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Tesla CEO Elon Musk issued a warning Wednesday about the soon-to-be-delivered Cybertruck that may sound familiar to those who have closely followed the company’s Model 3 “production hell” era.
Summary? Scaling up production of a vehicle like the Cybertruck is difficult and will take some time to become profitable. Musk estimated that it would take about 18 months for the Cybertruck to become cash flow positive. Musk predicted that at some point in 2025 — and once Tesla overcomes these production challenges — the company will make “approximately” 250,000 Cybertrucks per year.
Pilot production of the Cybertruck has begun at the company’s Giga Texas factory near Austin. Musk said on Wednesday that the first Cybertruck will be delivered at an event held at the factory on November 30.
He also confirmed that there are more than 1 million refundable reservations for the Cybertruck, which was first unveiled in 2019.
“I want to emphasize that there will be tremendous challenges in reaching mass production with the Cybertruck and then turning Cybertruck cashflow positive — that’s absolutely normal,” Musk said during Wednesday’s third-quarter earnings call. This is probably the company’s best product to date. “When you have a product with a lot of new technology or an entirely new vehicle program, especially one that is as different and advanced as the Cybertruck, you have to have a lot of new things in proportion to how many new things you’re trying to solve.” There will be problems. scale.”
He later added: “A lot more work will be required to reach mass production at a price people can afford and be cash flow positive.”
The Cybertruck has already undercut Tesla’s earnings. The company on Wednesday reported third-quarter net income of $1.85 billion, driven by declining margins due to repeated price cuts of its EVs as well as increased operating expenses on its Cybertruck, AI and others in the same year. There is a decline of 44% compared to the same period. Research and Development Programme. Tesla’s operating expenses in the third quarter were $2.4 billion, up 43% from the same period last year.
This lack of profitability for the Cybertruck presents a challenge for Tesla.
The company continues to grow in terms of footprint, people and programs like Cybertruck – meaning spend more money. And while it still leads EV sales in North America by a wide margin, the company’s strategy of lowering prices has steadily eroded its margins. Industry watchers worry that some signs of EV demand slowing will force Tesla and other automakers to continue cutting prices.
Meanwhile, no other new Tesla models are expected in the near term, which could further reduce profits.
And while its free cash flow declined to $848 million in the third quarter, Tesla is sitting on $26 billion of cash, cash equivalents and investments, leaving it with plenty of wiggle room. Whether shareholders will remain patient is unclear.
