Tesla (NASDAQ:TSLA) is gearing up to commence deliveries of its long-awaited Cybertruck on November 30, marking a delay of more than two years from the initially projected timeline. CEO Elon Musk initially introduced the Cybertruck prototype in 2019, boasting a vehicle with a range exceeding 300 miles and a targeted price of around $50,000, positioning it as a more affordable option than the Ford F-150, America’s top-selling pickup.
However, Tesla has encountered setbacks, with Musk acknowledging cost and manufacturing challenges. Specifications for the Cybertruck have been removed from the order page, and concerns about production hurdles have been raised. The company initially offered Cybertruck deposits at prices ranging from $39,900 to $69,900. Still, due to rising production costs and inflation, the final price could potentially reach around $60,000.
During an earnings call last month, Musk admitted that scaling up production for the truck posed a significant challenge, likening it to the “production hell” Tesla endured in the past. He cautioned that it might be another 18 months before the company achieves volume production and substantial cash flow from the pickup. Musk stated that Tesla is unlikely to reach an annualized production rate of 250,000 Cybertrucks until sometime in 2025.
Some analysts are suggesting that, due to cost overruns and delays, Tesla should reconsider the Cybertruck project. Jefferies, for instance, expressed the opinion that Tesla shares would benefit from canceling the Cybertruck, arguing that the truck is “off-mission” for Tesla and has diverted resources from high-volume global segments of its established vehicles.
Production challenges for the Cybertruck include significant delays, primarily due to the use of a stainless-steel alloy for the truck’s body. While corrosion-resistant and paint-free, this material is expensive and challenging to shape and weld. Tesla has also shifted the Cybertruck to an 800-volt architecture from the 400-volts used in its other vehicles, citing cost savings for heavy vehicles. Additionally, difficulties in scaling up production of the new 4680 batteries have contributed to delays.
The ultimate success of Tesla’s Cybertruck may hinge on cost competitiveness. To compete effectively, the Cybertruck needs to offer a compelling price, comparable to or better than the $50,000 starting point for Ford’s electric F-150 Lightning. Despite the challenges, Tesla could benefit from a pent-up demand for the Cybertruck, as Musk revealed that over a million people have already reserved a place in line by putting down a $100 deposit. This substantial interest could potentially sustain several years of Cybertruck sales for Tesla.
Featured Image: Unsplash @ Jonny Caspari
