Tesla (TSLA) yesterday (Oct. 18) reported disappointing financial results for the first time in a while. Both revenue and profit for the quarter ended Sept. 30 missed analysts’ estimates, mainly due to the company’s sharp price cuts over the past year in a bid to boost sales. In one of the few positive notes in the earnings release, Tesla said it’s on track to begin delivering the long-awaited Cybertruck on November 30. However, CEO Elon Musk warned that the eccentric-looking electric pickup will require “immense work” to reach volume production and be profitable.
“I’ve driven the car. It’s an amazing product. I do want to emphasize that there will be enormous challenges in reaching volume production with the Cybertruck, and then in making a Cybertruck cash flow positive,” Musk told analysts on the call yesterday.
“This is simply normal for when you’ve got a product with a lot of new technology or any new vehicle…especially one that is as different and advanced as the Cybertruck,” he explained. “You will have problems proportionate to how many new things you’re trying to solve at scale.”
Tesla is a clear leader in the global electric car market. The Cybertruck is the company’s attempt at winning the electric pickup sector, a relatively untapped market due to the technical challenges of electrifying trucks.
Read Also: Why It’s So Hard to Make an Electric Pickup Truck
Tesla revealed the Cybertruck in November 2019 and touted it as a mass-market electric pickup priced at just below $40,000. Musk initially set a goal of reaching volume production in 2021, but that process turned out to be much more complex than he’d thought.
“Often people do not understand what is truly hard. That’s why I say prototypes are easy, production is hard,” Musk said on yesterday’s call. “It’s like 10,000 percent harder to get to volume production than to make a prototype in the first place, and then it is even harder than that to reach positive cash flow…So, I just want to temper expectations for Cybertruck.”
“I mean, we dug our own grave with Cybertruck,” he added later during the Q&A session.
Acclaimed automobile designers have raised doubts about the Cybertruck’s commercial prospect. Former Ferrari and Maserati designer Frank Stephenson has predicted the pickup may fall out of fashion very quickly because of its strange look. Lotus’s chief designer Ben Payne recently told Observer the Cybertruck’s flat body panels and vast windshield would be challenging to produce at scale.
“There are many technical challenges for engineers. If they can produce it for the mass market, it will be a real breakthrough,” Payne said in an interview in September.
Despite its unusual appearance, the Cybertruck is extremely popular, Musk claimed. He said there are more than a million buyers on the waitlist for the vehicle.
Tesla’s near-term goal is to produce 250,000 Cybertrucks a year by 2025, Musk said. Tesla manufactures roughly two million vehicles a year, with the vast majority being Model 3 and Model Y cars.
Yesterday, Tesla reported a quarterly revenue of $23.4 billion, up 13 percent from a year ago. However, net profit fell 44 percent from last year to $1.9 billion for the July-September quarter, reflecting Tesla’s shrinking profit margins. Tesla stock fell more than 8.7 percent today but is still up more than 100 percent this year.