Tesla Model X Delayed Again, Model S Sales Highest Ever: Third Quarter Report

Tesla Model X prototype in Culver City, California [photo by Instagram user jmtibs]

The Tesla Model X electric SUV will be further delayed for additional quality and validation testing, according to the latest earnings report from Tesla Motors.

Deliveries of the luxury electric crossover utility vehicle are now scheduled to start in the third quarter of next year.

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The company delivered 7,785 cars from July through September, essentially meeting its most recent guidance of 7,800 cars for the quarter.

That number had been reduced from 8,000 when the company announced it would shut its assembly line in July for retooling.

2014 Tesla Model S 'P85D' all-wheel-drive model

The newly announced third-quarter number is the highest-ever quarterly sales for the company, and 40 percent higher than its Model S deliveries during the same period of 2013.

For 2014 as a whole, Tesla said it expects to deliver 33,000 Model S cars, down from previous guidance of 35,000--the second time in a row it has cut the following quarter's delivery projection by 2,000 units.

Its projection for fourth-quarter production is now 13,179 (or more), with sales of 11,179--the disparity presumably being due to having more cars in transit to markets outside North America.

Tesla said it is "confident" that next year's Model S sales and production will rise 50 percent over the 2014 levels--meaning deliveries of 49,500 or more cars.

Its confidence is due partly to "extraordinary" orders, it said, following the introduction of the new all-wheel-drive option and the high-performance P85D model last month.

Tesla Model X at 2013 Detroit Auto Show

The third-quarter shareholder letter included a number of items of interest to Tesla advocates (and investors), but the Model X delay and Model S deliveries were the two headliners.

Tesla issued the report yesterday afternoon after the markets closed

Model X delay: more testing

Specifically, the letter to shareholders included this passage:

Work continues on the finalization of Model X with the testing of Alpha prototypes and initial builds of the first Beta prototypes. Model X powertrain development is almost complete with the early introduction of Dual Motor drive on Model S.

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We recently decided to build in significantly more validation testing time to achieve the best Model X possible. This will also allow for a more rapid production ramp compared to Model S in 2012.

Tesla Model X prototype in Culver City, California [photo by Instagram user jmtibs]

In anticipation of this effort, we now expect Model X deliveries to start in Q3 of 2015, a few months later than previously expected. This also is a legitimate criticism of Tesla – we prefer to forgo revenue, rather than bring a product to market that does not delight customers. Doing so negatively affects the short term, but positively affects the long term.

The company added an implict slap at other automakers, noting that "many other companies that do not follow this philosophy ... may be a more attractive home for investor capital" but pledging that "Tesla is not going to change."

2014 Tesla Model X all-electric crossover with 'Falcon Doors' open

Latest delay

When it was launched in January 2012, the Tesla Model X was originally projected to start deliveries in December 2013.

By March the next year, that goal was extended to December 2014, in a company filing with financial regulators.

MORE: Tesla Model X Electric Crossover Pushed Back A Year To Late 2014 (Mar 2013)

"Tesla has decided to slightly push back the development and timing of Model X to 2014," the company wrote, leading analysts to question the use of "slightly" for a full-year delay in the Model X schedule.

This past February , CEO Elon Musk hedged further, saying that deliveries would actually start in March 2015.

The company has yet to show a final production version of the car, although at least construction of Beta prototypes indicates continued progress.

But it's clearly a challenge for Tesla, as indicated by Musk's comment on the earnings call that followed release of the shareholder letter: "It's hard to engineer and it's hard to produce."

Elon Musk signs new 2013 Tesla Model S at Tesla Store opening, Austin, Texas [photo: John Griswell]

Musk was very reluctant to provide any projections on Model X production, given that the vehicle may still be subject to further delays.

But, he said, he's confident that demand will be "very high." Musk has previously predicted that the Model X could come to outsell the Model S once both vehicles are in full production.

Reservations rising 'rapidly'

The company said its Model X reservations were "rapidly growing," and it noted that it shut down production in July to retool assembly lines to accommodate higher volumes of Model S and the addition of the new crossover utility vehicle.

Restarting production after that shutdown, the company said, took longer than anticipated due to "system integration issues," resulting in a loss of almost 2,000 units of Model S production during the quarter.

However, Tesla said, it expects to be building "more than 2,000 vehicles per week" by the end of 2015, meaning its annual production will be 100,000 vehicles or higher.