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Who Says The Production Of The Model X Is Risky For Tesla?

The bears have been deeply concerned about the liquidity crisis at Tesla Motors (TSLA). The company’s second offering, its act of drawing every penny of the DOE’s $465 million loan and not meeting the production guidance of 5,000 Model S cars for this year have given the bears enough reasons to be worried about the company’s future liquidity position. In this situation, they also seem to be anxious about the company’s ability to produce the Model X cars in the future. They believe that there is massive incremental execution risk associated with the Model X launch relative to the Model S. Therefore the question is: Is it really risky for Tesla to produce the Model X cars?

In order to find an answer to this debate, we need to analyze the following aspects:

the demand for the Model X cars
the execution risk involved in its production

The Demand

Before the launch of the Model S car, the bears regarded the electric cars as unconscionable waste. However, the Model S has changed this notion completely. As already mentioned in one of my previous articles on the Model S, the car did not come with any of the usual compromises attached to a conventional electric car. After winning the Motor trend “Car of the year” award, the Model S has proved that it does not belong to the world of conventional electric cars with short ranges, long charge times and poor acceleration. It rather competes with the Porsches and BMWS of the auto world.


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