Sept. 29--After nearly two years of delay, Tesla Motors Chief Executive Elon Musk will hand the first of the electric car company's new Model X crossovers to customers Tuesday night at a ceremony near the company's Fremont, Calif., factory.
These initial sales -- expected to be just a handful -- mark the first time the Palo Alto car company will have two models in the market at the same time. The company already sells the Model S electric sports sedan and also is developing the Model 3, a compact electric car. (Its first car, the roadster sports car, was discontinued before the Model S was released.)
Analysts said that was an important milestone for the company, which has yet to sustain a profit as it drives to increase its sales volume and benefit from economies of scale.
Tesla has not released many details or final pricing of the Model X, but that hasn't stopped the automaker's passionate followers from putting deposits on the car.
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According to the Tesla Motors Club blog, the company already has nearly 32,000 orders for the vehicle. Each reservation requires a $5,000 deposit.
"It is a beautiful car. I am a big fan of the design they have chosen. It doesn't look like anything else in the market," said Anton Wahlman, an independent analyst and investor in Palo Alto, who has seen the Model X as the automaker tested the crossover on local roads.
The crossover is noteworthy for its distinctive "falcon wing" doors that fold up rather than swing out, a tricky design Wahlman said will make the vehicle stand out in the crowded luxury crossover market as long as they work correctly.
"They are uncharted territory," he said.
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The Model X, designed at Tesla's studio in Hawthorne, will fit seven adults in three rows of seats, the automaker said. It will use Tesla's flat battery pack, positioned on the underside of the vehicle. That clears space in the cabin and also allows for a second trunk under the hood.
Musk has said that with the same options, the Model X would cost about $5,000 more than the S because of its larger size and body complexity. The rear-wheel-drive base model of the S with a 70-kWh battery and 230-mile range starts at about $70,000 before any federal and state incentives for electric cars. The typical buyer pays closer to $100,000 for the sedan with options.
The electric car company plans to offer a fully loaded Signature Series version of the Model X for $132,000.
The Model X will be the only fully electric crossover on the market.
Tesla originally said it would start manufacturing the Model X at the end of 2013, with sales to begin last year, but the program is behind schedule. Part of the delay was because Tesla could not use as many of the same parts for both the X and the S, Musk said.
"As a luxury crossover, the Tesla Model X is in one of the fastest-growing segments of the North American market, so it is well-positioned to add volume for a manufacturer that needs additional volume and economies of scale," said Jack Nerad, an analyst at auto price information company Kelley Blue Book.
The new vehicle greatly expands Tesla's market and could help it break out of the male-oriented customer base that supported its first car -- the discontinued Roadster sports car, and the Model S, said Dan Dolev, an analyst at Jefferies Equity Research.
"Tesla now has a family car," Dolev said. "I think that will appeal to a lot of moms who are driving their children around."
Americans purchased only 82,000 high-end luxury sedans last year, just 0.7% of the U.S. auto market, according to Kelley Blue Book. But consumers purchased nearly 400,000 midsized luxury SUVs -- the segment that Model X matches -- last year, accounting for 2.4% of auto sales.
Almost 30% of the people trading out of Tesla Model S cars for a new vehicle are purchasing a sport-utility vehicle, according to an analysis of transaction data by car shopping company Edmunds.com.
"Tesla can capture those Model S owners who either want something larger or would like an SUV to add to their personal fleet," said Jessica Caldwell, an Edmunds.com analyst.
Tesla expects sales to grow now that it has entries in what amounts to about 3% of the U.S. auto market. The electric car company expects to deliver about 50,000 vehicles this year -- including sales in overseas markets. Dolev thinks all but about 4,000 will be Model S cars. Wahlman thinks Tesla won't get beyond producing more than 1,000 crossovers this year.
But Tesla anticipates that production will ramp up quickly next year, when it projects manufacturing roughly 85,000 to 90,000 Model X and S vehicles. Analysts will be looking at the mix of vehicle sales to see if the Model X -- as the latest offering -- eats into sales of the flagship Model S.
"My fear is that 1 plus 1 does not equal 2," Wahlman said.
Dolev said he's less concerned about potential sales cannibalization than Tesla's ability to nearly double its production without harming quality.
"Making the cars, that's the key," Dolev said. "I am not worried about the demand."
This is especially important for Tesla's aspiration to become a major automaker rather than a niche brand for the wealthy, environmentally concerned consumer.
Tesla engineers are busy working on the Model 3, which Musk describes as "our smaller and lower-cost sedan," that will go into production "in about two years." Musk will reveal the look of the car in March and Tesla will begin taking orders then.
Musk said the Model 3, which is expected to sell for about $35,000, has to wait until Tesla's giant "gigafactory" battery manufacturing plant under construction near Reno is fully operational.
Tesla is counting on the battery manufacturing cost reductions and efficiencies that it expects from the plant to help keep down the cost of the lower-priced sedan.
The automaker also will begin to see greater competition in the electric car market from traditional automakers such as Chevrolet and Nissan as well as the luxury brands.
Chevrolet plants to bring out its electric Bolt compact car with a range of about 200 miles in late 2016 or early 2017. Nissan is working on a new version of its Leaf EV that will have a similar range.
Audi plans to challenge Tesla's dominance in the luxury electric vehicle market with a sport-utility vehicle, introducing a concept version of the model at the Frankfurt, Germany, auto show earlier this year.
Called the Audi e-tron quattro, the sporty SUV concept auto will provide the first look at the luxury brand's plans for fully electric cars. Audi, a division of Volkswagen, is expected to produce an electric SUV based on the concept starting in 2018.
And Mercedes plans to abandon the electric powertrain it buys from Tesla for its electric B-Class car for a new system with a range of about 300 miles. The vehicle's current range is under 100 miles.
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UPDATE
2:05 P.M.: This post was updated with additional details and analysis.
This post was originally published on Sept. 29, 2015 at 9:42 a.m.
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