What Is Behind Tesla’s Latest Model X Delay?
Building any new car, let alone the game-changer many believe Tesla’s Model X will be, is a process that always involves delays. In that respect, there was nothing extraordinary when CEO Elon Musk said the Model X’s arrival was being pushed back a few months to the third quarter of 2015 in a recent earnings call. All car companies not being Tesla and not all automobiles being the Model X, word of another delay was bound to prompt scrutiny. Here are the factors behind the Model X’s most recent delay.
Perfecting an all-new platform
In essence, Musk told analysts in the earnings call that Tesla was perfecting a new platform and the complexities were behind the delay. The quarterly letter to shareholders said it most succinctly.
“We recently decided to build in significantly more validation testing time to achieve the best Model X possible,” Musk wrote. “This will also allow for a more rapid production ramp compared to Model S in 2012. In anticipation of this effort, we now expect Model X deliveries to start in Q3 of 2015, a few months later than previously expected.”
During the call with analysts, Musk was asked to clarify what exactly was holding up the process. He said the bottom of the car was more or less “sorted out, but [w]ith the falcon wing door and the second row of seats…we’re adding some very new stuff…that’s really not out there, that never really has existed in a way that was useful.”
Rather than hinting of disappointment with the process, Musk addressed his audience with the tone of a perfectionist who refuses to be rushed into comprising the finished product.
Good for company and customers long-term
“This also is a legitimate criticism of Tesla.” Musk wrote in the shareholder letter.”We prefer to forgo revenue, rather than bring a product to market that does not delight customers. Doing so negatively affects the short term, but positively affects the long term.” Having gone through the experience of producing the Model S, Musk said the lesson learned was “what really matters is at what point can we get to scale production of a really high quality car” rather than when a few could be made.
He also offered the example of what happens when one in 100 cars has a flaw. Instead of being able to isolate it in a single car, an automaker has to check every car and sets the clock back to where it started. Investors will likely have little to complain about in the Tesla strategy, and by the end of the week its stock price barely dipped.
Skeptics will say the Model X originally was scheduled to appear in 2013; that it next was pushed back to 2014; and, now that the deadline is the third quarter of 2015, everyone should expect to wait even longer. Maybe that will be the case, but Tesla is clearly trying to knock one out of the park rather than hit a bloop double. In other words, the electric vehicle manufacturer hopes for a worthy successor to its blockbuster Model S.