Elon Musk, the CEO of Tesla, issued a warning on Wednesday regarding the upcoming release of the Cybertruck (pictured above). This warning may resonate with those who closely followed the company’s challenges during the Model 3 production phase.
Musk emphasized that due to production challenges, Tesla will lose money on the Cybertruck for some time. He estimated that it would take approximately 18 months for the Cybertruck to generate positive cash flow. Musk described the vehicle’s growing pains as “simply normal.”
Musk predicted that by 2025, once Tesla overcomes these production hurdles, the company will be producing around 250,000 Cybertrucks annually.
However, skeptics believe that the Cybertruck could be unprofitable for much longer. Musk has a history of being overly optimistic regarding the Cybertruck. The vehicle’s launch date was delayed five times, as reported by Jalopnik.
Initial production of the Cybertruck has already started at Tesla’s Giga Texas factory near Austin. Musk announced that the first deliveries of the Cybertruck will take place during an event on November 30 at the factory. Additionally, he confirmed that there are over 1 million refundable reservations for the Cybertruck, which was first unveiled in 2019.
The unprofitability of the Cybertruck is currently posing a challenge for Tesla.
According to TechCrunch, the company’s net income decreased by 44% year-over-year in the third quarter. This drop was largely due to increased operating expenses related to the Cybertruck. Tesla’s operating expenses in the third quarter were $2.4 billion, a 43% increase from the previous year.
The Cybertruck’s unconventional, futuristic design means that production costs are much higher than for more typical vehicle models.
Even with the excitement generated by this week’s announcement of the Cybertruck launch date, Tesla remains in a difficult spot.
The company is experiencing continuous growth, particularly in terms of its presence and workforce. However, its strategy of reducing prices has resulted in shrinking profit margins.
Moreover, industry watchers are warning about a potential decline in EV demand in the near future. If this happens, Tesla may be forced to slash prices even more.
Additionally, there are no new Tesla models anticipated in the near future, which could further impact profits negatively. Despite a decrease in free cash flow to $848 million in the third quarter, Tesla still holds a substantial $26 billion in assets, which provides some flexibility.
It remains uncertain whether shareholders will maintain their patience.
Image Source: Mukul Pathak, https://shorturl.at/bEV19