Tesla Motors, Inc.'s Model X: Sales to Surpass Model S?

While Tesla Motors (NASDAQ: TSLA  ) has been ramping up production and sales of its Model S and expanding its international footprint, it's also been working on extensive development work for its next vehicle: the all-electric Model X crossover. More recently, however, Tesla has probably been putting the final touches on the model, because production design prototypes will soon begin making their way through Tesla's production line, the company says.

Model X pictured next to the Model S. Image source: Tesla Motors.

Retooling for success
Last week, despite severe supply limitations and all the demand the company could desire despite spending no money on advertising, Tesla's factory went on pause.

Hail the Model X. Tesla is retooling the factory to boost capacity for production for the Model S and to make way for Tesla's next big thing.

Tesla spokeswoman Alexis Georgeson explained: 

This week, we started a two-week pause in production at our factory in Fremont to expand capacity, supporting immediate increased production of Model S and the introduction of Model X. The effort will increase production capacity from 800 to 1,000 vehicles per week by the end of 2014. Regular production will recommence by August 4.

The next major step in Model X production should come in early 2015, when Tesla said it will begin producing models for customers.

Image source: Tesla Motors.

The Model X reservation line, which requires a $5,000 deposit, has reached figures exceeding 11,000 -- so Tesla has its work cut out for it. Notably, 11,000 vehicles is about 4,000 more than Tesla has delivered in any single quarter.

The Model X will mark Tesla's first all-wheel-drive vehicle, enabled by dual motors. The SUV will race to 60 mph in less than 5 seconds, Tesla says. The Model X will be priced comparably to the Model S -- perhaps just a few thousand dollars more than the luxury sedan if Musk holds true to comments he has made.

More potential than you may expect
Crossovers and SUVs are becoming increasingly popular, and Tesla plans to bank on this trend. In fact, a new report from IHS Automotive asserts that combined SUV and crossover sales have overtaken sedans in the United States. This category accounted for 36.5% of new-vehicle registrations in the U.S. from the beginning of the year to May, IHS reports. This figure compares with 35.4% for sedans.

Tesla is expecting a similar trend. In the 2013 fourth-quarter letter to shareholders, Tesla CEO Elon Musk gave investors a glimpse of the Model X demand it is planning for.

[T]he Model X demand is very high. ... Even though there is zero marketing for the Model X ... demand seems to be remarkably high. ... In relative terms, it appears that the X will see at least as much as demand as the S. And if I were to guess -- and this is just a guess -- I think the X demand will exceed S demand. ... That's my best guess.

But just because Tesla has considerable demand for the Model X, and Tesla is finally bringing it to market, doesn't mean Tesla is about to outperform expectations. This stock has some incredibly bullish assumptions priced into it. So investors should consider expert execution on the Model X as a requirement, not as a catalyst for the stock.

Model S. 

The only area Tesla really has room to surprise with the Model X, at this point, is with the final design or surprise features that make it to the final version of the crossover.

With production prototypes about to be built, Tesla may finally take the wraps off the production version of the Model X in the next few months. Tesla said in the 2014 annual shareholder meeting that the production version of the X looks better than the design on its website today.

Risk-free for 30 days: The Motley Fool's flagship service
Tom and David Gardner founded The Motley Fool over 20 years ago with the goal of helping the world invest ... better. Their flagship service, Stock Advisor, has helped thousands of investors take control of their financial lives and beat the market. Click here to sign up today.


Read/Post Comments (10) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 27, 2014, at 3:38 AM, deeageaux wrote:

    Unlike some of the legacy automakers that have a SUV/CUV/and minivan Tesla will only have this one vehicle. So I do expect Model X to outsell the Model S.

  • Report this Comment On July 27, 2014, at 10:14 AM, fpl1954 wrote:

    Tesla does have advertising. Check the video on the website. The X is very well presented. I'd love to have one, but first I need to be able to drive it. So far, not feasible where I live.

  • Report this Comment On July 27, 2014, at 11:14 AM, Carfan79 wrote:

    Um, there are 18,378 reservations for the Model X, not 11,000.

    http://www.teslamotorsclub.com/showthread.php/7535-Model-X-T...

  • Report this Comment On July 27, 2014, at 11:44 AM, Ustauber wrote:

    ThxTSLA from Belmont,Ca

  • Report this Comment On July 27, 2014, at 12:37 PM, TMFDanielSparks wrote:

    @carfan79,

    Thanks for the update.

    The 11,000 figure was meant to be conservative. That's why I said "figures exceeding 11,000." Since we don't have any official statement from Tesla on total reservations, and many Model S buyers reportedly reserve a Model X and then transfer that deposit to a Model S to get the extra amount other than the $2,500 deposit required for the Model S on the credit card, and some buyers withdraw their deposits entirely, I like to be very conservative.

    Though 18,000 reservations drives home the point all the more :).

    Thanks again!

  • Report this Comment On July 27, 2014, at 4:52 PM, dannystrong wrote:

    Oh good, the Fool is acting as the Tesla publicity department again. 18,000 Model X sales would make Tesla's vehicle the 59th best selling SUV in the united states. That would be six percent of Honda CR-V sales, or of Ford Escape sales. 18,000 Model X's would be 0.4 percent of all suvs sold in the US (if they managed 30,000 - yeah, sure - they would leap to... 47th.) Just a little perspective.

  • Report this Comment On July 27, 2014, at 7:56 PM, haid1 wrote:

    dannysweak, that is 18,000 orders before anyone has driven or seen the vehicle. No other SUV manufacturer can claim anything comparable. Try comparing apples with apples next time.

  • Report this Comment On July 28, 2014, at 8:59 AM, TMFDanielSparks wrote:

    @dannystrong, how about among comparably priced SUVs in the U.S.?

  • Report this Comment On July 29, 2014, at 2:32 AM, peteroo wrote:

    IMO, The Model X will be a huge success for Tesla. Porsche is a similar auto company to Tesla, and both manufacture prestige, performance automobiles. In 2013, Porsche’s production was as follows: 13% Panamera (a competitor to Model S), 16% Boxster-Cayman, 18% for the 911, and … 53% for Cayenne. Who knew Porsche is now a SUV maker, not a sports car company! The SUV % will probably rise in future years with the arrival of the smaller Macan.

    I have owned 7 SUVs and worked for 3 auto dealerships (Jeep, BMW, Porsche-Audi). From my experience, every SUV owner says the following:

    1. I love my SUV

    2. I love my SUV but it gets lousy gas mileage.

    3. I love my SUV but it has an appetite for brakes.

    The Model X will solve #s 2 and 3.

  • Report this Comment On July 29, 2014, at 9:25 AM, Bert1987 wrote:

    If Tesla is retooling their factory with the goal of 1000 cars per week, does that mean there is enough battery supply from panasonic?

    If there is enough battery supply, does that mean that Panasonic is also quickly ramping up battery supply?

    I'm just wondering which is the bottleneck: the factory or the battery supply

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3045540, ~/Articles/ArticleHandler.aspx, 10/22/2014 10:32:51 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement