Bolt EUV
• Ford Escape PHEV
• Lincoln Corsair PHEV
• Toyota RAV-4 Prime (PHEV)
• Hyundai IONIQ 5

None of the above BEVs has the long-range Model Y range or access to Tesla’s charging networks. But all of the vehicles above (except the Chevrolet Bolt EUV) qualify for the EV federal tax credit. And, of those who do, everyone qualifies for the $ 7,500 credit, except the Ford Escape and Lincoln Corsair PHEVs, which reach $ 6,843.

And in addition to the 10 new SUVs / CUVs above, the Chevrolet Bolt EV, Kia Niro EV and Hyundai Kona EV remain options for buyers who want an affordable electric crossover with about 250 miles of range.

Perhaps Tesla and Musk always planned to offer a ~ 250 mile range Y Model in the $ 40,000 range, but were just waiting until the competition warranted it. Nevertheless, the standard range is here and I have no doubt that it will be a major seller in the USA.

The great news for consumers in America is that, for the first time in history, there are several electric SUVs / CUVs in the $ 35,000 to $ 50,000 range to choose from. This is great and will do a lot to increase EV adoption in the United States.

(Disclosure: I own all 1 Tesla shares.)

Related: Tesla Model Y = 2020 CleanTechnica Car of the Year

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Selling Teslas in 2012 vs. 2021

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Tag: competition, range, Tesla Model Y