Submitted by wmg on 04. April 2015
Comments from Morgan Stanley.
2015 is all about the Model X. We cannot sufficiently impress upon
investors the importance of the Model X launch this year. Key execution
variables include: launch timing, speed of ramp, initial quality, media reception,
order backlog and cash flow (working capital). Profit impact may need to wait
until the very end of 2015 or into 2016 given up-front costs and
manufacturing inefficiencies inherent in any product launch. We expect the
Model X to be far better than the Model S in virtually every measurable
category with the exception of exterior design (the Model S being hard to beat
and naturally more athletically gifted as a sports sedan). While the Model S is a
great car, we really believe it will be the worst car Tesla will ever make… not
because it’s bad, but because it’s the first car they ever made from the ground
up. The Model S was made by a cash-strapped, resource-constrained company
where many suppliers refused to do business with Tesla. It’s remarkable that
the car is as good as it is given the bootstrapped nature of the development.
On the other hand, the Model X is the first car made by Tesla as a wealthy,
well-endowed company with an array of suppliers that want to do business
with them – some even opening up dedicated facilities in California only to
supply Tesla. Tesla also has all of the experience of the Model S (what worked,
what didn’t) and the 1 billion miles traveled of its 100% connected fleet.
We don’t pretend to have an edge on visibility of timing or attributes
of the Model X launch. We only know the product is more than 18 months
delayed from its original launch date and that the company has made nearfinal
prototype ‘release candidates’ for testing on public roads for some weeks
now. A successful launch and ramp of the Model X can significantly improve
the tone of investor sentiment on Tesla’s execution abilities, estimate revisions
and financial liquidity… potentially putting the company in a strong position to
tap into further capital resources to develop new models and technologies,
growing its ability to produce at higher volumes and enhancing its ecosystem
of electric, connected mobility.