It has been a dramatically successful few years for the electric car manufacturer Tesla Motors Inc (NASDAQ:TSLA), with the company feeling increasingly emboldened about its prospects both in the United States and East Asia. With Tesla engaging in a publicity stunt this week in which members of its staff drove an electric car from Los Angeles to New York, it is clear that the company has massive ambitions and intent for the future.
But one minor blot on Tesla Motors Inc (NASDAQ:TSLA)’s otherwise flawless complexion has been the delay of a product which has been eagerly anticipated for some time. The Tesla Model X was originally scheduled to enter production in December 2013, yet the company has yet to even confirm publicly when it will be released.
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This has come as something of a surprise, as it was at one time assumed that the company viewed the release of this vehicle as instrumental to its short-term future. Yet the goalposts have apparently shifted on that perception. So the questions that immediately come to mind regarding the Model X are…why haven’t we seen it released yet? Will it be delayed even further? And when can be expect for it to be released?
Model X background
The Tesla Model X is a souped up and update version of the company’s highly popular Model S, which first entered production in mid-2012. Although the Model S has done extremely well for Tesla Motors Inc (NASDAQ:TSLA), and established it as the world’s most successful electric car producer, the Model X is mooted to deliver key improvements over its predecessor. Firstly, it is purported to have a much more spacious interior, and secondly the vehicle will deliver four-wheel drive to ensure that its performance in winter is top notch.
The general consensus of opinion among analysts is that the Model X will be a massive success when it is released. Yet Tesla Motors Inc (NASDAQ:TSLA) has suddenly become reticent about when it will hit the shops. This despite the fact that it was initially unveiled exactly two years ago, in February 2012, with the company even inviting deposits at that time. It is estimated that 10,000 people have in fact put down refundable deposits of $5,000 with the belief that they would receive their shiny new Model X in either late 2013 or early 2014. Yet now the company states that we won’t see it until late 2014 at the earliest, and possibly even later than that.
Model S motivations
There are two fundamental reasons for this apparently risky decision – after all, no business wants to be playing fast and loose with customers’ money – and they are both Model S-related. Firstly, their existing vehicle has sucked up resources in its ongoing support. It would seem that Tesla had underestimated this prospect, and are still working on issues which they would rather resolve before the Model X is released. The most obvious of these is the so-called ‘vampire draw’; the process whereby energy is sucked from the vehicle overnight while it’s sitting doing nothing. Evidently, Tesla Motors Inc (NASDAQ:TSLA) want the Model X to be as energy efficient as possible; an obvious desire for an electric car, after all.
Secondly, the almost unqualified success of the Model S has bought the company time. Economically, it naturally makes sense for Tesla to squeeze every drop of juice out of their existing vehicle when it’s still selling very well and quite frankly the best product of its type on the market. It is almost entirely due to the Model S that Tesla stock has increased under $30 to over $180; thus, there is little incentive for Tesla to rush out the Model X when things are going so well for them. A Model X release that is a genuine game changer could really see their stock blow up. In a good way.
So we know that we’re unlikely to see the Model X until 2015, and at the very earliest it will be released in Q4 of 2014. But could it be delayed further still? This is a definite possibility given that we have seen very little evidence that the Model X has been tested on public roads. There is an existing photograph of a Model X being driven on a public road in Los Angeles, but there is no video footage whatsoever, and as far as we know this is a one-off. Previous motor vehicle releases would tell us that testing vehicles on public roads in demanding climates can take quite some time.
Additionally, Tesla Motors Inc (NASDAQ:TSLA) knows that it is facing increasing competition in this sphere, and it was only days ago that a new Audi electric car was announced. Conventional wisdom might suggest hurrying the Model X out and gaining a head start over the competition, but Tesla may feel that to stand out from the crowd they need something truly outstanding, and thus delay the Model X to ensure that they get it as good as it can possibly be.
So we may see the Tesla Model X released late in this year, or early next year as has been implied. But the fact that Tesla Motors Inc (NASDAQ:TSLA) have kept very quiet on this suggests that maybe they know something we don’t, and the Model X may be delayed further still.