Within a week of its 2019 launch, Tesla claimed to have logged 250,000 advance reservations for the Cybertruck, and CEO Musk claims the number is now up to 1 million. Yet, even with the all-electric pickup finally in production, it very well could turn into a bust, CEO Elon Musk telling investors and analysts “We dug our own grave with the Cybertruck.”
More than a year late to market, the Tesla Cybertruck has finally begun rolling out the from its factory in Austin, Texas and, with CEO Elon Musk Wednesday claiming the automaker has 1 million advance reservations, it might seem to be a guaranteed success.
Not so fast. Declaring he wanted to “temper expectations,” during a third-quarter earnings call, Musk raised serious questions about whether the all-electric pickup will live up to its early hype, even become an outright bust.
Noting that the cost of prepping the Texas plant already hit Tesla earnings hard, Musk said, “We dug our own grave with the Cybertruck.”
Cutting prices on its vehicles probably didn’t help much either — it certainly cut into the company’s bottom line. Tesla’s revenue for the third quarter was up 9%, but its net income fell 44%.
High hopes, serious problems
Tesla fans, along with many of its friends on Wall Street, had high hopes for Cybertruck when it was first revealed at a flashy event at SpaceX headquarters in November 2019. Skeptics were far more wary and saw as an omen the accidental damage that occurred during a demonstrations of a prototype’s supposedly bulletproof windows.
With its distinctive stainless steel body panels and triangular shape, Cybertruck has certainly been controversial and Tesla has faced far more challenges getting it into production than had been expected.
All sorts of problems have delayed the program, starting with seemingly minor challenges like coming up with windshield wipers capable of effectively clearing the truck’s huge front glass. In August of this year, as “production candidates” began rolling down the Austin assembly line, Musk acknowledged an equally serious issue.
Stainless or stained steel?
“Due to the nature of Cybertruck, which is made of bright metal with mostly straight edges, any dimensional variation shows up like a sore thumb,” he wrote in a company-wide e-mail. To overcome that problem, according to Musk, will require manufacturing tolerances of a mere millimeter, a fraction of what the industry today calls state-of-the-art.
It now appears that the decision to use stainless steel could haunt the automaker — much as it did when the alloy was used by the late John DeLorean on his iconic DMC-12 sports car. Despite its name, stainless steel can smear and pick up fingerprints and marks. Tesla is now looking at offering buyers the opportunity to have the EV truck painted to hide such problems.
Cybertruck is “one of those special products that comes along only once in a long while. And special products that come along once in a long while are just incredibly difficult to bring to market to reach volume, to be prosperous,” Musk said during the earnings call.
“Enormous challenges,” Musk warns
The hit the company took while preparing to build the truck didn’t end with the launch of production, the CEO added, saying he wanted to “emphasize that there will be enormous challenges in reaching volume production with the Cybertruck and then making the Cybertruck cashflow positive.”
He described that as “simply normal,” and some observers might agree. It took Tesla roughly a decade to start earning a profit on its EVs — and even when it finally pushed into the black, much of its initial earnings came from selling zero-emissions credits to other automakers.
The question is how long might it take for Cybertruck to turn its finances around.
Some buyers might have to wait years for delivery
One of the longer-term issues is volume. Almost immediately after the truck’s 2019 debut it generated an estimated 250,000 advance reservations.
During the earnings call, Musk claimed the number was up to 1 million – though there have been reports since last year, when the Cybertruck launch was first delayed, that some potential buyers were starting to ask for their deposits back.
Sam Fiorani, the lead analyst with AutoForecast Solutions, is confident that a large share of those reservations remain in place, especially those involving existing Tesla customers. But those with no particular brand loyalty may not be sticking around.
Complicating matters, Musk has indicated that the Texas Gigafactory is only tooled up to produce 125,000 Cybertrucks annually. That means it would require eight years just to meet the reservations Musk claims to have in hand. Never mind potential new customers.
A glut of competition
The CEO indicated Tesla might be able to double capacity by 2025. But that would still mean many existing reservations wouldn’t be filled until nearly the end of the decade.
And, by then, the market will face a glut of offerings in the electric pickup segment. GMC already has the Hummer EV, Rivian the R1T, and Ford the F-150 Lightning.
Chevrolet recently began rolling out the commercial version of the Silverado EV, with retail models to follow in 2024. Next year will also see the launch of the GMC Sierra EV and Ram 1500 Rev, with still other all-electric trucks in the works.
There’s yet another concern that dangles over Musk’s head like the Sword of Damocles: how many buyers actually want a battery-electric pickup? Until recently, industry analysts and planners answered: “plenty.” But that optimistic forecast is now less certain.
Will the EV pickup market live up to expectations?
Like Tesla, Ford claimed to have logged several hundred thousand advance reservations for the Lightning after its 2021 debut. And early sales outstripped production capacity at the factory it set up in Dearborn, Michigan. That prompted the automaker to begin a massive expansion of capacity – set to reach 150,000 by the end of this year.
But Ford this week announced it was temporarily dropping one of two shifts at the Rouge Electric Vehicle Center. It cited several issues, but a slump in sales is clearly the primary factor. Demand during the third quarter plunged 46%, year-over-year, to 3,503.
General Motors sounded another cautionary note this week when it revealed plans to delay the reopening of the Lake Orion, Michigan plant that will produce the Chevy Silverado EV and GMC Sierra EV. It explained in a statement that the delay was meant not only “to better manage capital investment” but also for “aligning with evolving EV demand.”
Commercial versions of the Silverado EV are already rolling out of GM’s Factory Zero, with retail models to follow next year. And that Detroit plant will add a second shift to enable it to launch the Sierra EV, as well.
“We dug our own grave”
But along with Ford’s production cutback. GM’s decision to delay its other EV pickup plant raises new questions about whether the market really wants as many battery-powered trucks as Musk and others in the industry had expected. For Tesla, considering what it has invested in Cybertruck could mean it has dug itself into serious trouble.