Tesla fans have been waiting for years to get their mitts on the futuristic Cybertruck, the stainless-steel pickup that promises to revolutionize the EV truck market. The wait is finally over, as Tesla has confirmed it will start delivering the first batch of Cybertrucks to customers on November 30, 2023. But before you get too riled up, there are some caveats to keep in mind. According to Tesla founder Elon Musk, the Cybertruck is an “amazing product” but also an “insanely difficult” one to produce and sell at an affordable price. The truck is so “radical” and “special” that it poses “enormous challenges” in reaching volume production and making it cash-flow positive.
Musk says he has driven the Cybertruck and loves it, but he also admits that building prototypes is easy compared to scaling production versions for sale to customers. The truck is made of stainless steel, which is hard to work with and requires tight tolerances to avoid gaps and discrepancies in the bodywork. The truck also has many unproven features and technologies that make it more complex and costly to manufacture.
Everything’s Bigger In Texas
Tesla’s Texas plant will have the ability to produce 125,000 Cybertrucks a year, but Musk says it won’t reach that level until sometime in 2025 at the earliest. He also says a million people have reserved a Cybertruck, but he doesn’t expect all of them to buy one. The truck was initially promised at a $40,000 starting price, but Tesla backed off that number in 2022 and has not announced the final pricing yet.
Musk says he wants to “temper expectations” for the Cybertruck, as it is a “special product” that only comes along once in a blue moon. He also says he thinks it is Tesla’s “best product ever,” but he acknowledges that it is not for everyone and may not appeal to hardcore truck buyers.
Trouble In Paradise
The Cybertruck is not the only hurdle that Tesla faces in the near future. The company’s third-quarter earnings showed a decline in profit and revenue growth, as well as lower operating margins. Tesla blamed higher production costs at new plants, higher interest rates, and supply chain issues for its weaker performance. The company also said it is spending more on research and development, especially on its AI-based driver assistance systems and its Optimus robot project.
Tesla is also preparing to launch the newly refreshed 2024 Model 3, which has many evolutionary tweaks over the previous version. The Model 3 is Tesla’s most popular and affordable electric sedan, yet it will face increasing competition from other automakers in the coming years.
Tesla is the current darling of the automotive industry, but it also faces many risks and uncertainties as it tries to maintain its leadership position and expand its product portfolio. The Cybertruck is a bold and ambitious product and it remains unclear whether it will gain acceptance in the marketplace. We will soon find out how the majority of truck and fleet buyers respond to the Cybertruck.
This author will go out on a limb here and predict the Cybertruck will be the first flop for Tesla. Musk’s admission that the Cybertruck is difficult to produce must have legacy automakers chuckling under their breath. We’ve all heard the benefits of Tesla’s manufacturing prowess including clean sheet SDV architecture and new assembly techniques like gigacasting and how this will give Tesla a cost advantage over legacy auto.
The reality is, validating and scaling completely new manufacturing techniques is risky at best. Building, selling, and servicing conventional vehicles at scale is extraordinarily hard, and even Musk has conceded this. Remember, Tesla was profitless for years and Musk slept on the factory floor in Fremont during his stay in “production hell.” This news about the Cybertruck teething problems is an admission from Musk that Tesla is back in the Hades of vehicle validation. Despite all the breathless press coverage and fawning fandom, Tesla isn’t immune to this critical stage of auto production.
Commensurately, legacy truck makers are in a production hell of their own right now. Combine that with the UAW strike, and EV trucks are at a standstill. GM has pushed back their Ultium-based trucks by a year, Ford has a glut of Lightning pickups in stock and has delayed its much-ballyhooed Michigan battery factory with Chinese partner CATL. Rivian claims it’s losing thousands of dollars for every truck sold.
Where Do We Go From Here?
EV truck adoption will happen, but will “bloom” only when the technology scales up and the prices come down. What’s becoming clear is the current demand for EV trucks is soft, and will most likely take a couple of decades of mixed offerings from truck makers until the transition to fossil-free models is complete. GM might be getting the last laugh here as it invested almost a billion dollars in the next version of its small-block V-8 for a new-generation lineup of ICE trucks. A shrewd move by Mary Barra and Co.
In the meantime, one of the key barriers to EV truck migration is the cost of ownership, and soft demand might just be a silver lining for early adopters, i.e., lower prices. So if you are keen on an EV truck, maybe now is the time to get one at a discounted price.