“We dug our own grave with Cybertruck,” Tesla CEO Elon Musk said during the company’s Q3 earnings call on Wednesday night. “Special products that come along once in a long while are just incredibly difficult to bring to market, to reach volume, to be prosperous. It's fundamental to the nature of the newness.”
Despite the company finally revealing a November 30 delivery date for the Cybertruck, for at least a few select customers, Musk warned of “enormous challenges” in ramping up Cybertruck production and that volume production of 250,000 units would not be reached until 2025.
While Tesla and Musk are confident in the Cybertruck demand story, it seems that hasn’t been the case for other EV pickups that are currently on the market.
‘Evolving EV demand’
The Lightning has been well-received as a product, though not without some challenges, including a battery defect that affected production earlier this year and other teething pains. While the truck sold well following its release last year, recently sales have been challenged. Ford reported in Q3 that Lightning sales fell 46% year over year to 3,503 vehicles sold.
This subsequently led to Ford temporarily cutting a shift at its F-150 Lightning electric pickup plant in Detroit. Though Ford didn’t indicate demand was a problem, the Wall Street Journal reported a United Auto Workers (UAW) official connected with the Lightning’s Rouge assembly plant claiming that “it doesn’t take a rocket scientist to figure out that our sales for the Lightning have tanked.”
Cost may be the biggest issue for Ford at the moment. “Consumers might be hesitant to pay 24% more for an EV pickup [versus a gas-powered truck] which could be causing [automakers] to rethink their EV pickup strategy until they can make them more cost competitive,” online car shopping site CarGurus CEO Kevin Roberts said to Yahoo Finance. Roberts notes the average new listing price on CarGurus (CARG) at the end of September for a F-150 Lightning was nearly $76,000, while a regular gas-powered F-150 was around $61,000.
Ford’s crosstown rival GM (GM) has also been hearing the rumblings of demand drying for EV pickups. GM said it will delay the conversion of its Orion Assembly plant in Michigan, which was supposed to be repurposed for the production of the Chevrolet Silverado EV and GMC Sierra EV pickups, and will push production to late 2025 in order to “better manage capital investment while aligning with evolving EV demand.”
“Evolving EV demand” is the key phrase here, as GM just started deliveries of its Silverado EV work truck for commercial customers.
“Brands like Chevrolet, Ford, and GMC made assumptions about what percentage of their future truck sales would be electric trucks. It’s clear those assumptions were unrealistic based on the current and near-term future demand for these models,” iSeeCars analyst and longtime industry watcher Karl Brauer said to Yahoo Finance.
Brauer noted electric trucks, compared to standard EVs, cost more up front and require an even larger dedicated space to store and charge. “Now roll in their compromised real-world functionality, with shorter ranges even before adding passengers, payload, or a trailer, and your potential buyers get pretty scarce compared to tractional trucks,” he said.
Ford addressed pricing concerns recently with new incentives in the form of $7,500 cash rebates for certain trim levels of the Lightning. With Ford already burning through billions on its EV efforts, price cuts like these will only eat deeper into Ford’s already negative margins for EVs.
The Rivian factor, and lifestyle buyers
Rivian with its pickup and just released R1S SUV have seen deliveries pickup recently, even as it raised prices after selling out its initial cheaper orders. Rivian delivered 15,564 vehicles in the third quarter, beating Wall Street estimates and up 23% from the second quarter. Rivian also confirmed its 52,000 unit 2023 production goal, as it tries to meet demand for its trucks.
Rivian never tried to address the work truck market like Ford and GM; Rivian targeted coastal and higher income buyers who were more interested in recreational activities. Though Rivian is far from profitable, it has been cutting costs and predicts gross profits by 2024.
Brauer says Rivian’s success illustrates the variation in market appetite between electric SUVs and adventure pickups, and electric work trucks. “The overwhelming majority of truck buyers purchase their vehicles to satisfy real-world demands that no other vehicle can satisfy. It appears electric trucks aren’t yet capable of satisfying those needs.”
“Tesla’s customer profile is all about early adopting, ensuring plenty of initial excitement for its first truck.
But ... Tesla's buyers are not, by nature, truck buyers. And truck buyers, as we now know, are not by nature electric vehicle buyers. After the initial rush, Cybertruck sales will be like Model S and Model X sales — a fraction of Tesla’s total volume.”
While Ford and GM look to invest in their EV future and try to cater to both professional and recreational electric truck buyers, they have other problems at hand which may be curtailing ambitions EV plans. GM, Ford, and Stellants, are still embroiled in a bitter UAW contract negotiation.
“Uncertainty regarding the UAW strike, and the potential cost of the next labor contract, could be leading to [GM, Ford, and Stellantis] looking to closely watch expenses until a new contract is agreed upon,” CarGurus’ Roberts said.
One company that’s targeting that adventure and recreational user, and doesn’t have the UAW contract overhang, is the aforementioned Tesla. And this may provide it a leg up in the unfolding EV pickup wars.
“The elephant in the room is the coming Cybertruck,” Roberts said. “If it’s a hit then we’ll probably see OEMs [original equipment manufacturers] get more aggressive with launches.”
ISeeCars’s Brauer predicts a big initial reaction for the Cybertruck, but mass adoption isn’t likely.
“Tesla’s customer profile is all about early adopting, ensuring plenty of initial excitement for its first truck. But when it comes to long-term demand and sales volume, it will not be another Model Y,” Brauer said. “Tesla's buyers are not, by nature, truck buyers. And truck buyers, as we now know, are not by nature electric vehicle buyers. After the initial rush, Cybertruck sales will be like Model S and Model X sales — a fraction of Tesla’s total volume.”
Tesla, and its legacy rivals Ford and GM, will be hoping truck buyers will eventually embrace EV pickups as pricing comes down and charging infrastructure improves. It just may not come soon enough as precious capital is allocated for products that consumers want right now, or at least in the near future.