Tesla Cybertruck production faces 'enormous challenges,' admits Musk
Roughly four years after we first saw the Tesla Cybertruck in all its stainless-steel glory, the automaker has confirmed its plans to start delivering the first batch of the massive pickup trucks to customers on November 30. We recently spotted truckloads of Cybertrucks in the California desert, perhaps making their way to final preparation for delivery.
But don't expect high production volumes, low prices, or profits anytime soon, Tesla CEO Elon Musk told investors on a call to discuss the company's third-quarter earnings.
Musk says he has driven the Cybertruck and "it is an amazing product." But "there will be enormous challenges in reaching volume production with the Cybertruck and in making the Cybertruck cash-flow positive."
The Texas plant has the capacity to make 125,000 trucks a year, and Musk insists there are 1 million people who have reserved one, but those numbers don't mean Tesla will ramp things up quickly, as the truck is so difficult to make and get right, as leaked documents detailed this summer.
Musk: Making trucks and money is hard
Making prototypes — which is what Tesla has been doing with the truck for years now — is easy, Musk says. Making the production version for sale to customers is "10,000 percent harder," he insists, because the truck is so "radical" and "special." Those are polite ways of saying stainless steel is hard to work with, and flat expanses of bodywork are unforgiving when it comes to gaps, fit, and finish.
"I think it is our best product ever," says the CEO, but because it is so different and tech-heavy, it will be hard to manufacture.
And making money on it, even though final pricing has not been announced, seems elusive at this point. It is "insanely difficult to make it at a price people can afford," Musk said, a challenge made worse by higher interest rates further pushing up vehicle prices. The truck was initially promised at a $40,000 starting price before the company backed off that number in 2022.
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Cybertruck ramp-up not until at least 2025
Economies of scale won't help bring down cost for a while. The CEO still thinks Tesla will eventually build 250,000 Cybertrucks a year, but said it won't reach that production rate until sometime in 2025 at the earliest. At that point, it could generate cash flow for the company. Even so, it's a timeline Musk called his best guess; roughly two years ago, he said volume production would start in 2024. In the meantime, work on the prototypes continues to be costly — with those costs climbing.
"I want to temper expectations for Cybertruck," Musk said, while making the absurd claim that "there have not been new car [brands] that have been successful for 100 years, apart from Tesla."
"We dug our own grave with Cybertruck," Musk told investors, calling it the type of special product with lots of bells and whistles that only comes along once in a while.
Timing of Mexico plant in question
In other matters, Musk says plans continue to build a plant in Mexico, and he is pleased with the location chosen, but the project will not proceed until interest rates come down and people can afford vehicles again.
In the third quarter, Tesla continued to increase its production numbers but sell the vehicles at smaller margins. The operating margin for the third quarter was down to 7.6 percent — which is in the realm of many legacy automakers — and a steep drop from a year ago when the company's margins were 17.2 percent. New profit also fell 44 percent to $1.9 million and revenue growth has slowed to its lowest level in more than three years.
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The company said production costs at new plants were higher than at established plants, but upgrades have been put in place to bring those costs down. Tesla's energy business had another record quarter and is the real engine behind corporate profits.
Tesla is also spending more on R&D, especially its AI-based training as it builds its data to apply machine learning to rewrite its driver assistance systems, and it continues to work on the Optimus robot project.
Accompanying Musk on the call in the chief financial officer role was chief accounting officer Vaibhav Taneja after previous CFO Zachary Kirkhorn stepped aside in August. Tesla is also preparing to launch the newly refreshed 2024 Model 3, widely known as "Highland," early next year. For more on that car, see our first drive review and in-depth look at the many changes made to the popular small electric sedan.
