How will Cybertruck shape the future of Tesla and the car industry?
With exceptional performance and exceptionally good price the Tesla Cybertruck could radically alter Tesla’s product strategy and force the rest of the industry to adapt.
The Cybertruck is often compared to the price of gasoline trucks, where it in comparison offers quite a good price but if you actually compare it to the other offerings of Tesla, the price is quite frankly shockingly low.
A Tesla Model X costs $85,000 for the long range and $105,000 for the high performance version. The midrange Cybertruck which is most comparable in range is sold at about $50 000, but you can get a cheaper version for $40,000.
That is more than 40% lower price for a car which is actually larger and in many regards offer more utility. Many people in my native Norway like the Model X, because it is good to go the cabin with, bring with skis, hiking equipment etc. The Cybertruck will be even more cable.
That kind of radical improvement in bang for the buck is not going pass by without having some major impact on Tesla and the car industry itself.
At this point you may be think “yeah, but is it even realistic that it will be this cheap to make the Cybertruck?” And of course it could be they just plan on selling a few at a loss or have significantly smaller margins than on other cars.
But as I have detailed before, I think this low price is a real thing, and it derives from clever design choices.
What if Cybertruck Becomes a Hit?
The big question for Tesla and the rest of the car industry is what do you do if Cybertruck becomes a reality and it is a hit in the market? For Tesla, they suddenly have a formula for how to make cars with impressive specifications at a low price, but it means some sacrifices. It means a flat angular look and no paint job.
But what if consumers love it? Do they replace their existing lineup of Model 3, Model S and Model X with angular Cybercars? It would allow them to lower their price and hence more easily outcompete their gasoline rivals.
Or should they simply keep their existing lineup of cars and simply add a whole new Cybercar lineup? So you can get a Cybercar SUV, a Cybercar sedan etc. It will be cheaper, tougher versions likely with lower acceleration. I suspect a stainless steel version of Model S will weigh more and hence not offer the same acceleration.
The rest of the car industry will be in a jam. Disruptors are hard to deal with. They can so radically alter the game, that there are no safe choices anymore. Keep doing what you have always done, and you risk the market shifting to the disruptor which can offer a crazy looking car which happens to be the new aesthetic and offering better performance and lower price.
The problem with disruption is you have no idea where it is going. It could be a flop or a fad. I remember when iPhone and iPad assaulted the market. A lot of the traditional PC guys were convinced it was a temporary fad.
My prediction is that the Cybertruck will be a hit, although I am sure it will be off to a rough start as almost all Tesla products. They will likely not meet their announced delivery time, and because it will be a different manufacturing process, they will have struggles getting it up and running.
I am going to go out on a limb a guess that their initial 2021 release will not be met, but that they will instead start delivering early 2022. However expect production problems for at least half a year, limiting their output. It requires a whole new production process, an Elon Musk being Elon Musk is probably being over optimistic about how quickly they can learn to do this new process.
However Elon, must have learned something from the Model X and Model 3 release, so expect him to be better at getting the time estimates right this time.
The first trucks will likely have some flaws they have to fix up.
However I think ultimately the initial release will be far more successful than the truck competition is expecting. The response thus far has been much like Microsoft’s Steve Balmer’s response to the original iPhone. Steve Balmer famously burst out of laughter at the suggestion that iPhone would be a serious competitor.
There’s no chance that the iPhone is going to get any significant market share. No Chance.
It was too different and weird for what Steve Balmer was used to to take serious. It didn’t have a physical keyboard so it was useless for businesspeople he said. We see much of the same response from truck executives at established car makers. They say Tesla will not be able to deliver the features promised at the price point promised. Ironically they had said this ever since the original Tesla roadster was released.
Here is a statement by Chesty Trucks President of Automotive Sales Bob Hanks, which will be interesting to review again once the Cybertruck is out:
I’m sorry, but you simply cannot mass produce stainless steel, and there is no machine on earth — and never will be one — that can produce that ‘exoskeleton,’ which appears to be something Elon Musk sketched while on a Moonhopper flight. To be honest, approximately 50% of the components of the Cybertruck have never been seen before, cannot be produced in this world’s current laws of physics, and appear to have been lifted from a video game toolbox.
Auto-executives are basically laughing at the Cybertruck. Here is another one capturing their sentiment, from The CEO of BustaNut Trucks:
While Silicon Valley is good at cyber, we’re good at horsepower and princess wagon towing. We haven’t had any customers come and ask us for self-driving software, Netflix, or a solar panel tonneau. We’re not worried about this sissy girl stuff!
Of course basing your argument on what customers have said they want is not exactly a receipt for being ahead of the curve. As Henry Ford famously said:
The problem for auto-executives will be a repeat of what happened with iPhone and the Tesla Model S. They will have slept well in their beds and ignored the challenge. When they realize they got a problem on their hands they are scrambling to catch up but they are already several years behind.
Don’t expect Cybertruck to be a massive hit over night. It will be more popular than the established players predict initially but truck drivers are not going to be running down the store to get one initially.
Gaining marketshare and mindset will be a gradual process. As Cybertrucks start getting on the road and people get experience with them sales are going to pick up momentum. Nobody sells a product better than an existing happy user.
A lot of truck driver are initially going to go “I am not going to buy that ugly thing!” But a lot of them will be curious. If a friend gets one they are going to want to take a drive and see what it is like. Over time consumer will start to see past the look or even love the look and decide that they want one because it has a compelling set of features at competitive prices.