Elon Musk: Model S, Model X production continues for ‘sentimental reasons’

Tesla continues to produce the Model S and Model X more for “sentimental reasons than anything else,” CEO Elon Musk said Wednesday during a call with investors, calling the electric vehicles “niche” products.

“They are really of minor importance to our future,” Musk added.

Sales of Tesla Model 3 vehicles far outpace the company’s older Model S and Model X vehicles. Tesla delivered 17,483 Model S and Model X vehicles in the third quarter, compared to 79,703 Model 3 cars. And Musk anticipates the Model Y, which has yet to be produced, could surpass Model 3 sales.

Still, while the Model S and X are more expensive and lower volume than the Model 3, the vehicles have been important to the financial health of the company for years. Tesla’s automotive gross margins have been buffeted in the past by sales of the higher-priced (and better margin per vehicle) Model S and X vehicles.

The vehicles might not be part of the company’s long-term future, but for now, Tesla is sticking with the two vehicles.

Tesla is increasing production on Model S and X lines for this quarter in response to increasing demand for the electric vehicles, CFO Zach Kirkhorn noted during the call.

As Tesla has launched, ramped and stabilized Model 3, the company is now able to focus its attention on the rest of its products, Kirkhorn said.

Tesla continues to see a strengthened order rate, which the company anticipates will be reflected in Model S and X deliveries in the fourth quarter, Kirkhorn added. 

Musk did take time to rave about the Model S, particularly the newer version, which has a new “Raven” power train.

“It’s so easy to drive, it makes you feel like Superman driving that car,” he added. “And it’s incredibly safe.”

Musk then described the X as “the Fabergé of cars,” before adding that “it’s an art piece basically.”