By on November 6, 2014

teslaelio

In it’s third quarter letter to investors, Tesla Motors announced that they are pushing back the start of production of their falcon-winged Model X crossover again, this time until the third quarter of 2015. This is the third time that production has been delayed for the Model X, which Elon Musk originally promised for 2013. That was subsequently pushed back to this year, then to late this year and now delayed again. Tesla put a good face on the delay, characterizing it as “a few months”, and attributing the later production start to more extensive validation testing, wanting to “delight customers” when the Model X does start deliveries.

In anticipation of this effort, we now expect Model X deliveries to start in Q3 of 2015, a few months later than previously expected. This also is a legitimate criticism of Tesla – 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. There are many other companies that do not follow this philosophy that may be a more attractive home for investor capital. Tesla is not going to change.

Some folks have questioned whether Elio Motors will ever start production of it’s low-cost high mpg reverse trike because of its repeated delays in reaching production, now coincidentally also schedule to begin in the second half of 2015. One wonders if those same people will be as skeptical about the Model X. Of course, it isn’t a completely fair comparison as with over 33,000 deliveries of the Model S to date, and the Tesla Roadster before that, Tesla has already proven that they can put at least one vehicle into production.  Still, Tesla’s announcement of the delayed Model X shows that contrary to what the Elio skeptics would have you believe, production delays are a part of the car biz.

Tesla Motors Q3 2014 Stockholder Letter

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34 Comments on “Wanting to “Delight Customers”, Tesla Delays Model X Production Again...”


  • avatar
    319583076

    I loathe the term “delight customers”. It’s been a buzzphrase in my workplace for the last 18 months.

  • avatar
    Master Baiter

    Assuming what he’s saying is true, it’s a good decision.

  • avatar
    CoreyDL

    I love energizing my own vehicle as well, by pressing the 93 button. There are hundreds of 93 Energy Rectangles throughout the country!

  • avatar
    MarkySparky

    I think it is quite illustrative of Tesla’s success that the chief complaint is now the timing of new model releases. A few years ago, they were dismissed for basically slapping electric motors in a Lotus to harvest EV credits. Now they are selling a well-regarded electric sedan at unprecedented volumes, building a nationwide charging infrastructure, and vertically integrating battery manufacturing, and preparing to release a purpose-built electric crossover.

    The people focusing on quarterly targets are missing the forest for the tiny bug on a tree, IMHO.

    • 0 avatar
      schmitt trigger

      I fully agree.

      But…..people who are waiting for the Model X may become impatient for the additional and significant delay, and may decide to open their checkbook somewhere else.

    • 0 avatar

      Musk is doing more than building a nationwide infrastructure. Europe and Asia now account for more than 50% of the Supercharger permitting/construction activity. This further emboldens your point that Musk is hitting many balls out of the park.

    • 0 avatar
      stuki

      Not really all that convinced the “vertically integrating” part is something to be proud off. Smacks of being forced to do so, in order to sucker easier money of out less hardnosed fashion-of-the-week investors, than could be done by a free standing battery maker less able to ride the wave of Tesla cool.

      Battery tech is evolving fast, and somewhat independently of Ecar manufacturing. If the option was realistically available, I suspect Tesla would have preferred to remain more independent from that side of the business than where they currently seem to be heading. But a $30billion market cap from selling political/investor class toys, does make multibillion dollar investments, with large political components, a bit easier to fund…..

      • 0 avatar
        Mike999

        They’re building the Giga factory to insure the batteries they need for their own demand and the demand of SolarCity.
        Musk has already said they can modify the production of batteries to handle future advances.

    • 0 avatar
      Ihatejalops

      Success? What? They’ lose money hand over fist. They make 1 car (we don’t know how well yet). Even boutique manufacturers have more than 1 car.

      • 0 avatar
        Mike999

        A GAAP loss? While they have more profit that simply doesn’t qualify under GAAP is losing money hand over fist?
        Wish we all could “lose money hand over fist” so well.

        • 0 avatar

          Tesla are like many other west coast companies; ploughing huge amounts of money back into their companies to generate growth. Amazon.com is one example of a very successful company that lost money hand over fist for many years as it fueled its growth and building out its distribution centers.

  • avatar

    “Delight the customer” is spin. Musk is probably delaying the car because it’s not going to be ready before then. But Musk is to be forgiven if the X comes out all it’s supposed to be, and without any glitches. Tesla has gotten the cars out before, so I’m assuming they can do it again.

    And if Elio can get its trike out, more power to it.

