What the Model X Will Do For Tesla Motors?

Tesla Motors (TSLA) recently launched the long awaited Model X finally on Tuesday, 29th Sep 2015. The event included delivering the first six volumes of Model X to a select group of early investors and board members in front of a crowd that comprised of thousands of Tesla customers and fans. The electric SUV is full of luxury, style, power and examples of Tesla’s automobile engineering prowess.

But CEO Elon Musk had to express his regret about the Model X by saying, “I think we got a little carried away with the X. If we had known the true engineering costs and complexity, we would have done fewer things.”

The Features and Price:

The SUV is loaded with engineering feats like “falcon wing” doors that actually sense the other nearby objects and can accordingly either raise straight up or spread out like wings. Further, a HEPA filter is fitted in the front of the vehicle to make the air in the cabin so clean that it can actually filter chemicals from even a biological weapon. Because of the low lying battery, Tesla’s vehicles are already known for their immunity against a roll over and their high scores in crash testing and other safety related tests.

Mr Musk expects the SUV to be the first ever to score a perfect five stars in every such category. He also said “he expects the Model X to get about half its sales from North America and the remainder from the rest of the world and for the SUV to sell as much as the Model S and boost the total annual sales.”

But the result of putting too much of engineering features is that the production process has become complex and slow. As a result the orders placed today could be fulfilled only after 8 to 12 months. This could lead Tesla to revise their annual sales guidance further down while announcing the 3rd quarter results. After the slowness of market throughout the second quarter, Tesla revised its annual guidance to the lower end of the range 50,000 to 55,000 vehicles.

Because of the complexity and features, the manufacturing cost and in turn the market price of Model X also exceeded expectations. Earlier, many estimates priced Model X at around $ 120,000 at most. But now the fully loaded version would actually cost $ 132,000. And with the “ludicrous” mode it will cost $142,000. The current Model X carries a 90 kW-hr battery with a range of 257 miles.

The least expensive Model X will cost about $5,000 more than the Model S, which starts at $75,000. This version will be a lighter one with a battery pack smaller than 90 kW hr. and may be a shorter range.

Impact on the mass market:

So after all, the Model X is not the car for the mass market. It is for the luxury class even more than its predecessor, Model S, is. It is one more example of how the automobile industry can manage without fossil fuels. But it is quite expensive when seen from the utility point of view. And some industry people believe that the future of electric cars belongs to the cheaper, mass-market electric and hybrid cars like the Nissan Leaf, Chevrolet Volt and Ford Focus which are priced at an affordable range of within $30,000 after all the subsidies.

Although Tesla has created its own class among the electric vehicle makers by incorporating the various autonomous features in its “Models”, the mass market doesn’t need them and is not going to pay as much as Tesla is asking for.

In contrast Tesla’s Model 3 which is expected to be launched in 2017 will be in a much more affordable range. $ 35,000 is the price point that is expected for Model 3. At this price, it is very possible that people find it worthy to spend money to own a Tesla. Therefore although Model X is an engineering wonder, it may be unable to drive enough volume at the current price point. May be its lighter version or finally may be Model 3 will prove to be a target achiever for Tesla.

Conclusion

The Model X is positioned in two ways. First, it is the most advanced electric vehicle: high power, great acceleration and great range. The other way is that it’s a luxury SUV. Now, a total of 529, 817 SUVs and crossovers were sold in the US in September, up 30% from September last year. Year to date, this segment has grown 14.6% in the US compared to cars which have shown a negative growth.

Tesla being the leader of EVs, this could lure the others to build electric SUVs and crossovers. This indicates that we are yet to see the fiercest rivalry of EV industry in near future. And Tesla’s real weapon will be Model 3 while Model X will remain an exhibition of Musk’s vision and Tesla’s capabilities.

Published on Oct 16, 2015
By Harsh Singh Chauhan

Copyrighted 2016. Content published with author's permission.

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