Model Y Will Make Tesla Billions

Model Y Will Make Tesla Billions


Hey, I’m Steven and this is Solving The
Money Problem. If you’re new to the channel, welcome. If you’re a regular, welcome back. Happy new year everyone. In March 2019, the Model Y was unveiled to
little fanfare — despite its colossal potential. In the months following, Tesla stock fell
close to 40% and hardly a peep was heard about Model Y. Meanwhile, the investor in me was salivating. So, why did everyone ignore Model Y? I think the answer is simple: Model 3 stole
its thunder. Model 3 was Tesla’s make-or-break, bet-the-company,
mass-market electric vehicle — the ultimate goal of their 2006 Secret Master Plan. A revolution in transportation and Tesla’s
crown-jewel. So when Model Y was revealed 3 years later,
sharing 75% of its parts in common with Model 3 and thus looking starkly similar, no one
seemed to care. They’d seen it all before. It was boring. And that is exactly the point. Nearly everyone is sleeping on Model Y’s
potential. It’s not flashy, it’s not controversial,
it’s not ground-breaking, it’s not Cybertruck. It’s just a fantastic SUV. So let’s dive in and explore why I believe
Model Y Will Make Tesla Billions. There’s a Colossal Existing Market The global SUV market is GIGANTIC at 30 million
new SUVs sold every year. 30 million is a large number. In means a new SUV is sold approximately once
every second. Let that sink in. Globally, Toyota, Nissan, Honda, Jeep, Hyundai,
Ford, Volkswagen and Kia ALL sell north of 1 million SUVs annually. Is it unreasonable to imagine Tesla can capture
a few percent of the market? I don’t believe so. After all, Model 3 sales are absolutely DOMINATING
every vehicle in its class — capturing up to a quarter of ALL small and mid-sized luxury
car sales in the US. Tesla can’t build Model 3s fast enough to
keep up with demand. Model Y will be no different. The fact that
it’s electric doesn’t matter. The fact that it is unequivocally better in every area of
importance to most consumers DOES matter. Elon Musk has stated that he believes Model
Y demand will exceed the total demand for S, 3 and X combined. Tesla is expected to deliver over 360,000
vehicles in 2019 and thanks to the Shanghai Gigafactory, will reach combined S, 3 & X
production capacity of 590,000 in 2020. If Model Y does the same total of 590,000
at an average selling price of $50,000 (which is super conservative), we’re talking $29.5
billion in revenue — JUST from the Model Y. This is not an incremental increase. It’s a quantum leap! Tesla’s combined automotive revenue from
2017 AND 2018 was less, at $28.5 billion. But Tesla isn’t stopping there. We already
know Tesla’s gigafactories are built with future expansion in mind. I suspect that when
the Shanghai and Berlin Gigafactories are fully ramped, we’ll see Tesla producing
in excess of 350,000 Model Ys per year from each factory, just as we see 350,000 Model
3s coming out of Fremont. That’s 1,050,000 Model Ys year. We’re
talking $52 billion in revenue. How long will it take Tesla to ramp to such
production volumes? I don’t know. But we have seen Tesla increase annual deliveries
more than 10 fold in just the last 5 years. They’re scaling incredibly fast. It won’t
be long. In short, the market for Model Y is colossal. This matters. Fat Margins and Parts In Common Tesla is an optimization machine. At every level of the business, from corporate
structure to the machine that builds the machine, Tesla is constantly looking for ways to remove
complexity, save time and save money. Model 3 taught Tesla a LOT and those valuable
lessons have gone in to the Model Y. Model Y shares about ¾ of its parts in common
with Model 3. This isn’t an accident. Tesla thought long
and hard about how to make the best product possible, as efficiently as possible. [It’s a lot of little things like, looking
at each little tiny part, each process–say “Is the process necessary?”. Because the
best part is no part, the best process is no process”] – Elon Musk What better way to save enormous capital expenditures
than to share parts? Doing so means far less new equipment is required
and there’s a much lower learning curve for workers and robots who are already familiar
with most parts and processes. But Tesla didn’t stop there. Tesla filed a patent in 2019 for a gigantic
die-casting machine. Its purpose? To turn 70 separate parts into 1 — assembling the
entire Model Y frame as a unibody — in ONE process. This change alone will save an absurd amount
of time and complexity, greatly helping margins. But Tesla didn’t stop there. One of the most exciting patents filed by
Tesla is for a new vehicle wiring system. [Yeah, sounds riveting Steven. Please, tell
us more about this exciting wiring system.] 🤦‍♂️ I’m glad you asked. Let’s watch this clip: Like general assembly is the one I was talking
about as being really well suited to people. Because you’ve got a lot of weird things
that you’ve got to put together. For parts that are complicated and fiddly,
like–wiring harnesses are especially difficult. You see how like the wiring harness kinda
needs to snake through the car? It’s literally like winding a snake through the car. You’ve
gotta like poke it through holes and do various things. That’s SUPER difficult for a robot. Did you catch that? Wiring a car is a fiddly,
cumbersome, time-consuming pain in the ass that must be performed by humans. Well, Tesla’s new wiring system adds a little
stiffness to the mix, creating rigid cables that can easily be manipulated by robots. This will save a gargantuan amount of time,
and thus cost. But wait, there’s more. Not only is the writing system now a “drop
in place” delight rather than a floppy, flaccid mess to install, but Tesla’s innovation
has allowed them to remove an absolute s**tload of waste, weight and cost. Model S has about 3km of wiring harnesses. Model 3 has about half that at 1.5km. Model Y has about 100m of wiring which is
roughly 6% of the Model 3 and 3% of the Model S This saves material costs but far more importantly,
weight. The lighter the vehicle, the more range its
battery will provide on a charge and the better value it is to consumers. The Model Y will cost about the same to produce
as a Model 3. Yes, it’s a little bigger and there’s a tiny bit more material involved,
but I expect the new manufacturing efficiencies will even things out. Tesla is selling Model Y for about $3,000
more than the Model 3. Most of this is pure profit. This matters. There’s No Compelling Competition Tesla’s lack of competition is embarrassing
and depressing. The Model S, 3 and X are each in a class of one. This could change. This should change. I hope
this changes, but as it stands today, there is nothing that comes CLOSE to matching Model
Y on any meaningful metric. Range? Even if we reach up into the luxury
SUV no one is close, except Tesla’s Model X. Audi’s e-tron taps out at just 204 miles.
Jaguar’s i-Pace at 234 miles. With their Mustang Mach E, Ford claim to be
targeting the same EPA range of 300 miles that Tesla are with the Model Y, and I really
hope they succeed. But I have my doubts. So far, the trend from legacy automakers has
been to make big claims about range, only to let everyone down with the final result.
Tesla has done the opposite, delivering on their promises and then even INCREASING range
further, with over-the-air updates. Infotainment? No one is close. Safety? Well, we’ll have to wait and see
but Model 3 is the safest vehicle ever tested. S and X are #2 and #3. I don’t want to be presumptuous but… Actually f**k it, I DO want to be presumptuous. Model Y will be either the safest vehicle
ever tested by NHTSA or the second safest. Charging infrastructure? No one is close. Over-the-air-updates? No one is close. Storage? No one is close. Cost of ownership? No one is close. Value? Nothing comes close. You get the point, right? Tesla is running circles around everyone on
everything that matters. Model Y will be the best SUV in its price
range by a ridiculous margin. And SUVs are the most popular vehicle on planet
earth, accounting for a third of all new vehicle sales. And this market is GROWING. The option for 7-seats expands Model Y’s
market further. Consumers who know about the Model Y, and
care about rational things — which I admit, isn’t everyone — will find it very compelling. It won’t suit everyone but it will suit
plenty of the 30 million people buying SUVs every single year. It’s WAY Ahead of Schedule We were originally told to expect Model Y
production in late 2020. Then, as Tesla reported their Q3 2019 results,
we learned that the Model Y production ramp was 6 months ahead of schedule, with production
expected to begin by mid 2020. Following that, a rumour leaked that Model
Y production would start as early as Q1 2020 and soon after that, a Taiwanese website reported
that Tesla suppliers has been told to expedite Model Y parts delivery by a further 6 months
putting Model Y production at late 2019 or early 2020. Why does being almost a year ahead of schedule
matter? Because it means billions in revenue will
arrive early and more importantly, Tesla can begin dominating the SUV market sooner by
getting a head start. Tesla does not advertise its vehicles. They don’t need to. The cars are so good they sell themselves. When a new owner takes delivery of a Tesla,
their friends and family suddenly get exposed to a Tesla. And as we know, once someone experiences a
Tesla, they tend to want one and if they have the financial means, they tend to buy one. More sales equals more sales. PLUS, each new vehicle Tesla puts on roads
is a mobile data center, feeding its self driving AI to become even better and moving
us closer to full self-driving. I really need to stress this point. The single most important thing for Tesla
to do right now is put more vehicles on roads to collect more data for full self driving. If they solve full-self driving first, it is game over. While other companies are paying engineers
and drivers to collect data to train their AI, Tesla’s customers are paying Tesla for
the privilege of collecting and GIVING them valuable data. Think about that for a moment. To sum it up, the market for Model Y is absolutely
gigantic and Tesla looks poised to take a very healthy slice, just as its Model 3 has
done in the sedan market. After all, Model Y is just a bigger Model
3 with more storage and slightly less range. With a massive market, low capex, a short
learning curve, high margins, production ramping almost a year ahead of schedule and no noteworthy
competition, Model Y looks poised to make Tesla tens of billions in revenue and dominate
for years to come. In my opinion, Model Y alone will account
for more of Tesla’s revenue within a few years, than their entire business generates
today. That’s food for thought. I’m Steven Mark Ryan, this is Solving The
Money Problem, and I love you all. Thanks so much for watching. Let me know your thoughts in the comments
below. Do you see Model Y becoming Tesla’s best
selling vehicles? Will you buy one? Do you agree or disagree with anything I said? And of course, if you have any ideas for future
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