"We put too many new features and technology -- too many great things all at once into a product," said Tesla (NASDAQ:TSLA) CEO Elon Musk during the company's most recent earnings call when he was discussing the Model X SUV. "The net result, however, is that the Model X is an amazing car," he said later. But he noted Tesla wouldn't go so far if it were to do it again.
This isn't the first time Musk has suggested the company may have overengineered the vehicle. He's talked like this several times. But what if the overengineering wasn't that at all in light of the impact the flashy vehicle could potentially have on demand for the company's upcoming Model 3? More specifically, could Tesla's double-hinged falcon wing doors end up turning into the ultimate marketing tool?
What happens when you put a Model X in a mall?
Tesla's Model X falcon wing doors, which open with a custom arch each time depending on their surroundings, are unquestionably flashy. And it seems the company may be delivering some of these new SUVs to Tesla stores just in time for the March 31 unveiling of the Model 3, which is also when preorders will start for its most affordable vehicle.
"We are making more Model X vehicles available at our stores for viewing and test drives in the weeks to come," Tesla said in its fourth-quarter shareholder letter published on Feb. 10.
While the timing mentioned in the letter wasn't specific, the reference to "weeks" instead of "months" implies Model X could begin rolling out to Tesla stores before the unveiling its Model 3 at the end of March.
The Model X could play a key role in accelerating demand for Model 3. Whether Tesla intended it or not, the falcon wing doors on the Model X will likely generate far more foot traffic to Tesla stores, which are located in high-foot-traffic locations such as malls, than the Model S did. And with the more affordable Model 3 available for preorder at the end of March, Tesla could actually turn a lot of these shoppers into customers.
A changing story
Before Model 3, Tesla didn't need any additional foot traffic in its stores. After all, the majority of shoppers probably weren't interested in buying vehicles starting at $70,000. But it's a different story with the Model 3 reveal around the corner. The Model 3 is Tesla's first step in transitioning from a company expecting to sell 80,000 to 90,000 cars this year to one that is striving to sell as many as 500,000 vehicles per year by 2020. And the Model 3 starts at half the price of its current models.
If the Model X, along with its flashy falcon wing doors and its extra features like auto presenting doors and the world's largest front windshield, really does serve as a key catalyst for Model 3 generation, then maybe it wasn't overengineered after all.
Tesla will unveil its Model 3, which starts at $35,000, on March 31. Customers will be able to reserve their order by putting down a $1,000 deposit, well below the $2,500 and $5,000 deposits required for Tesla's Model S and X. The company plans to begin production of the vehicle in late 2017.
Investors will be watching the Model 3 and anything Tesla says about the demand for the vehicle closely.