A previous version of this article said Tesla would only offer the Model X in rear wheel drive, when it will only be in 4 x 4. TheStreet regrets this error.
NEW YORK (TheStreet) –– Tesla Motors' (TSLA) - Get Tesla Inc Report upcoming Model X may blow past both investor and consumer expectations, despite having reinvigorated excitement in the automotive industry with its Model S.
CEO Elon Musk made comments on Tesla's second-quarter earnings call that not only helped propel the Model X into the forefront of investors' and driving enthusiasts minds, but could highlight the earnings power of the company. "So if we -- so it's sort of reasonable to expect that if one has -- just address the demand and then the servicing side of things -- it's reasonable to expect that if we see sort of a comfortable 1,000 unit demand on the sedan side, well, probably we should expect that similar number on the SUV side," Musk said on the call. "My guess is we'll actually see slightly higher on the SUV side. I think the Model X is going to a phenomenal car."
As the Model X goes into production in the Spring of 2015, Musk said he expects the split between the Model X and the Model S to be around 1,000 units a week and, given the strength of the market for SUVs, it could be slightly skewed toward the Model X.
According to data compiled by The Wall Street Journal, the SUV market is picking up. Sales of small SUVs rose 8.5%, while midsize SUVs rose 6.6% year over year, large SUVs rose 25.8%, and luxury SUV sales rose 28%.
Deutsche Bank analyst Rod Lache stated that the market for mid-sized luxury SUV’s (which would include the Model X) "is nearly as large as the market for premium sedans (and in the U.S., the market for SUV’s is actually larger)." Lache estimates that Tesla would be able to sustain strong momentum for both the Model S and the X, "in the 150,000 unit range, 2x our previous assumption."
Tesla said in its July 31 letter to shareholders that it expects to end 2015 with an annualized delivery rate of more than 100,000 units, provided the company "execute[s] well and there are no serious macroeconomic shocks."
Pricing for the Model X has not been announced, according to an emailed statement from Tesla spokesman Liz Jarvis-Shean. However, Morgan Stanley analyst Adam Jonas recently said in a research note he expects the Model X "will have a base starting price around $75,000." At a base price of $75,000, that would skew the Model X toward the luxury end of the SUV market, which has seen the strongest growth year over year.
Currently, there are no Model X vehicles available to test drive, but demand is exceptionally strong, for a sport utility vehicle that's more than six months away. A look on the Model X forum shows that reservations have surpassed 11,000, with many of them coming from both the United States, as well as other areas around the world, including Norway, Switzerland and China, countries where Tesla has or is starting to make a name for itself.
To reserve a Model X, customers must put down a down payment of $5,000, which reserves the right to purchase the vehicle.
On the earnings call, Musk said the car that shown in February of 2012 is an "advanced prototype, is sort of a pre-alpha." The company is currently working on the alpha model itself right now, with a beta version about three months after the alpha testing is done. Road tests and validations for the Model X are expected to be done in the first quarter of next year, with eventual release in the Spring of 2015.
Tesla has had to push back the timeframe for the Model X, with Musk noting that the falcon-wing doors done correctly have been extremely difficult. "What we're aiming for with the Model X is that when you open the falcon-wing door, you have the second row seats were essentially framed and we want that to feel like a work of art," Musk said at Tesla's annual shareholder meeting. "Like if you open up the door it should give us amazing experience. I mean it may sound a bit silly . . . I mean it's just a seat but we want the seat to be like feel like a work of art like something you could have in a museum I mean that's where we're going for with the Model X since bloody hard."
In a research note last week, Morgan Stanley analyst Adam Jonas stated that despite the success, both within the industry and from the consumer of the Model S, the Model X has a chance to surpass that. "If you think the Model S is a good car, just wait until you drive the Model X," Jonas wrote in a the note. "Reservation commentary, forward production and delivery guidance and key balance sheet items (reservation deposits) all point to Tesla’s continued success with just one vehicle line on sale."
Jonas noted Tesla is currently investing four times the amount of capital expenditures and twice as much in R&D spending this year, ahead of the Model X launch as it did ahead of the launch of the Model S, leading analysts to question what Tesla is doing with that spending. On the conference call, Musk noted Tesla may have some aces up its sleeve. "In the past, we've shown all of our cards, so people have kind of gotten used to us showing all of our cards," Musk said, when discussing the capex and R&D spending. "We're not currently showing all our cards."
Not only is Jonas expecting the Model X to be a huge hit, stating, "We’d be disappointed if the Model X did not sweep every major Car of the Year award on offer by the automotive media," but he also expects improvements on the X, not seen in the S. "We look for significant advancements in every measurable area of performance, functionality and safety /autonomy."
According to Tesla's Web site, the Model X will come with two motors, and be offered with an optional All-Wheel Drive, which will it allow it to accelerate from 0 to 60 in less than 5 seconds.
That's comparable to the Model S, which goes from 0 to 60 in 4.2 seconds, using the high-end P85 battery. TheStreettest drove the Model S in 2013, calling it an incredible experience, as Tesla "has been able to redefine what luxury driving should be."
The Model X will come with both 60 kWh and 85 kWh battery models, and will feature a four by four drive train option, as well as a Dual Motor All-Wheel Drive option.
The Model X will offer a third row of seats, and the second row slides forward, making access to the third row easier. By having Falcon Wings, it allows you to stand up as you get in and out, meaning no more bending over when entering and exiting the vehicle.
As with the Model S, the Model X will have what Tesla calls "a stylish combination of premium interior surfaces and panoramic glass."
The Tesla Touchscreen will also be available in the Model X, as it is in the Model S. The touchscreen, which looks like an enormous iPad, offers a wide range of entertainment and information options.
From the dash, you can change the general climate in the car, both for the driver and passenger side. There's also a slew of other features, including opening and closing the optional panoramic sunroof, opening the front trunk as well as offerings of Internet radio (labeled "Media" on the dash), Navigation (featuring Google Maps), surfing the Internet, the rear-view camera and connecting your phone via Bluetooth.
--Written by Chris Ciaccia in New York
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