Why the Model Y will be Tesla’s most important car

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New York (CNN Business)Tesla on Thursday is expected to unveil the Model Y, its most important car yet.

Tesla expects the electric SUV to become its best-selling vehicle. Car buyers in the United States are increasingly choosing SUVs over sedans.

Tesla (TSLA) already makes the Model X SUV, a luxury model that is often priced at more than $100,000. It only accounted for 15% of Tesla’s sales in the fourth quarter, but it did edge out sales of the Model S, it’s luxury sedan.

The Model Y is expected to be priced for the mass market. But getting to that affordable price could take time. Tesla has just begun taking orders for the long-promised $35,000 version of the Model 3, almost three years after it was unveiled.

The Model Y will soon have a lot more competition from other automakers, which are making their own electric SUVs. That raises the stakes for Tesla’s launch because it risks losing its grip on the electric car market.

One of reason electric vehicles haven’t taken off is because most of them have been available only in sedan models, said Michelle Krebs, senior analyst for AutoTrader. Electric vehicles represent just over 1% of new car sales in the United States.

“It really hasn’t been in a body style that people are buying,” she said. “The only one out there now is the Model X. But that won’t be the case for long.”

CEO Elon Musk is clearly counting on big things for the Model Y.

“The demand for Model Y will be maybe 50% higher than Model 3 — could be even double,” Musk told investors on a conference call in January when he announced the Model Y would be going into production next year.

If his figures are correct, the Model Y will have a chance to become the bestselling SUV of any kind — gas or electric — in the United States, a title currently held by the Toyota Rav 4.

The Model Y unveiling can’t come soon enough for Tesla, which had a really bad past six weeks.

  • The SEC asked that Musk be charged with contempt.
  • Tesla’s chief financial officerand chief counsel left the company
  • Consumer Reports removed its “recommended” ratingfrom the Model 3
  • Tesla shut most of its storesonly to backtrack on those plans two weeks later
  • Musk warned investors Tesla would lose money in the first quarter
  • Tesla’s second-largest shareholdersuggested it might be better off without Musk as CEO
  • Tesla repaid $920 million in debt with cash rather than stock, renewing cash crunch fears

Tesla’s stock is down 10% since February 5.

It could use the excitement of the Model Y unveiling to change the conversation and reverse its fortunes — and the direction of its stock.

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