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(Bloomberg) -- Not everything Elon Musk touches has been a runaway sales success.
While Tesla Inc.’s Model S has been a hit and thousands lined up to order the upcoming Model 3 sedan, the Model X sport utility vehicle hasn’t met the chief executive officer’s expectations. Model X deliveries have yet to keep pace with the Model S, as Musk predicted, and U.S. registrations of the SUV have slipped the last two quarters, according to IHS Markit.
Musk has chalked up challenges with the Model X to making the vehicle too complicated. Features including the double-hinged falcon-wing doors have constrained production and contributed to a costly $82,500 starting price. For Tesla, the lack of cheaper and easier to produce configurations has meant missing out on roaring demand amid America’s SUV boom.
“Luxury SUVs are really hot right now, and the Model X should have been a big hit and broadened Tesla’s audience,” said Michelle Krebs, an analyst with Autotrader.com. “You don’t hear a lot of buzz about the Model X, and when you do, it’s the negative stuff.”
Musk said on an earnings call this month that there’s enough demand for Tesla to sell 100,000 Model S sedans and Model X SUVs combined this year. Tesla worked through a backlog of Model X orders from overseas markets and built up supply of the SUVs in its test-drive fleet during the first quarter, both of which impacted U.S. registrations, a spokeswoman said.
Tesla’s growing pains with the Model X have been well documented, and Musk has been candid about challenges with the SUV’s doors and independently operable second-row seats. Several features were difficult to engineer and dependent, in part, on multiple components and suppliers. When the carmaker fell short of its first quarter 2016 sales forecast, it blamed “hubris in adding far too much new technology.”
“Model X became kind of like a technology bandwagon of every cool thing we could imagine all at once,” Musk said during an earnings call earlier this month. “That is a terrible strategy.”
Consumer Reports magazine rates the Model X second to last in its ranking of 15 luxury midsize SUVs. The Model S, by comparison, scores as the No. 2 ultra-luxury car.
“SUVs are popular because of utility, and this is an SUV that doesn’t have a lot of utility,” Jake Fisher, director of automotive testing at Consumer Reports, said in a phone interview. “The X was a big science experiment to say, ‘How far can we go?’ And they went too far.”
In a report detailing his personal experience ordering, owning and servicing a Model X, Sanford C. Bernstein & Co. analyst Toni Sacconaghi summed up his customer-service experience as “not good.” His vehicle, which he started driving in July, was shipped to a Tesla service center 60 miles away on three occasions in the first 4 1/2 months of ownership.
“Like many (most?) Model X owners, we had repeated technology issues with our car,” Sacconaghi wrote in a May 19 report.
Tesla has said it’s made significant improvements to the Model X using over-the-air software updates and offers in-person repairs for hardware issues. And many Model X buyers report loving their SUVs, regardless of reported issues with faulty sensors, defective door seals or even balky sun visors.
Consumer Reports’ own annual satisfaction survey released in December found 88 percent of owners would buy it again. Global deliveries have risen quarter over quarter since the vehicle was introduced, according to sales figures released by the Palo Alto, California-based company.“I won’t consider buying anything but a Tesla at this point,” said Bobby Kansara, a Model X owner from suburban Minneapolis who’s reserved a Model 3, largely for use by his wife and kids.
Kansara said he likes his Model X’s performance, never having to stop at a gas station and the driver-assistance features known as Autopilot. “Tesla is the only company that I see advancing automobiles beyond the plateau,” he said.
Market researchers at J.D. Power say Tesla customers view the company through “rose-colored glasses.” After conducting focus groups, J.D. Power said in a March report that it was hard for affluent buyers who had spent so much money on their vehicle to admit flaws.
That loyalty may not last as the company reaches a younger, more urban demographic with its upcoming models, the market research-firm predicts. The Model 3 sedan -- Musk’s push into affordable mass-market automaking -- is scheduled to roll-out in July. It’s also planning a semi-truck and a compact SUV called the Model Y.
“Model 3 buyers will not be as accepting of body panel gaps or misalignment,” Kathleen Rizk, director of global automotive consulting at J.D. Power, said in a phone interview. “As millennials step into the Model 3, they are expecting it to work perfectly.”
Musk, too, will be holding Model 3 to high standards. He’s said a simple design and stronger supply chain should spare the sedan from the complications that plagued the Model X.
“We’re making the simplest Model 3 first, like we did with S,” Musk wrote in a Tweet Monday. “Didn’t do it with X, because I was an idiot.”
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