It's difficult to overstate how important electric-car maker Tesla Motors' (NASDAQ:TSLA) upcoming launch of its Model X sport utility vehicle is to the company's success. With Model X, Tesla effectively intends to double its revenue, which is currently entirely dependent on sales of its $75,000-plus Model S. But before Tesla reaches this point, it's going to have to actually bring the vehicle to market and significantly ramp up sales.
Model X launch
In the most recent update on the timeline for Model X, Tesla CEO Elon Musk said the company plans to let customers with pre-orders begin to configure their vehicle's specs in July. The first deliveries to customers, he said, will begin in September.
Customers and investors, however, have good reason to be skeptical of Tesla's timeline for Model X launch. The vehicle was originally planned to launch much sooner, with management initially targeting 2013 for the first year for deliveries. The vehicle's launch has been delayed multiple times since.
Model X deliveries
What about Model X deliveries? More specifically, how many vehicles will the company ship this year?
With more than 20,000 deposit-backed orders, demand for the SUV this year shouldn't be a problem. So, Tesla's ability to deliver vehicles will depend entirely on the company's ability to ramp up production of the new vehicle. Musk seemed to suggest during the first-quarter earnings call that if things go well, the addition of Model X could help Tesla double its quarterly deliveries in the fourth quarter compared to the other quarters in 2015.
"[W]e do expect to see a significant ramp in Q4 for the X and have something that may be as much [as] 2X other quarters in Q4," Musk said.
Piecing this comment together with Tesla's prediction for total 2015 Model S sales to increase by 50% in 2015, management may expect annual sales to pan out something like the chart below.
To reach the big Q4 estimated Model S and Model X sales combined of 23,000, as seen in the chart above, Tesla would, indeed, need a "significant ramp" in Model X sales -- probably about 9,000 in Q4 --- to help it hit a point where its fourth quarter deliveries are about two times its deliveries in other quarters in 2015. To illustrate how significant this ramp is, compare this figure to the 2,400 Model S delivered during the car's first full quarter of deliveries in Q4 of 2012. Sure, Tesla has ramped up its production capacity and gained crucial manufacturing experience since the launch of Model S, but 9,000 deliveries of this falcon-winged SUV would still be quite a feat.
Investors should note that even Musk acknowledges the wide range of possible outcomes for Model X deliveries in Q4.
"But because that production ramp just scales exponentially, depending upon where that exponential curve falls across a quarterly boundary, [the actual production ramp] can actually make quite a significant effect on the production and deliveries in that quarter," Musk said.
There's little Tesla investors can count on with certainty when it comes to what to expect from Model X launch and deliveries. Sure, the launch is probably coming soon. But when, exactly, the launch will happen, and how significant Tesla's ramp-up in Model X production will be, will depend on a range of uncertain and complex inputs.