Tesla Motors Inc (TSLA) Model X Shambles Sets Model 3 Scheme

Elon Musk Tesla Motors Inc (TSLA) and SolarCity Corp (SCTY)

Tesla Motors Inc still hasn’t shipped the Model X. The EV SUV was revealed for the first time at an event on September 29. It’s been over a month since the launch, and the car has still only reached a handful of people that are closely connected to the firm. That’s not exactly compelling people to buy stock ahead of Tuesday’s earnings, and there may be more shocks on the horizon.

Elon Musk Tesla Motors Inc earnings

There’s a reason that the Model X is so late. Elon Musk has been warning for months that the EV SUV is the “hardest car in the world to build.” Right after the launch, which turned out to be a bit of a facade, Elon Musk said that the firm had likely put too much new tech into the Model X, and that it might be considered an error. That’s nothing compared to what Tesla Motors CTO JB Straubel has been saying about the Model 3.

Move over Model X, it’s Model 3 time

In a speech given at the University of Reno in Nevada Mr. Straubel said that the Tesla Motors Model 3 would include “new motor technology, new battery technology, inventing new platform and new structure technology.” That’s not exactly what those with cash behind the firm were looking for after the delays in the Model X, and it may add more weight to the firm’s forecasts going forward.


The Model X launch was, and still is, rife with the sort of problems that Wall Street wants to see Tesla Motors put an end to. The car was delayed for more than two years as a result of changes in business strategy. While the delay dragged on, the design was tweaked. That made it harder and harder to build.

Now we’re left with a “sculptural” Model X that only exists inside PC monitors for most people. It will be months before Tesla Motors ships the first couple of thousand Signature editions of the car. It’s clear that the firm would like to complete that before Christmas, but those with very early orders still haven’t heard when their Model X will arrive.

It will be some time after that, more than likely, before the Model X will be available to test drive at Tesla Motors stores across the country. The importance of the Model X delay can be discounted, and it often is. Those with shares in Tesla Motors have more to worry about, and near term issues aren’t taken seriously for the most part.

Tesla Motors gets a pass

Those who are bullish on Tesla Motors  shares are working off of a specific set of assumptions. The most important of these is the firm’s targets. The only important one, to long term investors at least, is the 500,000 per year shipments that Elon Musk has promised for 2020.

If the Model S and Model X production lines are up and running at full capacity they will, if Elon Musk is right, account for about 100,000 units per year. The other 400,000 is set to be made up of units of the Tesla Motors Model 3. That’s a lot of pressure for a car that won’t appear for another two years, using Mr. Musk’s likely generous timeline.

Given that it’s the most important thing on Tesla Motors’ list and, in terms of share value at least, it’s what the entire Tesla project so far has been leading up to.

Tesla Motors will run out of room

That 500,000 per year number is off immense importance. It’s what Tesla Motors bulls tend to measure the success or failure of the firm’s actions today off of. If Tesla is losing money it doesn’t matter, because it’s investing in infrastructure, usually the Gigafactory and the Supercharger network, that will allow it to sell that many cars by the end of the decade.

That sounds like the right sort of line to take when putting money behind a firm like Tesla Motors. In order to buy shares in the EV maker in the first place, you must be aware of the huge risks. If you’re comfortable backing the firm after taking those risks into account, it’s likely better to focus on the long term, like Elon Musk, and leave short term fluctuations to the day traders.

The long term is, however, fixed on that 2020 number. JB Straubel’s latest ideas on the process to build the Model 3, something he said that most of the design staff at Tesla Motors are working on right now, is a little bit scary in light of the Model X mishaps.

It’s that deadline that all decisions made right now are leading up to, and it’s only facts that seem to get in the way of the design and rollout of the Model 3 that will likely scar the shares in the coming months.

Waiting for the Model X, and the Model 3

Tesla Motors said that it would show the world the design concept for the Model 3 for the first time in the early part of next year. Wall Street will be waiting to see if it shares anything like the complexity of the Model X, and whether building such a car on the Tesla Motors timeline is at all possible, or likely.

Elon Musk says that his firm plans to start selling the Model 3 for the first time in 2017. That may be a little optimistic. Tesla Motors is not known for hitting deadlines, and if it hasn’t learned the lessons that the Model X was supposed to teach, namely that sometimes simpler is better, that date could be driven further back.

Tesla Motors will release its earnings numbers for the three months through September on Tuesday October 3. Among the questions we’re like to hear quite a bit about the Model X. Everybody is wondering why the car has been delayed, and how long we can expect to wait before production is ramped up.

Elon Musk said, on the firm’s last earnings call, that the Model X would likely ramp up to mass production late in the fourth quarter. With one third of the fourth quarter gone, and the holiday season coming in hard and fast, it’s hard to see how Tesla Motors  will have time to fit that in before the end of the year.

The Model X delay will likely be at the fore on Tuesday, but worries about the Model 3 are sure to become more important as we head toward the supposed release date of the mass market Tesla. With all the new tech the firm wants to add to the car, it’s hard to see how margins are going to be kept high, even if the firm does manage to bring it to market on time.

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