Was Building The Model X Tesla’s Biggest Mistake?

Is the Tesla Model X a mistake? Elon Musk has a plan. Sell really outstanding electric cars that cost a lot of money. Use the profits from those cars to build electric cars that ordinary people can afford. How does the Model X fit into that plan?

Tesla Model X

Here’s the problem. Somewhere on the way to building affordable electric cars, Tesla seems to have lost its way. Instead of building a smaller, more affordable car, it pirouetted to an entirely different strategy — building the Model  X. It was supposed to be an SUV version of the Model S, but as time went on, it became its own car with its own set of production problems.

The highly opinionated Bob Lutz calls the Model X “unbuildable.” Even Elon admits, “There’s far more there than is really necessary to sell a car. Some of these things are so difficult. They do make the car better, but the difficulty of engineering those parts is so high, that in retrospect, if we had known the true engineering costs and the amount of complexity associated with it, I think we would have probably done fewer new things.”

Tesla has lost $12 billion in stock value since the first of the year. The former darling of Wall Street has turned into an ugly duckling. Many observers blame the flyer Tesla took on the Model X as the primary reason for the change in attitude. If it had started on the Model 3 three years ago, Elon’s plan Musk would now be complete. Instead, the Model 3 won’t be available until at least 2017. Analyst Adam Jonas thinks it will be 2018 before the car goes on sale.

In the meantime, Chevrolet plans to bring its own 200 mile electric car to market later this year. BMW, Audi, Mercedes are all rushing electric and plug-in hybrid models to market. Many of them may go on sale before the first Model 3 gets built. Another factor to consider is that sedans are the least desirable models in the market right now. Customers are flocking to to SUVs, a factor that has not gone unnoticed by other manufacturers.

Instead of having the only affordable electric car two years ago, the Model 3 may be facing stiff competition when it finally goes on sale. Tesla seems to have squandered its lead for little or no gain. How did this happen? Elon Musk is known to never shrink from a challenge. He seems to have a deep seated need to conquer obstacles. The more intractable they become, the more determined he becomes to overcoming them. The Model X may be a monument to Musk’s hubris.

The Model X is a wonderful automobile. By some measures, it may be the finest car ever built. But building it may have diverted Tesla from an essential element of its overall corporate agenda. When the company makes its fourth quarter earnings report to investors later today, we may find out if Wall Street is ready to forgive Tesla for straying from its self-proclaimed path.

Photo credit: LearnBonds.com


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.