Tesla on Thursday introduced its latest electric vehicle, the Model Y, a crossover SUV.
Demand for sport utility vehicles in the United States has been high over the past few years. New models have flooded the market, looking to unseat best-sellers like the Toyota RAV 4, Nissan Rogue or Honda CR-V.
Tesla hasn’t offered a new SUV to tap into that demand since it began producing its Model X vehicles in 2015. The X features falcon-wing doors, which delighted some drivers but repelled others. The Model Y ditches this feature.
According to Musk, however, the Model Y will share about 75 percent of its components with the company’s Model 3 electric sedans, allowing Tesla to start manufacturing the new SUV for far less money that it spent to begin producing the Model 3.
Auto-makers typically share parts across new models, and sometimes build different models on shared assembly lines. This helps them control costs and get new vehicles to the market relatively quickly.
In the past, Tesla missed its part-sharing goals, production and sales targets.
Its Model X was supposed to share a majority of its parts with Tesla’s Model S, but it only wound up sharing around 30 percent after Musk originally planned for 60 percent.
Pricing of the Model is a key consideration for investors. Bernstein senior technology research analyst Toni Sacconaghi wrote in a note ahead of the Model Y debut, “We’d expect the initial price to be around $ 55,000. This will be key to manage against cannibalization.” He also said that longer-term, the Model Y could enjoy higher gross margins than Tesla’s Model 3, a car that the company intended to offer for an accessible price, aiming to bring electric vehicles to the masses.
Tesla previously said it would most likely manufacture the Model Y at Gigafactory 1, its sprawling battery plant outside of Reno, Nevada.
This story is developing.