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Tesla delays Model X SUV to spend more time testing


Tesla's sports-utility vehicle, called the Model X, is being delayed to the third quarter of 2015, the company said Wednesday. CNET

Electric car maker Tesla again reminded investors that it's focus on quality comes ahead of short-term success.

The company Wednesday said it is delaying the release of its Model X sports utility vehicle, the third major addition to its car lineup. Deliveries will start in the third quarter of 2015, "a few months later than previously expected," Tesla said. The delay is a result of the company spending more time testing the new SUV before releasing it.

"This ... is a legitimate criticism of Tesla -- we prefer to forgo revenue, rather than bring a product to market that does not delight customers," Tesla CEO Elon Musk wrote in a letter to shareholders following the release of the company's third-quarter earnings results. "Doing so negatively affects the short term, but positively affects the long term."

Tesla also said upgrades to the assembly line producing the Model S during the summer "took longer than expected," cutting production by 2,000 units. Tesla said it expects to make up for that production shortfall in the fourth quarter, but said it will deliver 33,000 Model S sedans this year. That's 2,000 fewer units than the company previously forecast.

"Being unable to increase production fast enough, not lack of demand, is a fair criticism of Tesla," Musk wrote.

Under Musk's leadership, Tesla has a far greater influence on the automotive industry than its size would suggest. His charisma, along with his ability to disrupt the entire auto industry, makes Tesla "the world's most important car company," Morgan Stanley analyst Adam Jonas wrote in a note to investors last month. The company is also building its first Gigafactory in Reno, Nev., where it expects to make more lithium ion batteries in 2020 than the entire world produced in 2013.

Tesla retooled its entire Fremont, Calif., factory as it prepares to simultaneously produce both the Model S and Model X. The factory was closed for a month during the process, leading Tesla to deliver 7,785 vehicles last quarter, a record number but still 117 units fewer than analysts had expected.

"We'd like to grow faster of course," Musk said on a call with investors Wednesday, "but also bear in mind we have got one factory. In some cases, when we upgrade the factory it's like trying to change the wheels on the bus while it's going down the freeway."

Musk forecast a 50 percent rise in orders and deliveries of its Model S sedan next year. Tesla said it plans to reduce manufacturing complexity by cutting the number of Model S options and powertrain combinations customers can buy.

Tesla said sales including deferred revenue rose 55 percent to $932.2 million. Profit that excludes some costs was 2 cents a share. Analysts had expected a 1 cent loss. Tesla shares rose 7 percent, to $247 a share, in after-hours trading.