Tesla shares are up 55% in the a year ago - and 98% in the last six months - surpassing GM and Ford in market value, despite comparatively miniscule sales and no profits.
It adds the Model Y will also be "a much simpler auto with respect to the electrical systems inside" and "built on an entirely new vehicle architecture platform".
But the company is not without its challenges.
Tesla's reputation as being an industry disruptor is set to grow as it continues to diversify its electric auto range.
The first wave of customers will have only two choices for the mid-market electric vehicle, Musk said: "What color do you want, and what size wheels do you want?" Musk's brother, Kimbal, is a board member.
Tesla opposes the proposal.
But shareholders sided with Tesla, which says its mission requires long-term strategic planning and three-year terms ensure that board members aren't distracted by short-term returns.
Pricing for the Model 3 will start at $35,000, while the most expensive versions should be in the $50,000 to $60,000 range.
Design: The Tesla Model 3 comes with a glass roof windshield, just like Model X. It is designed like a premium sedan and has the look and feel of one. The company's vehicles have often faced delays getting to market. It has faced manufacturing delays with previous models, including the latest Model X SUV which was almost 18 months late. "We made a mistake by trying to drive the Model X from the Model S platform", Musk said at the meeting today.
With BMW developing an all-electric X3, it also only makes sense for Tesla to put something out to compete. Most recently, the company raised $1.4 billion selling stock and convertible bonds.
Tesla hasn't even shown people the public the real Model 3 yet and it's already planning a vehicle to follow. Tesla is also looking to build a new factory, according to Musk, to support the production of the Model Y. That leaves many potential owners miles away from a service center.
The shadowy teaser image depicts a conventionally-shaped vehicle with a hood and swept-back windshield, and the top of what appears to be a new front fascia design.