Tesla launched its long-awaited Model X SUV this week to great fanfare in the San Francisco Bay Area.
The launch was a big success, well attended by Tesla owners, fans, and the media.
But along the way, Tesla CEO Elon Musk admitted that the Model X’s advanced technology caused major delays.
Musk had already claimed that the Model X was “the most difficult car in the world to build.”
But at the launch, he went further.
“I’m not sure anyone should have made this car,” he said at a press conference just hours before the first Model Xs were delivered to VIP customers.
“We probably should have just [modified the Model S],” he added. “There are so many more features and difficult to build parts on [the Model X] than it is necessary for us to sell the cars.”
Generally, Musk spoke proudly of the technological advancements his company has made in the design and construction of the car.
The Silicon Valley tycoon boasted of the crossover’s intuitive automatic doors, futuristic “falcon wing” back doors, panoramic windshield, an air-filtration system with a “bioweapon defense mode,” and incredible performance.
I had the opportunity to test drive a production Model X P90D and found the blend of performance, luxury, and futuristic tech to be a compelling package. But even without all of the futuristic bells and whistles, the Tesla’s powertrain – capable of a claimed 3.2-second 0-60 time in “Ludicrous Mode” with 250 miles of range – and versatile crossover design would be impressive enough to sell the car.
Instead, Tesla created an insanely complex car. Built-in ultrasonic sensors just to keep the falcon wing doors from dinging nearby cars. A triple-layer-carbon air filter can virtually eliminate all bacteria from the cabin. Then there’s the panoramic windshield that features what the company claims to be the largest single piece of glass ever installed on a car.
- REUTERS/Stephen Lam
And now they have to build the cars. A lot of them. In a hurry.
According to Musk, it’ll take the company at least 8 to 12 months just to clear that the 25,000 order Model X backlog.
This is a significant problem for Tesla to solve, especially because the Model X was delayed several years and has arrived with a steep price tag (Musk has said that subsequent trim levels will be cheaper than the top-level P90D’s $132,000).
The company has long said it wants to build 500,o00 a year by 2020. But with production of the Model S in full swing and the production of the Model X ramping up, Tesla is expected to produce just 50,000 to 55,000 cars this year. The complexity of the Model X could slow down the production process.
“The initial production run has been very difficult,” Musk said. “Ninety percent of parts for the X are fine, 9% are difficult to deal with, and the final 1% is excruciating.”
Tesla needs to work the kinks out of its future production goals for the X if it wants the vehicle to be rolling as many, or more, Model X’s off the assembly line as Model S’s.
In its previous life, Tesla’s factory was operated by NUMMI – a joint venture between General Motors and Toyota. At its peak, the facility built roughly half a million cars a year.
- Benjamin Zhang/Business Insider
Thus far, Tesla has been able to build all the cars it said it would. (It’s experienced delays with delivering them.) But its production process is a long way from that 500,000-per-year goal. This is why the Model X is critical: It sets the stage for Tesla to launch the Model 3, its mass-market car. The Model X and Model S, in some versions, sell for over $100,000. The Model 3 – the design will be revealed in early 2016, and the car is slated to launch in 2017 – could sell for $35,000.
Building and selling large numbers of the Model S and especially Model X is a key way for Tesla to fill its coffers enough to go ahead with the Model 3.
“The Model X allows us to double our addressable market,” Musk told Business Insider. “The S and X serve as the revenue foundation for the Model 3.”
Thousands of owners were invited to Tesla’s launch party, and it’s fair to assume that they’ll remain unflinching in their enthusiasm for the brand. Future Model X owners have had their patience tested, but it’s unlikely that they’ll bail out on their orders, even after waiting years and putting down thousands of dollars in deposits.
It remains to be seen how patient new Model X customers will be. Musk has said a number of times that Tesla doesn’t want to stoke excessive demand because he doesn’t want owners to have to wait on their cars. But the challenge now is that Tesla needs to start increasing demand to spur production, generating the revenue necessary to fund Model 3 development.
In retrospect, maybe Tesla shouldn’t have made the Model X quite so good. After all, the annals of automotive history are littered with failed car companies that built brilliantly engineered cars but couldn’t make enough money to stay afloat.
But what Tesla has going for it is that it does make fantastic cars, and its customers have an almost unshakable faith in Musk. Building cars isn’t rocket science, but it also isn’t exactly simple. Tesla’s mass-market competitors have had 100 years to figure out how to do it effectively.
Tesla will have to crack this nut in a much shorter time span. Then again, Musk is a guy who has made rocket science look easy.