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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Well, it’s finally here. Sort of. Tesla’s PS1-vector-styled memetruck is available to order now for $60,990 in its most basic form (though at that price it won’t be arriving until 2025 at the earliest and the optional extras include paint, floor mats and a ladder).
What Thursday’s Cybertruck launch did do was cause another glut of media stories about Cybertruck. For November Factiva logged 1,072 individual stories in the global English-language press, which made it the third most Cybertrucky month of the year to date:
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That’s 10,931 Cybertruck stories in the first 11 months of 2023 for . . . . how many Cybertrucks exactly? Here’s what Morgan Stanley expects.
We forecast 50 deliveries in FY23 followed by 30,000 units in FY24 and 78,000 units in FY25. Our ATP assumption starts at $90k and falls to $84k by 2025. We expect ‘Cybertruck’ will be supplemented by a range of ‘Rivian-looking’ pickups and SUVs in the latter part of the decade with a design language more consistent with prevailing Teslas.
Yep. Fifty. Year-to-date, that’s 218.62 stories per truck that might be delivered.
Based on the current run-rate the ratio might fall to 0.4 new stories per truck in 2024, though Tesla’s track record of meeting expectations has put some fairly wide error bars around that estimate.
We’re being facetious for a reason. The value to Tesla from making weird-looking novelties that people gawp at isn’t solely economic. It’s not economic at all, even at a starting price that’s 56 per cent higher than the one announced in 2019. Morgan Stanley again:
By 2025, we forecast Cybertruck will account for less than 5% of Tesla revenues and closer to 0% of profit. A part of Tesla’s brand allure and engineering philosophy involves following through on various ‘moonshot’ projects that are intended to push the collective engineering team to tackle audacious, difficult projects with the intention of improving more mainstream products over time.
And RBC Capital Markets:
This pricing is at the high end of what we expected, and supports our view that conversion rate on the 1M + reservations will be low, likely under 20%. However, this shouldn’t be a factor through 2024 as we don’t expect Tesla to deliver a cumulative 200k units until well into 2025. The base model is available starting in 2025, so the starting price through 2024 is $80k. We expect this pricing to ultimately come down after deliveries to early adopters. We think this pricing compares favorably compared to other offerings from Rivian and Ford. At only 3% of total Tesla volumes in 2024, we don’t expect Cybertruck to be much of a margin headwind in 2024, especially given the limited impact of the larger scale ramps in China, Texas (Model Y), and Berlin. Cybertruck is more of a ‘’halo’‘ product, in our view, to attract consumers to the brand for the mainstream vehicles Model 3 and Model Y.
Which raises the question, why bother selling it at all? Why not leave it as a concept? Quite a few analysts say the thing would be more valuable to Tesla dead than alive; Jefferies’ Nitij Mangal argued earlier this month that cancelling the project would be “climbing out of self-dug holes”.
1) Cybertruck “off-mission” – Modest incr. growth, no mfg leverage, drags on profit/cash (incl capex guidance raised twice) all suggest Cybertruck diverted resources from high volume global segments and supply of 4680 for Model Y.
2) Double negative on affordability – Higher rates are impacting all OEMs but bigger cuts in new prices have dragged residual values c.10 ppts lower than new, a bigger than peers drag on affordability. Allocating capital to support residuals would be a better use than Cybertruck.
Morgan Stanley’s Adam Jonas suggests damage would me minimised in the middle ground, where Cybertruck joins all those other Tesla-badged novelties and is turned into a very, very, very limited edition:
By Elon Musk’s own admission, the Cybertruck is an extraordinarily difficult product to manufacture at scale and will not be profitable for some time. While we expect Cybertruck to be made in significant volumes (yes, you will see this truck at tailgates and soccer practice drop-offs), we believe the company may decide to purposely limit series production to maintain scarcity while focusing company resources on more profitable products. There are historical precedents for models with limited production (Aston Martin produced 645 units of the Lagonda) as well as more recent precedents (Ferrari Daytona SP3 limited to 599 units). Collectors can find bottles of Teslaquila or the Boring Company ‘Not a Flamethrower’ for sale on eBay for thousands of dollars.
… though they can also find plenty of Tesla merch on sale for dozens of dollars, including the novelty tequila that once retailed at (obviously) $420 a bottle.
The thing about the halo effect is that halos don’t really exist. Musk’s problem with the Cybertruck is that it now does.
