The vehicle is expected to be priced towards the higher-end of SUVs/crossovers and sell around 10,000 units in its
first year, growing to around 50,000 units by the end of our forecast period.
Forecast Rationale
Supporting:
1. LOW OPERATING COSTS – Conventional SUVs and crossovers have high operating costs due to their gas guzzling
nature. The all-electric Model X, on the other hand, has no such costs involved. Combining cost savings from using
electricity as a fuel vs gas as fuel, business tax savings, shorter commutes (electric vehicles are essentially allowed to
use an HOV lane) and elimination of trips to the gas station, a Tesla user can save up to $700 per month. Tesla's new
leasing arrangement with Wells Fargo and U.S. Bank allows consumers to purchase a vehicle for no down payment
(it is taken care of from the tax saving) and a $500 per month installment. Additionally, after three years the residual
value of the car is guaranteed by the company to be no less than that of a Mercedes S-class, widely considered to be
the best premium sedan on the market. These assurances make the car accessible to a much broader audience.
2. CUTTING EDGE TECHNOLOGY AND DESIGN – Apart from its all-electric zero emission engine, the Model X boasts a
number of unique features, such as its top quality design, touchscreen control panel, and high end performance (0-60
mph in 5.6 seconds). We expect these features to enable it to compete with well established luxury car manufacturers
such as Audi, BMW, and Mercedes Benz.
3. INCENTIVES FROM GOVERNMENTS – Many Governments around the world offer incentives to companies offering
green technology. In the state of California, for example, makers of zero-emission vehicles get credits from the state
Government. Tesla's Model X can qualify for these credits if it can get a certain percentage of its users to swap
batteries at Tesla's battery swap stations. In many cities in China, it is difficult to obtain number plates because users
have to enter auctions for a limited number of plates on offer. However, buyers of electric vehicles do not have to go
through the auction process, which saves them both time and money (up to $10,000). As a result, some consumers are
more likely to buy electric vehicles. In some European countries, like Norway, the Government offers incentives, like
free parking and separate driving lanes, for users of electric cars. This props up demand for such technology and
makes it an attractive target market for a company like Tesla Motors.
Sources for historical data and explanations can be found on the Trefis.com website (link)
— MODEL X GROSS PROFIT MARGIN —

This represent the gross margin associated with the Model X.

TREFIS ANALYSIS for TESLA MOTORS

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