Good News, Bad News From Tesla

First, the good news. Tesla managed to deliver 17,400 vehicles in the fourth quarter of 2015,. That’s up a whopping 75% from then same quarter last year and 48% more than the previous quarterly record set earlier this year. The Tesla Model S was the best selling electric car in the world in November, according to Inside EVs, beating out the Nissan LEAF by a wide margin.

Tesla Model X

Global Equities Research managing director Trip Chowdhry told International Business Daily on December 31 the company was working feverishly to deliver as many cars as possible by the end of the year. He described the pace of activity at the factory as being “at least three times” what it was at the same time last year. Tesla began the year by saying it would deliver 55,000 cars in 2015. By August, that number became 50,000 to 55,000 and by October it was down to 50,000 to 52,000. At the end of the year, the final figure was 50,580 — just barely enough to meet Elon Musk’s prediction.

Tesla has a habit of just barely meeting its projections. It promised it would start production of the new Model X SUV in the third quarter of 2015. In the end, it held a gala event to announce the car’s arrival on September 29, one day ahead of the deadline. Buried beneath all the glamour and glitz of the event, which included a brief ballet that focused on its unique falcon wing doors, was the fact that only 12 cars had been completed in time. They were all mostly hand built specials put together for Elon Musk  and other company big wigs, plus a few Silicon Valley superstars. Some scoffed that trotting out hand built specials hardly qualified as the start of production.

Here’s the bad news. The Model X has been beset with a variety of issues that have delayed full production. Mostly, the unique monopost center row seats were to blame. In the end, Tesla decided to build them in-house in order to get the problem under control. Still, it only delivered 208 Model X cars in the fourth quarter, far fewer than the 4,000 or more it had hoped to get into the hands of customers by the end of the year.

In a press release, Tesla said “Model X deliveries are in line with the very early stages of our Model X production ramp as we prioritize quality above all else. That ramp has been increasing exponentially, with the daily production rate in the last week of the year tracking to production of 238 Model X vehicles per week.” It is going to have to build a lot more than that if it going to work its way through a backlog of orders from an estimated 25,000 reservation holders any time soon.

The company says the base price of a Model X is $80,000, but it won’t be able to produce any cars at the price until cars for all those reservation holders have been built. There are questions in some quarters about whether all those people with reservations will actually convert them into firm orders.

There are dark mutterings that the Model X is a disappointment. It has significantly less range than the Model S sedan and less interior carrying capacity than some other full size SUVs, primarily because its stylishly sloping rear cannot accommodate taller items. It may be that some of those extra Model S cars delivered in the fourth quarter were purchased by Model X reservation holders who changed their mind. After all, the Model S is the highest rated car of all in 2015. It is so good, it actually made the Consumer Reports Top 10 list twice

Tesla, of course, is the land of perennial smiles and constant sunshine. It will reveal its midsize Model 3 in March and will start accepting reservations at that time. Tesla really needs to get that car to market on time and at the price promised in order to transition from a specialty maker of luxury automobiles to a bona fide full line car maker.

If the past is any guide, it will produce just enough cars to meet its target date of deliveries starting in 2017, but full production may lag far behind. By then, competent competitors from the world’s major auto companies will be in showrooms. The next two years will be critical to Tesla’s survival.

Steve Hanley

Closely following the transition from internal combustion to electricity. Whether it's cars, trucks, ships, or airplanes, sustainability is the key. Please follow me on Google + and Twitter.