Tesla Motors recently unveiled a few more details about the Model X and delivered a handful of the crossovers to insiders, which you might think would spur demand for the crossover vehicle. However, analysts from one firm have found an interesting trend: it looks like Model X demand is soft but that demand for the Model S is picking up.

Tesla Model X Fueling Increase In Model S Demand?

No showroom models of Model X

It seems likely that Tesla delivered the first Model X SUVs as a show for investors due to the multiple delays in the release of the vehicle and the fact that the first vehicles went to management and board members. Interestingly, it looks like the automaker decided to deliver those vehicles to management rather than ship them to its sales centers in the U.S.

Pacific Crest Securities analyst Brad Erickson ran some checks of Tesla’s showrooms and found a lack of showroom models. He added that the sales centers he checked with haven’t taken many orders for the Model X, and he believes that about 50% of the people who have reserved a Model X already own a Model S.

Combatting weakness in the Model X

The analyst believes that in order to overcome softness in demand for the Model X, Tesla must deliver more test drive-ready showroom models to its sales centers. Erickson doesn’t think this will happen until after the end of the year. Of course the move to deliver the first Model X crossovers to insiders rather than as vehicles for test drivers could also be an indication that Tesla is concerned about its production capabilities.

By holding back on showroom models, perhaps management is intending to keep demand soft for now until they can ramp production. The Model X is currently being made on the same production line as the Model S, and there have been reports that the complexity of the vehicle is limiting the number of it that Tesla is able to make per week.

As a result, it’s possible that management wants to simply delay demand for it. Also they emphasized even before the Model X deliveries that Tesla is production constrained rather than demand constrained.

Tesla sees higher Model S demand

Interestingly, Erickson thinks demand for the Model S has risen since the Model X deliveries. He cited comments from management and also his own checks, adding that he’s seeing “multiple demand tailwinds.” He said some people who were waiting to see the Model X be launched have since then ordered a Model S.

His checks also suggest that some of the people who canceled their orders for the Model X have ordered a Model S instead. This second bit of news is particularly good as analysts from multiple firms have wondered whether the higher than expected price of the Model X will spur a rash of cancellations. The only question now is how many cancellations are translating into orders for the Model S instead.

Tesla still struggling to make deliveries

The Pacific Crest analyst also said the increased demand for the Model S is “encouraging, but also critical.” His checks suggest that Tesla has not reduced the wait time between an order and delivery of the Model S, although the lead time is less than two months now, which he calls “relatively short.” He says this is “generally good” and that it suggests Tesla will produce and deliver more Model S sedans in the fourth quarter.

Analysts from most firms see it as being unlikely that Tesla will meet delivery guidance for the fourth quarter. Erickson is estimating that Tesla is able to increase production 40% sequentially and that production of the Model S must rise by about 22% quarter over quarter. He also estimates that Tesla must delivery 2,500 Model X’s in the fourth quarter.

Not a good time to own Tesla stock?

Overall, the analyst sees Tesla as “innovative” but doesn’t think this is a good time to own the automaker’s stock. He does think the automaker is the “leading innovator” in the space but notes that expectations remain high while sentiment has fallen.

He is also concerned about the weak start to Model X reservations. Erickson currently has a Sector Weight rating on Tesla but might move from the sidelines next year if management demonstrates solid execution and improves gross margins. He also sees the Model 3 and the gigafactory as being potential catalysts for the company but thinks it’s necessary “to get through these first few quarters of Model X ramping up before fundamentals can start to show enough improvement to warrant a higher valuation.”

As of noon Eastern, shares of Tesla Motors were up 0.05% at $216.98 per share.