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Coming September 29: Tesla's Model X -- Why It's Critical

By Daniel Sparks - Sep 3, 2015 at 1:40PM

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Tesla wants to prove its not a one-hit wonder. Can the Model X take Tesla to the next level?

Electric-car maker Tesla Motors (TSLA -6.80%) is sticking to its most recent timeline shared with investors for its Model X launch. Promising it would deliver a "small number" of Model X units by the end of the third quarter, Tesla has now started taking orders for the vehicle and has set a specific date for first deliveries: September 29.

The Model X is a crucial step in the company's big-picture plan to grow its business. Here's why.

It's a huge bet
Tesla isn't taking preparations for Model X production lightly. The CEO said on Instagram that it's just launched Production Line 2, which will initially produce only Model X and commands 542 robots. This far surpasses the roughly 130 robots used for the Model S production line before the first sedan was delivered. Musk also noted on Instagram that the line's central assembly point will host 15 robots operating simultaneously. This investment in an army or robots highlights the seriousness of the production line for Model X.

Model X at central assembly point on Tesla's "Production Line 2." Image source: Tesla Motors.

How big is the bet, exactly? As long as the orders keep coming in, planned production capacity is enough to at least double Tesla's current sales. This is why the company said in its second-quarter letter to shareholders it was "highly confident of a steady state production and demand of 1,600 to 1,800 vehicles per week combined for Model S and Model X." Pairing this with Musk's prediction during the company's second-quarter earnings call that Model X will represent slightly more than half of this weekly rate, the company is, therefore, expecting about 11,000-plus Model X sales a quarter once production ramps up. This is right around where Model S deliveries are today.

It will make or break investor confidence
Today, Tesla could appear to some as a one-hit wonder. But with the Model X, Tesla aims to show the world it can execute exceptionally at each major step in its plan to build a large automobile business.

While Tesla has launched two cars so far, the company's Model S sedan was its first clear attempt to outdo comparably priced gas cars. Its Roadster, a sporty two-seater, was simply a proof of concept -- a way to get enough people to believe in Tesla so that the company could move on to producing Model S. The Model S, however, was the real deal -- and it has since been smothered with accolade after accolade.

But can Tesla replicate the success it has had with Model S with its Model X SUV?

Confidence is building already. As Tesla confirms its launch date, and Model X is becoming a reality, the market is reacting positively to the news. There are several possible reasons to account for this optimism.

Model X prototype. Image source: Tesla Motors.

First, the company is achieving more notable functional and technical achievements than ever before. For instance, Tesla is actually following through with its "falcon wing" rear doors -- a significant achievement in design and practicality. Able to open up and then out, the doors offer a number of functional benefits current SUVs lack, including not having to worry about hitting the car next to you, as well as space to actually walk in and out of the vehicle as opposed to hunching over when stepping in or out. Not to mention these flashy doors' undeniable style, backed by approval of over 20,000-plus deposit-backed reservations. Furthermore, the Model X' storage space will downright put available space in every other SUV to shame.

Finally, with Model X's launch so far ahead of any competition in the space, Tesla continues to solidify its first-mover advantage in a proven market for fully electric vehicles with 200-plus miles of range.

Going forward, the two important questions investors will be waiting to get answers to are:

  1. How fast can Tesla ramp up production?
  2. Will the order book grow?

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