This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Here's Why the Model X Will Be Bigger Than the Model S

Updated from 11:13 a.m. to include thoughts from Morgan Stanley analyst in the fourth paragraph.

NEW YORK (TheStreet) -- Tesla Motors (TSLA - Get Report) future lies in its ability to meet demand for the Model S, the Model X and ultimately what comes after it. If Elon Musk has his way, the Model X will be bigger than the Model S.

In Tesla's shareholder letter, the company noted it expects "to have production design Model X prototypes on the road by end of year and begin volume deliveries to customers in the spring of 2015."

During the conference call, Musk noted that while Tesla has done no advertising for the Model X, reservations for the upcoming sports-utility-vehicle have been staggering, equating it to like fish jumping in the boat.

Morgan Stanley analyst Adam Jonas noted it was surprising how strong the reservation balance Tesla provided was, due largely to the Model X. "We agree with Tesla management that demand for the Model X could materially surpass that of the Model S," Jonas wrote in a note. The surprisingly strong $160m reservation balance was driven in large part by pre orders for the X."

An early view of the Model X prototype.

Must Read: Tesla, Elon Musk and the Gigafactory: What Wall Street's Saying

"I think the biggest thing we can attribute that sort of growth to is that the Model X demand is very high," Musk said on the call. "But there's a number -- obviously, we don't disclose it, but even though there's 0 marketing for the Model X -- essentially, it's like if you're going fishing, it's like the fish are jumping in the boat. We're not actually trying to sell the Model X at all, but demand seems to be remarkably high. And we're seeing a steady accumulation of Model X deposits."

The Model X is going to be huge for the company, as it moves from just selling a premium luxury sedan, to become a full fledged automaker, and potentially more with its planned giga-factory. Later in the call, Musk noted the X could be bigger than the S, which is astounding considering it's possible the X could wind up costing more than the S, well all options are added. "[I]n relative terms, it appears that the X will see at least as much a demand as the S," Musk said. "And if I was to guess, and this is just a guess, I think the X demand may exceed the S demand. I mean, this is very speculative, so don't hold me to it, but that's my best guess. I think X demand will exceed S demand."

It's a little concerning that Tesla has pushed back delivery of the Model X, as JPMorgan analyst Ryan Brinkman noted in a research report ("TSLA updated that its Model X is not expected to launch until the spring of 2015 (vs. earlier guidance for early 2014, which had slipped most recently to late 2014)." However, Musk is a perfectionist, and keeps tinkering with the design, noting he's making subtle changes to the design of the SUV, to get it just right.

Aside from the incredible demand already seen for the Model X, it's possible the new truck could have better gross margins than the Model S, something that's a concern. I referenced Tesla's gross margins, excluding Zero Emission Vehicle (ZEV) credits in my spot on CNBC earlier today.

With the Model X, it looks like Tesla has another hit on its hands, before it's even out. Now, all it has to do is just make the damn thing.

--Written by Chris Ciaccia in New York

>Contact by Email.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
TSLA $154.71 -12.00%
AAPL $94.02 0.00%
FB $104.07 0.00%
GOOG $683.57 0.00%
YHOO $27.97 0.00%


Chart of I:DJI
DOW 16,204.97 -211.61 -1.29%
S&P 500 1,880.05 -35.40 -1.85%
NASDAQ 4,363.1440 -146.4150 -3.25%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs