We're Not Surprised Tesla has Quietly Delayed Deliveries of "Refreshed" Models S & X
We're Not Surprised Tesla has Quietly Delayed Deliveries of "Refreshed" Models S & X
Months after they were promised, Tesla still hasn't delivered any newly redesigned Models S/X—and may not until summer. Gimmicky updates may have fallen flat with luxury buyers and may even be unsafe.
Tesla (TSLA) has quietly delayed deliveries of newly redesigned Models S & X for months, with no explanation.
The company has been teasing a “refresh” of its aging Models S & X for more than three years now, with mixed results. This means fans have been eagerly awaiting deliveries of all new Models S & X since Tesla unveiled them in January, telling investors deliveries would start in a few weeks.
However, it turned out that Tesla didn’t produce a single Model S or X during the first quarter and sold only 2,020 (down 83%) in existing models (see my report Tesla Reports Solid Beat With Strong Q121 Deliveries, But... on 4/4/21).
Now six weeks later buyers are still waiting indefinitely for the new versions and don’t know why. Tesla has pushed projected delivery dates to at least May-July.
Electrek reported that delays may be related to unfinished software updates which have prompted changes to the new user interface.
Perhaps, but if that’s true it suggests pretty substantial design changes still in progress months after CEO Elon Musk said Tesla was about to ramp up to full production on both new model versions in the second quarter:
Model S/X production lines are almost done with the retooling and will be aiming for max production next quarter. There is high demand, so we are soon going to need to go back to two shifts. Please recommend friends for recruiting.
Elon Musk in “leaked” email to employees, 2/25/21
I’m not convinced. We already know from past experience that Musk is happy to push cars out long before they are ready if he perceives demand is hot.
Recall in 2018 when he rushed 5,000 newly launched Model 3s through production in one week so defective that 4,300 of them had to be reworked.
He shipped unapproved Model 3s to Europe in 2019 which, as a result, were sold without functioning Autopilot.
Model 3s have proven to be problematic in heavy wind, rain, snow and, well, cold weather in general. Maybe don’t feed it after midnight, just to be safe (see my report The Trouble With Tesla's Arrested Development on 7/17/19).
Tesla got caught selling its very first Made-In-China (MIC) Model 3s in Shanghai with older, slower 2.5 version processors used in Autopilot versus the 3.0 chip buyers thought they were getting. Tesla blamed supply disruptions caused by the COVID-19 pandemic but not why it deliberately misled buyers.
And let’s not forget that regulators currently are investigating at least 27 Autopilot-related crashes with injuries and deaths. Its new Smart Summon feature was declared by Consumer Reports as an expensive "science experiment" that was "glitchy" and worked "intermittently, without a lot of obvious benefits for consumers."
Tesla even had to admit to regulators recently that its “full self driving beta” version of Autopilot, now a $10,000 option, lacks "true autonomous features" and is "not capable of recognizing or responding" to "static objects and road debris, emergency vehicles, construction zones, large uncontrolled intersections with multiple incoming ways, occlusions, adverse weather, complicated or adversarial vehicles in the driving path, and unmapped roads."
This directly contradicts claims Tesla has been making since 2016. And, apparently, Autopilot will never be capable of full self driving according to Tesla, which admitted "we expect the functionality to remain largely unchanged in a future, full release to the customer fleet." Adding "we do not expect significant enhancements" that would "shift the responsibility for the entire dynamic driving task to the system." The system "will continue to be an SAE Level 2, advanced driver-assistance feature."
To be clear, level 2 systems require continuous human oversight versus level 4, which actually are fully driverless systems.
So Tesla has long demonstrated it is willing to release cars and options that clearly weren’t ready or even what they advertised. What’s the hold-up now, given Tesla’s “standards,” on releasing the revamped Models S & X?
How about: lack of demand
As I noted in Tesla Reports Solid Beat With Strong Q121 Deliveries, But..., Tesla’s early announcements about the redesigned Models S & X revealed dubious gimmicks like a yoke steering wheel which may be unsafe, letting the car “guess” at gear shifting and direction using Tesla’s problematic Autopilot sensors, and moving key driver controls into Tesla’s touchscreen which recently was recalled for going dark while driving, among other issues.
I am skeptical such stunts will meaningfully revive interest for Models S & X in the coveted luxury market niche versus such formidable and clearly superior competition as, for example, the gorgeous Lucid Air Dream Edition which, like the sumptuous Porsche Taycan, sold out even before the first car made it to the showroom.
Tesla Reports Solid Beat With Strong Q121 Deliveries, But…, 4/4/21
Not to mention the gorgeous and stunningly innovative new Mercedes EQS coming out next year.
By comparison, the updated Model S looks sparse and unremarkable.
Sales of Models S & X have been in serious decline since 2018, when the primary competition was the then newly launched Model 3. The Model 3 now also is threatened by the newly launched and similarly flawed Model Y. Every Tesla model has dozens of serious rivals now and coming over the next year in the US as well as in China and Europe and, as I projected, its market share has eroded accordingly.
Given so many delicious options now versus Tesla’s aging designs, which have changed little over the past decade, and its notorious track record for poor quality and reliability—especially when it rushes to market—which also make its cars more expensive to insure and repair, it seems logical that luxury EV buyers may remain wary of “refreshed” versions of the still comparatively sparse, gimmicky, likely flawed, and no doubt richly priced Models S & X.
If so, I suspect Tesla is delaying production and delivery of revamped Models S & X due to chronic lack of interest in cars it may be better off retiring.
Tesla's 5.3% senior notes due 2025 are little changed since my last report at 104 (2% ytw; 160 bps), offering no credible upside versus potentially significant downside. The bonds remain excessively valued with yield tighter by 135 bps versus the BoA High Yield general index even though Tesla is a weak B3/BB- issuer. Pricing also indicates a meager 82 bps per turn of leverage on my estimated 2020 reported EBITDA and an appallingly low 36 bps per turn of leverage on core operating—unvarnished—EBITDA. Maintain "Underperform."
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