Is Tesla's Model X "just too darn expensive"?
Last week Tesla’s Model X was launched to great acclaim, although now it seems that “sticker shock” is starting to set in. Analysts at Morgan Stanley, who have been bullish on the stock, lowered their delivery forecasts on Tuesday, due to average transaction prices on the Model X that are “easily $10,000-$15,000 higher” than previously expected. They now expect 20,000 deliveries of Model X in 2016, down from 25,000, “unless Tesla introduces significantly cheaper versions soon.” Furthermore, MS cut their price target on the company’s shares to $450 from $465.

Tesla Motors Inc.’s newly arrived Model X might be an engineering feat, but the all-electric SUV’s sticker-shock of a price will make it harder for the Silicon Valley car maker to reach its sales targets.

That’s the consensus from analysts at Morgan Stanley, who on Monday cut their price target on the company’s shares to $450 from $465. Their new price target is still 56% more than the average price target on Tesla TSLA, +1.66% ($288.47 a share) as compiled by FactSet Research.

The analysts also scaled back their delivery expectations for the SUV as well as Tesla’s Model S sedan. They kept their rating on Tesla stock at buy.

The first Model X SUVs rolled out at Tesla’s Fremont, Calif., headquarters at an event last week amid cheers from Tesla fans and in the presence of Silicon Valley royalty. One of the first customers to receive a Model X is a known venture capitalist, and Google co-founder Sergey Brin was in the audience.

The car has distinctive features such as falcon-wing doors and an extra-large windshield, and it comes with a bioweapon defense mode, which Tesla Chief Executive Elon Musk said provides hospital operating-room filtering capabilities.

A fully loaded “Signature” Model X costs $132,000; Tesla has said cheaper trims will be available in the next few months.

“We had very high expectations for the technical capabilities of the vehicle and it appears Tesla has met these expectations,” the analysts said in a note. The price, however, is “easily ($10,000 to $15,000) higher than we had expected.”

Even presuming that prices will decline when Tesla introduces the lower-spec trims, the Model X will still be more costly than expected and may struggle to meet the market and Morgan Stanley’s volume forecasts, the analysts said.

See also:Why reviewers say Tesla’s Model X is the coolest SUV on the planet

“Unless Tesla introduces significantly cheaper versions soon, we do not expect the company to deliver more than ($20,000) units of Model X in 2016,” they said.

The analysts dialed down their Model X sales forecast to 1,506 units this year, about half of what it had expected, and to 20,000 cars in 2016, from 25,000 units seen previously. For 2017, they reduced their expectations to 34,000 cars delivered versus 42,000 units forecast, and 45,000 cars delivered in 2018 from predictions of 55,000.

“We are also trimming our forecast of Model S annual volume by between (2,000 and 3,000) units,” the analysts said. They predicted some “cannibalization” from Model X orders as well as a continued sales slowdown in China.

Tesla’s mass-market car, the Model 3, is likely to cost more than the company has anticipated, the analysts said. In a tweet last month, Musk said the car will likely cost $35,000. It is unlikely that production costs and battery costs will decline sufficiently, they said. The Model 3 is likely to cost $55,000 to $60,000, Morgan Stanley said.