    • 0 avatar

      You can call it spin, but look at it another way. If he released the car with known faults, the customer wouldn’t be “Delighted”. Of course he’s delaying because its not ready, if it were on target to be ready there would be no need for delay.

      • 0 avatar
        Ihatejalops

        Yet you can get many crossovers for a lot less, with established build quality. Don’t understand said appeal.

        • 0 avatar

          @Ihatejalops

          The Tesla is not my cup of coffee, but the S, at least, is a fine piece of machinery, and a piece of automotive art (unlike almost everything else out there), and for those who are fanatical about electrics, it can get you from Boston to Provincetown or to southern Vermont for the weekend, unlike the Leaf.

          • 0 avatar
            mcs

            David, do you want to make a bet about southern vt? How about Andover to Brattleboro in a Leaf? Actually, I’m thinking about a run up to White River Junction soon. I’ve also gone to Brunswick Maine. Maybe I’ll send you photos when I go. I have your email.

        • 0 avatar
          Xeranar

          You’re not their base, in fact you may be so intentionally off-kilter that you aren’t even attempting to be objective in this case. Of course if we followed your course of argument Toyota & Honda would never have made it off the ground.

      • 0 avatar

        @JPWhite

        we’re saying the same thing. And maybe arguing over some antics.

    • 0 avatar
      Russycle

      I like his invitation to disappointed shareholders to park their money elsewhere. Short-term thinking to maximize quarterly numbers is a great way to ruin a business (Hi there GM!), it’s nice to see a a CEO emphatically reject it to focus on the long game.

  • avatar
    DC Bruce

    Although I am by no means a Tesla fanboi, I don’t think the comparison is fair at all. As the article notes, Tesla has proven its ability to deliver a successful product. Notwithstanding the stupid corporate-consultant-speak buzzword (“delight customers”), Musk is right. Especially with a new product from a new company, getting it right the first time is very important.

    There are, in my mind, two remaining unanswered questions about Tesla: (1) can it survive without various direct and indirect subsidies (which can’t be expected to go on forever) and (2) because of its more aggressive use (depletion) of the vehicle battery, in comparison to other PHEV makers, will battery life and charge retention be materially shortened.

    As for the Elio trike, the list of reasons that justify skepticism is very long, and only starts with the company never before having delivered a product.

  • avatar
    Pch101

    Tesla has a track record of producing something, albeit at a loss. The company may not go the distance, but it is a real company for now.

    Elio is similar to Detroit Electric: It’s essentially a Powerpoint and a press conference disguised as a company.

    It doesn’t actually do anything. Delays add to the doubts that it will ever begin doing anything. The skepticism is warranted.

    • 0 avatar
      Luke42

      I’m also skeptical about Elio’s choice to make their own engine.

      They probably had to in order to bring the theoretical unit cost down, but why double the engineering effort required to get the first unit out the door? Why not just acquire or license an existing engine? Motorcycle engines are 100 year old mature technology, so it seems unlikely that the Elio folks have some fundamental insight that will make a better one – and all they need to make their engineering goals is reasonably light weight.

      Just because I want Elio to succeed doesn’t mean I’m not skeptical.

      As for Tesla, I see them investing more in new models and superchargers than necessary, while making less money than they should. That has Musk’s riskaphillic style of “go big or go home” written all over it. It may or may not be a good business decision, but I’d bet they’re doing it on purpose.

      I’d love to buy a Model 3, but i’m not holding my breath.

      • 0 avatar
        mcs

        >> but why double the engineering effort required to get the first unit out the door

        They didn’t. IAV engineering in Northville MI designed it. I’m guessing it uses a lot of off-the-shelf components as well. This way they control the quality and the supply and probably lower their cost.

        http://www.iav.com/us/about-iav/clients

  • avatar

    Tesla customers seem to be early adopters. Not to mention the fact that the more a product costs, the more s*** people are willing to deal with. A $25,000 Camry or Accord should be flawless for the majority of people. But a near-six figure Tesla can have all sorts of idiosyncrasies and quirks. So unless it’s a major flaw, I don’t see why they shouldn’t be able to release it…

  • avatar
    Tosh

    I’m glad I’m not designing those door seals! I can see them becoming a yearly replacement…

  • avatar
    Xeranar

    Technically Tesla has released two models, a roadster and the Model S. If anything this is an example of how hard it is to break into a long-term stabilized and monopolized industry. High cost of entry, difficulty in managing long resource lines, delays, it’s all part of the program.

    Ultimately the Model X will show up and sell probably double Tesla’s total output. The Elio actually will roll off the production line I’m sure, I’m just not sure it has a sizable enough market to sustain it.

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