Tesla Model X was recently launched and it now seems that it is unwittingly powering the sale of the company’s Model S.
The slow production and long waiting period for Model X is seen as reasons for customers to opt for Model S instead.
The launch of Tesla’s Model X crossover has created mixed reviews among fans and car enthusiasts. While many car experts raved about the high power capability and the gull-wing door of the Model X, investors are very cautious, driven by the slow production capabilities.
Currently 25,000 vehicles have been booked and this number is expected to be completed and handed over to the customers only in the second half of 2016. This long waiting period is actually deterring customers who have been saving to buy the new Model X.
Instead, they are opting for the more easily available and successful Model S. This production-lag, which is, despite the one-year delay in launching the vehicle, is reflective of the company’s slow production capabilities.
Customers are not willing to wait for 8-12 months for taking delivery of Model X. They are choosing to buy the Model S sedan which is being delivered in two months.
Brad Erickson, the analyst from Pacific Crest, said that the delivery time for Model S has not been increased despite the launch of Model X reflecting the fact that production for Model S has seen an increase and this could further see additions in the 4th quarter.
The analyst opined that the production of Model S could surge by 22% while the delivery for Model X will be only 2500 units. Tesla Motors has to deliver almost 17,000 vehicles so as to meet the annual target of 50,000 units.
While many enthusiasts are raving about the Model X, the pricing could be a huge deterrent. The Signature models are to be priced between $132,000 and $143,000, which is seen as an expensive deal for an EV.
Morgan Stanley’s Adam Jonas argues that such high prices could effectively raise the company’s average transaction price. A higher price combined with low production could result in lower demand for Model X and this could shift the demand to Model S.
Elon Musk, Tesla’s CEO, confirmed that Tesla recorded a rise in demand for Model S after the launch of the Model X. This rise could be an off-shoot from increased Model X cancellations driven by slow production capabilities.
This increase in sales for Tesla Model S against decrease in demand for Model X could lead to cannibalization concerns for Tesla between its two premier models. This can be stopped only if registrations for Model X increases significantly, opine analysts.
