Production Challenges
- Cybertruck is a great product, but it will take a year to 18 months before it is a significant, positive cash flow contributor.
- Tesla “dug its own grave” with the Cybertruck due to the extremely novel production techniques involved and the fact that it is an entirely new model.
- Cybertruck is potentially Tesla’s best product ever, but it will require immense work to reach value production and be cash flow positive at a price that people can afford.
- Tesla expects to deliver only a quarter-million Cybertrucks per year once it is in full production, and it is unlikely to reach that rate until 2025.
Overall, Musk’s comments suggest the Cybertruck is unlikely to be a major factor in the electric vehicle truck market in the near future. However, it is still possible that the truck could be a success in the long term, once Tesla is able to overcome the production challenges and bring it to market at a competitive price.
Elon Musk’s comments during Tesla’s Q3 2023 earnings call provide insights into the challenges and expectations surrounding the Tesla Cybertruck.
Cash flow
- Tempering Expectations: Musk began the call by cautioning that people should not expect rapid financial success from the Cybertruck. He projected that it would take approximately a year to 18 months for the vehicle to become a significant positive contributor to Tesla’s cash flow.
- Acknowledging Challenges: Musk admitted that Tesla faced difficulties with the Cybertruck, likening it to “digging their own grave.” He attributed these challenges to the use of extremely novel production techniques and the fact that the Cybertruck is an entirely new model. Historically, Tesla has faced hurdles when introducing entirely new products.
- New Technology and Advanced Design: Musk emphasized that the Cybertruck represents a groundbreaking product with new technology and an advanced design. He explained that it’s normal for such products to encounter production challenges, especially when attempting to scale up the production process.
- Production and Delivery Timeline: While Tesla’s Q3 report indicated that deliveries were expected to begin in November, Musk was cautious about providing specific delivery dates. He mentioned that there are still over 1 million reservations for the Cybertruck but did not specify when customers could expect to receive their vehicles.
- Production Rate: Musk expressed his optimism that Tesla could eventually produce around a quarter-million Cybertrucks per year. However, he indicated that achieving this rate might not happen in the next year and could take until 2025. This timeline is nearly six years after the initial unveiling of the Cybertruck.
Volume Production
- Competition and Challenges: Musk acknowledged the competitive landscape, with other electric truck offerings from traditional automakers. He mentioned the challenges faced by legacy automakers in delivering their own electric trucks, including delays and price increases. Tesla has previously faced similar challenges when introducing new models, such as the Model S and Model 3.
- Material Innovation: The Cybertruck’s extensive use of stainless steel was highlighted as a significant innovation but also a challenge in terms of manufacturing. Stainless steel is notoriously difficult to work with consistently in automotive applications.
- Hype and Anticipation: Musk acknowledged that the Cybertruck has generated a lot of excitement and anticipation in the market. Despite repeated delays in its on-sale date, it remains one of the most eagerly anticipated car debuts of the decade.
F-150 Killer
- F-150 Competitor: The question of whether the Cybertruck can compete with established trucks like the Ford F-150 remains open. Musk acknowledged that Tesla has significant work ahead to make the Cybertruck a success.
Conclusion
Elon Musk’s statements during Tesla’s Q3 2023 earnings call provide a candid and realistic assessment of the challenges and expectations surrounding the Tesla Cybertruck. While the Cybertruck has generated significant hype and anticipation, Musk acknowledges that its unique design, novel production techniques, and extensive use of stainless steel have presented formidable obstacles.
Musk’s caution regarding financial expectations underscores the complexity of introducing groundbreaking products, particularly in the automotive industry. The timeline for achieving significant positive cash flow from the Cybertruck is projected to be a year to 18 months, with the challenge of scaling production and addressing new technology-related issues.
Despite these challenges, Musk maintains his belief in the Cybertruck’s potential as a groundbreaking product. He also acknowledges competition from other electric trucks and the difficulties faced by traditional automakers in the electric vehicle market.
