Tesla CEO Elon Musk issued a warning during the company’s third-quarter earnings call about the upcoming Cybertruck, stating that it will not be profitable until 2025. This announcement echoes the challenges Tesla faced during the production of the Model 3, referred to as the “production hell” era.
Key Takeaway
Tesla CEO Elon Musk warned that the Cybertruck will not be profitable until 2025. Musk emphasized the challenges associated with scaling production and achieving profitability for a vehicle like the Cybertruck. Despite Tesla’s ongoing growth and leadership in the EV market, the repeated price cuts of its EVs have impacted the company’s margins. The delayed profitability of the Cybertruck presents a challenge for Tesla’s financial performance, especially as there are no other new models expected in the near term.
Scaling Production and Profitability Challenges
Musk emphasized that scaling the production of a vehicle like the Cybertruck is a complex task and will take time before it becomes cash flow positive. He estimated that it will take approximately 18 months for the Cybertruck to achieve profitability. Musk further predicted that by 2025, Tesla will be manufacturing around 250,000 Cybertrucks per year.
Cybertruck Production Updates
Pilot production of the Cybertruck has already commenced at Tesla’s Giga Texas factory near Austin. Musk confirmed that the first deliveries of the Cybertruck will take place during an event on November 30 at the factory. He also revealed that there are more than 1 million refundable reservations for the Cybertruck, which was initially unveiled in 2019.
Musk acknowledged the challenging road ahead for Tesla in terms of achieving volume production and making the Cybertruck cash flow positive. He highlighted that such difficulties are normal when dealing with a product that incorporates new technologies and represents a significant leap forward, like the Cybertruck.
However, Musk expressed confidence in the Cybertruck, stating that he believes it has the potential to be the company’s best product ever. He also emphasized that reaching volume production and profitability at an affordable price will require significant effort.
Impact on Tesla’s Earnings
Despite its growth and status as the leader in North American electric vehicle (EV) sales, Tesla has experienced a drop in net income in the third quarter. The company reported a 44% decrease in net income, amounting to $1.85 billion, primarily due to shrinking margins resulting from repeated price cuts on its EVs and increased operating expenses related to the Cybertruck, artificial intelligence, and other research and development programs. Tesla’s operating expenses saw a 43% increase to $2.4 billion compared to the same period last year.
Challenges Ahead
The delayed profitability of the Cybertruck poses a challenge for Tesla. The company’s ongoing expansion, coupled with the development of the Cybertruck and other programs, requires substantial financial resources. While Tesla still has a significant amount of cash on hand, there are concerns about reducing profit margins due to price cuts as well as indications of potential softening demand for EVs. Additionally, the absence of any new Tesla models in the near future could further impact profitability.
