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Will We Ever See The Tesla Model X?

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Tesla Motors, despite its iconoclastic leadership and Silicon Valley startup feel, is increasingly perceived as a real, legitimate automaker as production and delivery of the Model S continues and plans to move into more mass-market vehicles progress.

But there have been some cracks in the facade.

First, in March, Tesla [NSDQ: TSLA] decided to delay production of the Model X electric crossover by a year, until late 2014, despite claiming to be ahead of targets on profitability and Model S production. Why? Because of increased demand for the Model S. Even though Tesla says it has booked $40 million in advance sales for the Model X.

In other words, Tesla can’t make more cars that are already paid for because it’s busy making more cars that aren’t paid for yet.

Weeks later, Tesla announced it would cancel production of the most affordable 40 kWh Model S. Why? Because demand was essentially non-existent among pre-orders. Those with the money to buy a Model S opted at a rate of about 96 per 100 to buy the 60 kWh or 85 kWh versions.

That would make sense on its own–if you’re going out of pocket for a big cash purchase, why not go for the car you really want?

But it made even less sense than we suspected just a day later.

Tesla launched an unusual finance/lease program with a buy-back guarantee that claimed to deliver a Model S at just $500 per month “effective cost.”

We immediately debunked the $500 dream. Even with a gracious allowance for cost off-setting, the headlining 85 kWh Model S would cost something more like $887 by our math, and the 60 kWh model would cost about $764–effective cost.

But why would Tesla kill the most affordable version of the Model S just days before launching a financing scheme presumably aimed at reaching buyers who couldn’t come to the table with a suitcase full of cash?

Because, ultimately, the 40 kWh Model S wouldn’t have lived up to Tesla’s standards, apparently. But possibly also because it wouldn’t have been profitable–even with the added volume of financed buyers.


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