Yesterday, Californian automaker Tesla Motors announced its Q3 earnings, recording record deliveries of its now famous Model S electric sedan and a third-quarter profit of $3 million according to non-GAAP methods (and a loss of $74.7 million using GAAP methods, driven by high R&D costs during the quarter).
Among the generally good news that sent shares upwards in after-hours trading however comes the confirmation that Tesla’s upcoming Model X crossover SUV will be delayed again, reaching market for Q3 2015.
A full-size, all-electric crossover SUV which Tesla promises will offer seating for seven, impressive performance and upwards of 250 miles per charge, the Tesla Model X was originally unveiled in February 2012 with a promised launch date of December 2013. Shortly after its unveiling however, Tesla noted via an earnings filing with the Securities & Exchanges Commission that it would be pushing its planned Model X launch date back to December 2014. Despite Tesla holding onto that hope for some time, it confirmed in February this year that the Model X launch date would be nearer to March 2015.
Yesterday’s announcement of yet another Model X delay — this time in the official Q3 shareholder letter to investors — Tesla Motors [NASDAQ:TSLA] CEO Elon Musk admitted that the desire to ensure high quality in the Model X was the reason for the delay. Pushing the Model X launch back one quarter, it argued, would ensure that the company’s reputations would not be tarnished.
“Being unable to increase production fast enough, not lack of demand, is a fair criticism of Tesla,” the statement read. “This also is a legitimate criticism of Tesla – we prefer to forgo revenue, rather than bring a product to market that does not delight customers. Doing so negatively affects the short term, but positively affects the long term. There are many other companies that do not follow this philosophy that may be a more attractive home for investor capital. Tesla is not going to change.”
As we pointed out last month when Adam Jonas, a financial analyst from Morgan Stanley correctly predicted the 2015 Model X would be delayed, Tesla Motors has a huge set of commitments that it is currently trying to manage. In addition to readying the Tesla Model X for production, it is also working hard to bring its first lithium-ion manufacturing and reprocessing Gigafactory on line in the next two to three years, developing autonomous drive technology for all its vehicles, and bringing the recently-announced Dual-Motor Tesla Model S option to market by the end of February next year.
And that’s before we even consider design work on the first prototype of the Tesla Model ≡, which Tesla said will enter production in three-years’ time.
These challenges would be no small feat for a mainstream automaker like Nissan or GM, both of whom have revenues and resources that are several orders of magnitude larger than Tesla. They are practically unheard of for a company of Tesla’s size.
The reason behind the Model X delay is presumed to be the Model X’s trademark Falcon Wing second-row doors. Unlike conventional doors, these lift up in a similar way to gull-wing doors, but fold in the middle to aid operation in tight spaces. As Musk admitted himself earlier this year, the mechanics of the Falcon Wing doors has proven itself a challenge for Tesla, particularly when it comes to ensuring an airtight, watertight seal between the door and the car body.
“Making one of something is quite easy, making lots of something that will last a long time is quite hard,” Musk said of the Model X. “You have issues that are 1 out of 100 he says, but until you’ve made 100 you don’t necessarily see it. They are focused on doing that with Model X. “I do think the X is going to be something quite special but it’s hard to engineer and hard to produce.”
Other automotive experts postulate that the Model X’s all-electric range — promised by Tesla to be close to that of the Tesla Model S on which it is based — is proving tough to achieve given the Model X’s larger frontal area and we presume, heavier frame. While Tesla has not confirmed this publicly, we’d guess that Tesla is facing a technical challenge to meet its promised range.
Yet despite the delay to its Model X launch and one-month shut-down in production at its Fremont factory to ready the production lines for the Model X, the rest of Tesla’s Q3 report makes for positive reading. In short — save for a consequential drop in predicted production output for 2014 caused by the aforementioned plant shut-down — the news from the Silicon Bay automaker is good.
Are you a Tesla Model X shareholder? Are you pleased or disappointed by the Tesla Q3 earnings? Or perhaps you’re a Tesla Model X reservation holder frustrated to hear there’s yet another delay in your car? Are you prepared to wait, or have you now got second thoughts about ordering the crossover SUV?
Leave your thoughts in the Comments below.
You can also support us directly as a monthly supporting member by visiting Patreon.com.