Wednesday, October 14, 2015

Is The Model X Telsa's First Big Mistake?

The Model X is now finally in production and is shipping. People seem to love it. It's an amazing vehicle and a technological marvel. But did Tesla miss the boat on this one? Is this Tesla's first big mistake? I think it very well could be.

The first thing to note is the price. The Signature Series, which is fully loaded, checks in at $132,000. The low end, non-performance base model is going be about $93,000. Final details haven't been announced, but Musk has tweeted it will be about $5,000 more than a Model S, which is $88,000.

Musk has also said that they might have over-designed the car:

I’m not sure anyone should really make this car. There are far more things there than is needed to sell it.
 All that technology is awesome and makes one hell of a car, but it also drives the price way up.

Another possible misstep is the middle row of seats - they don't fold down. In February 2012, Musk presented the Model X to the world and said "All the seats fold down. You can practically fit a queen size bed in there." Except, now in the final production model, they don't. This cuts down on the amount of cargo that can be put in the car. To be sure, it can still hold a large amount of stuff, especially when you consider the Model X also as a frunk, like the Model S. But the inability to fold down the middle row of seats means you may have a hard time doing something like putting a bicycle in the back. Or a queen size mattress. People have cancelled their purchases because of this. Being able to haul large items like this is what many people want in an SUV.

There is no trailer hitch, so don't think about towing anything unless you add an after-market hitch. (Tesla has said a towing package will be offered in 2016.)

Given these issues, some internet commenters are saying the Model X isn't really an SUV - it's a minivan. I find it hard to disagree.

Almost all of the reviews I have read say the car handles really well. "Just like a Model S" is a common phrase running through almost every review. This exposes another problem: I think most Tesla cars will end up handling very similar to each other. The battery packs will give all models a low center of gravity and thus, great cornering and handling. The electric motor will give them crazy acceleration. So what's left to differentiate the models? Battery range, body style and features. This may be why Elon put so many gizmos into the Model X, but, as I mentioned, this raises the price.

The high price is causing concerns for investors. I don't see how another uber-expensive car is going to help Tesla grow. The Model X doesn't really open up new markets for the company. They are still only going to be able to be purchased by people who can afford a $100,000+ vehicle and there aren't too many of those people around these days. Yes, Tesla has a backlog of some 25,000 orders to fill. But remember that these reservations were placed starting way back in 2012, so it represents three years of pent-up sales. Once that backlog is worked through, I'm not sure what kind of yearly sales will materialize.

After reading Musk's biography, I believe he is driven to achieve perfection. That's great for producing fantastic vehicles and pushing the industry forward, but not so good for producing low cost vehicles. I honestly don't see how Musk can create a Model 3 in the $35,000 price range. I am predicting that will end up costing closer to $50,000.


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