Elon Musk pours love on the Tesla Model X, schedules Model 3 reveal

During the press conference following Tesla’s Q4 earnings report, Elon Musk took a moment to reflect on its newest car, the Model X SUV. Some have been critical of Tesla’s decision to build the Model X, which ate up a lot of money and time before it went into production. The detractors say the company should have focused on bringing its new, lower priced sedan to market instead.

In a rare moment of humility, Musk admitted that perhaps the company had gone overboard on the Model X, insisting it have every conceivable new technological feature imaginable all at once, rather than putting it into production and adding enhancements over time. He went so far as to say there was some “hubris” involved.

He admitted that solving all the technical and engineering problems that went into making it was an “excruciating” process, one that required lots of late nights and working weekends. In the end, though, he feels all the hard work was worth it.

“Model X is an amazing car. [It] is the best car ever,” said Musk. “I’m not sure anyone’s going to make a car like this ever again. I’m not sure Tesla would make a car like this again.”

Later, Musk confirmed that the Model 3, the smaller sedan that is supposed to be an affordable mass market car, would be unveiled on March 31. He said he and his team weren’t sure yet whether to “show all our cards” at that time. He had said previously that the company might not show the entire car during the event, but would parcel out details as the production date got closer.

Tesla has confirmed the car will have a starting price of $35,000. But Musk admitted at the press conference that the first cars produced would be more expensive, fully optioned versions.

“Our default plan, as we have done in the past, is that the initial sales are relatively highly optioned versions of the car, because we’ve got to pay back the investment of the tooling and everything. So it makes sense to have the higher optioned versions first. That’s what we did with the S and obviously again with the X.”

The price of the Model 3 will be roughly half that of the larger Model S. Musk says the company will realize the cost savings it needs to make the Model 3 profitable from a combination of economies of scale and because the Model 3 has been optimized for production from the beginning.

The Model S was designed first. Figuring out how to manufacture it came later, which made it more expensive to build.The Model 3 will be manufactured using mostly steel. The Model S and Model X are made from more costly aluminum.

Musk said the factory in Fremont, California was capable of building 500,000 cars a year. In fact, it already did so when General Motors and Toyota used it to jointly produce automobiles. He suggested that recent upgrades to the paint shop would allow 10,000 cars a week to be prepped and painted there.

Another factor contributing to the lower price of the Model 3 is that its batteries will be manufactured at the Tesla Gigafactory in Nevada. That giant facility is designed to integrate all aspects of battery manufacture under one roof. That is expected to lower the cost of batteries made there by 30%. In addition, the cost of some of the metals used to manufacture batteries, particularly nickel and aluminum, have fallen lately, although the price of lithium has not and may move upward in the future as worldwide demand for batteries increases.

Overall, Musk says Tesla plans to build between 80,000 and 90,000 cars this year. He was especially proud of the fact that Model S is outselling premium luxury cars from Mercedes, BMW, Audi, and Porsche, even in markets like Switzerland that do not have any electric car incentives in effect.

Detractors are already pointing out that the company continues to spend money like a sailor on shore leave and that it once said it would build 100,000 cars in 2016. But Tesla is about more than just cars.

It has begun delivering its Powerwall and Powerpack electrical storage batteries to customers in Germany, Australia and the US. It says those products are already making a profit. Worldwide, the market for storage batteries is far bigger than the market for electric cars. They are key to transitioning away from electricity made from fossil fuels to electricity from renewable resources.

People often forget that Tesla is not a car company. It is a battery company that also makes cars. Elon Musk may be famous for rosy predictions and opitmistic time lines, but he is a unique person with an unshakable faith in himself and his vision. It may take him and his company longer to reach their goals than anticipated, but reach them they will.

Posted by Steve Hanley

Steve Hanley is a car nut and Formula One addict who occasionally drives his Mazda MX-5 on track at HPDE events. He has been known to drive to Nova Scotia just to see the lupins in bloom or to Watkins Glen for a weekend of historic racing. He writes about automobiles, technology and travel from his home in Rhode Island.

  1. This Model X has the potential to be all over the roads – although I’ve not seen many be released since the release date!

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    1. Tesla has been slow getting production going, it’s true. But it says it will be building 600 – 800 a week by the beginning of April. By this summer, you should start seeing more of them on the road.

      Thanks for your comment.

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    2. I disagree that they will be all over the place. I know what you mean but even still the Model X will be the lowest production model out of the 3 models (Model S/X/3). There aren’t many high net-worth families with 3+ kids. Since the Model X is more of a crossover instead of an SUV (due to limitations in battery technology) it is unlikely to grab extra sales from SUV buyers. The only added sales (on top of wealthier larger families) will come from taxi companies for which it will offer an even more compelling value proposition. Once the Model X backlog is cleared then annual production will be half of that of the Model S going forward or maybe even less.

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  2. Can’t seem to get any Model X’s out of the factory, now about 4 months after the public launch.
    Not sure what gull wing doors give you over mini van sliders (which have been around since the 1980’s), besides looks. Front passengers still can’t get out of tight parking spots, would have made all four doors gull wing. Stock is down 40% recently, GM has the Bolt at $30K with 200 mile range now, two years, they will be up to 300 mile range at a for less price, but then again with gas at $1.50 a gallon and long term looking like low prices with Iran flooding the market with a poor negotiation deal, not sure the full electric car is going to make it at a low price point.

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    1. While I agree with you about the unneeded complexities of the X, I differ about the Bolt. It’s not here now and GM is saying “some” by the end of the year. That’s still way ahead of the Model 3, which will probably be delayed if Tesla stays true to form, but until they are in showrooms we shouldn’t be counting Bolts as a done deal.

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      1. My grandmother always said, “Don’t count your chickens until they’re hatched.” Apparently, yours did too! ; – )

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    2. That’s all true…..if you follow conventional economic theory. But the larger point is, the environment won’t wait while we all sit around reading Ayn Rand books.

      Carbon fees that will make the cost of fossil fuels equivalent to the damage they cause are coming. And no a moment too soon. Many decades too late, some would argue.

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  3. “The Model 3 will be manufactured using mostly steel…”

    What kind of “steel” I may ask…like this ?

    http://www.bluescopesteel.com.au/go/news/ultra-light-steel-auto-body-ulsab-project/

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    1. We don’t know. All Tesla has said is that the Model 3 will not be made primarily from aluminum as the Model S and Model X because of cost considerations. But if there is a steel out there that is different from the steel used by every other manufacturer, Musk will find it!

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  4. Interesting that the criticism comes from such accomplished over-achievers familiar with the work involved in building a billion dollar company, expanding into global operations, spending their own hundreds of millions and achieving what no one before has accomplished.

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  5. Thank you for reminding people about the stationary storage. I can’t believe how many analysts do not understand the need for utility-scale storage. These projects are not small. The project that Oncor (in Texas) wanted to go ahead with amounted to over a billion dollars. One project. When people realize that there are only three companies out there with that type of capacity, they’ll start taking Tesla very serious.

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    1. I always tell people that Tesla is not a car company that also makes batteries. It is a battery company that also happens to make electric cars. But nobody listens…….

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