Elon Musk Sets 18-Month Timeline For Cybertruck Profit

Elon Musk, the CEO of Tesla, warned on Wednesday about the upcoming Cybertruck, which will sound familiar to anyone who followed the firm during the "production hell" period of the Model 3.

The core idea? A truck such as the Cybertruck is hard to expand, and it will take some time before it turns a profit. Musk said that it would take the Cybertruck around 18 months to become profitable.

He predicted that by 2025, Tesla will be churning out "roughly" 250,000 Cybertrucks a year after addressing these manufacturing challenges.

The Cybertruck's pilot production has commenced at the company's Giga Texas factory, which is located close to Austin. The first Cybertrucks will be delivered at a manufacturing ceremony on November 30, according to Musk's statement on Wednesday.

He further stated that since the Cybertruck's 2019 debut, more than a million refundable reservations have been made.

“I do want to emphasize that there will be enormous challenges in reaching volume production with the Cybertruck and then making the Cybertruck cashflow positive — this is this is simply normal,” Musk said during Wednesday’s third-quarter earnings call, later emphasizing that he believes this is potentially the company’s best product ever. 

“When you’ve got a product with a lot of new technology or any brand new vehicle program, especially one that is as different and advanced as the Cybertruck, you will have problems proportionate to how many new things you’re trying to solve at scale.”

He later added: “It is going to require immense work to reach volume production, and be cashflow positive, at a price that people can afford.”

Tesla's profits have already suffered due to the Cybertruck. The company on Wednesday revealed its third-quarter net income of $1.85 billion, a 44% decrease from the same time last year. This decline was attributed to both growing operating costs for its R&D programmes, including Cybertruck and AI, and declining margins brought on by the company's periodic price reductions of its EVs.

In the third quarter, Tesla's operational expenses totalled $2.4 billion, a 43% increase over the same period the previous year.

For Tesla, this gap in Cybertruck profitability is a problem.

The company keeps expanding, which means it is spending more money on personnel, projects like Cybertruck, and physical space. Furthermore, despite maintaining a significant lead in EV sales in North America, the company's price-cutting tactics have significantly lowered its profitability.

Industry observers are concerned that given certain signs of waning demand for EVs, Tesla and other automakers may need to keep slashing prices.

Additionally, the absence of any upcoming new Tesla models could further hurt earnings in the near future.

Tesla still has a lot of room to manoeuvre even though its free cash flow decreased to $848 million in the third quarter due to its $26 billion worth of cash, cash equivalents, and investments. It's questionable if investors will have patience.