Tesla: What About The Model X?

| About: Tesla Motors (TSLA)


The Model X allows for a big-car lifestyle without the pain at the pump. This CUV could be a bigger game changer than most analysts and traders expect.

Estimates point to over 12,000 reservations made for the Model X.

The Model X should roll off production lines in 2015, which will add to EV's and test Tesla's Supercharger System.

Amidst the fresh announcement of the cheaper mass-market car's name, analysts and stockholders alike seem to be carried away with Tesla's (NASDAQ:TSLA) Model 3. As romantic as the idea of a cheap, good-looking and cost-efficient EV sounds, let's not forget that model would take more than three years to arrive, and the price is dependent on the success of the Gigafactory. Until then, it's the Model X that investors should be attracted to.

The Lack of Attention is Rather Insulting

If Tesla's Model X was personified into a diva, it would look rather drained at the lack of attention it has been receiving since the announcement of the Model 3's official title. The Model X is an important step as the Company targets a different consumer base and potential metrics to predict future results. The vehicle will be released next year and is not dependent on the Gigafactory, which makes it a lot more relevant to Tesla's consumers and stockholders, today, than the Model 3.

Why Consumers Should Look Forward to the Model X

"You can finally live a big-car lifestyle without living at the pump," boasts Tesla Motors' website about the Model X. Up till now, Tesla has only offered an electric sports car, the Roadster, and a sedan, the Model S. The Model X, however, is a Crossover Utility Vehicle - in the words of Tesla Motors, it looks to "blend the best of an SUV with the benefits of a minivan". If things go as reported, the Model X would be 10% heavier than the Model S hatchback and, according to images presented at Tesla's website, would also be slightly higher and more spacious than the previous model, accommodating seven instead of five passengers. The addition of the "falcon-wings" adds to the spaciousness as well as style of the vehicle. Despite the car's heavier weight, it would, according to the website, accelerate from 0 to 60 mph in less than 4.4 seconds - a timing even better than some sports cars out there; and, perhaps more importantly, than the Model S's 5.4 seconds. So with the Model X, consumers would get bigger size yet better speed than the Model S, at almost the same price range (perhaps a little higher). Tesla is definitely upping its game in comparison with its own vehicles, but how does the company's new offering fare in comparison with other electric vehicles?

As of now, American consumers are not offered any electric SUVs. Europeans, however, have a few options, with the Mitsubishi Outlander PHEV and the Volvo V60 topping the list. As hybrid vehicles, both the Outlander and the V60 do not offer a mammoth battery pack - the former comes with a 12 kWh pack and the latter with an 11.2 kWh. This means that on pure "EV" mode, the Outlander has a range of 32.5 miles while the V60 has a range of 31 miles.

In comparison, the Tesla Model X, just like the Model S, comes with two battery pack sizes: 60 kWh and 85 kWh. If the range of the Model X matches that of the Model S, the CUV would be able to run from 208 to 265 miles on a single charge. The comparison with the hybrids is more than a little unflattering for the Model X, especially since it offers even better 0 to 60 mph acceleration timing than the two cars offer on gasoline: the Volvo takes "under 6 seconds" while the Mitsubishi takes 11.7 seconds. The difference between a dedicated EV maker and part time hybrid makers is quite evident.

Why Investors Should Look Forward to the Model X

Even though there is a year still left until the car's official unveiling, the Model X is bringing good news for Tesla Motors, already. Reportedly, by April, 2014, as much as 13,000 reservations were made for the Model X, for a $5000 deposit each.

Source: ValueWalk Model X Pre-Orders

Morgan Stanley analyst Adam Jones also reiterated the importance of the Model X in building up the revenues for Tesla, attributing much of the company's $160 million reservation balance to the Model X. Tesla's CEO Elon Musk, himself, echoed Jones' view by stating,

I think the biggest thing we can attribute that sort of growth to is that the Model X demand is very high […] essentially, it's like if you're going fishing, it's like the fish are jumping in the boat. We're not actually trying to sell the Model X at all, but demand seems to be remarkably high. And we're seeing a steady accumulation of Model X deposits.

This shows how positive consumers are of Tesla' newest offering, despite several news of fires. With more cash flow, the company could look to build up on its meager profits and look to increase its gross margin. With the consumers so firmly by the company's side, Tesla Motors need not worry about the success of its newest vehicle, once it is out - and, so, its investors need not worry about the company's stock's performance. If that's not reassuring for Tesla's stockholders leading up to 2015, then perhaps nothing is.

Investors and analysts would be better off focusing on the Model X - especially since it offers a lot of positivity to investors and a lot of material to brainstorm on for the analysts. The addition of over 12,000 EV's to Tesla's market will test the strength of Supercharger stations. With the the Model X rolling of production lines in 2015, investors have a lot to look forward to as Tesla gets to expand its dominance in the EV market.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.