Luxury electric-vehicle maker Tesla (TSLA) held its Cybertruck event several weeks ago at the company’s headquarters in Austin, Texas, during which the futuristic-looking vehicle reached its first batch of customers four years after its debut.
While celebrating the company’s new and unconventional Cybertruck pickup, CEO Elon Musk predicted the truck would usher in a new, more exciting future. But depending on who you ask, there will be a range of opinions as to the long-term potential of the Cybertruck and its ability to unlock value or provide Tesla a competitive advantage in the quarters and years ahead. For 2024, Wall Street analysts were forecasting Tesla to show more than $21 billion of revenue growth.
In that regard, the U.S. electric pickup truck market, while the leading players are moving 400 to 800 thousand units annually, the broader market has not expanded the way that EV sedans have. As such, some OEMs, including both Ford (F) and General Motors (GM) are scaling back EV trucks until demand picks up. Many thought the electric pickup truck market would have grown much faster when the Cybertruck was initially revealed in 2019.
However, unlike the current EV trucks on the market, the Cybertruck is poised to unlock a substantial new market for Tesla to expand its presence in the broader automotive sector. The Cybertruck can help drive annual sales of pickup trucks in the U.S. towards a noteworthy milestone of 3 million units. Assuming Tesla’s Cybertruck captures, say, just 10% of this market, this would add roughly $20 billion $30 billion in annual revenue for Tesla, potentially surpassing many existing analysts’s estimates.
Looking out to 2024, the Cybertruck is poised to generate considerable demand, given its intriguing and polarizing and unconventional design, and how it is enveloped in a specialized stainless steel alloy body. As such, Tesla may likely enjoy a wonderful problem of having sales exceed initial projections. That said, all of the unconventional appeal raises questions for the feasibility of not only mass production, but also the task of expanding production, a historically challenging feat for Tesla.
Musk, during the company’s third-quarter earnings call with analysts, sought to lower expectations for the Cybertruck. “I want to underscore that there will be significant challenges in achieving volume with the Cybertruck,” Musk said, noting that it would take roughly a year or more before Cybertruck revenue can becomes a “meaningful positive cash flow contributor” to Tesla’s quarterly results. In the Q3 shareholder letter, the company listed initial production capacity at 125,000 Cybertrucks.
In August, Musk sent an email memo to Tesla employees, stating, “due to the nature of Cybertruck, which is made of bright metal with mostly straight edges, any dimensional variation shows up like a sore thumb.” Understanding the constraints of the design, Musk highlighted in the memo that all vehicle components “must be designed and built to sub 10-micron accuracy.”
Nevertheless, at peak production capacity, the company plans to produce around 375,000 Cybertrucks annually. This includes reaching an annual run rate of about 250,000 sometime in 2025. Is the Cybertruck a gamble for Tesla? Without a doubt it is. But so was the original roadster, the Model S, the Model 3 and several more products that have been launched. The biggest gamble of them all was betting on an EV market that didn’t exist.
In the case of the Cybertruck, it is no exception to other bets Musk has made. The truck, which has received two million pre-orders, is another gamble that should pay off handsomely for the company and help expand the broader Tesla growth story over the coming years.
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