"Preparations for Model Y production in Fremont began in Q2," Musk confirmed. The Model Y will also have a major advantage over Model 3, as Musk believes it will be more profitable than the electric sedan. Due to a significant overlap of components between Model 3 and Model Y, we are able to leverage existing manufacturing designs in the development of Model Y production facilities, "Musk said. "Additionally, we are making progress in managing the Model Y cost with only a minimal cost premium expected over Model 3." Musk also cited the high demand for SUVs and higher sales prices as the reasons why the Model Y will be a more profitable product than the Model 3.