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Add Tesla (TSLA) to the list of automakers that retain electric pickup trucks.
“We dug our own grave with Cybertruck,” Tesla CEO Elon Musk said Wednesday afternoon on the company’s third-quarter earnings conference call. “The specialty products that pop up from time to time are incredibly difficult to market, to succeed in volume, and to be successful. This is basic to the nature of novelty.
Although the company eventually revealed a Nov. 30 delivery date for the Cybertruck, at least for some customers, Musk warned of the “enormous challenges” of ramping up production of the Cybertruck and that volume production of 250,000 units would not be reached until 2025. .
While Tesla and Musk are certain of the demand for Cybertruck, it turns out that this hasn’t been the case for other electric pickup trucks that have appeared on the market lately.
Take the Ford (F) F-150 Lightning pickup truck as an example.
The Lightning has been well-received as a product, but not without some challenges, adding a battery failure that affected production earlier this year and other initial aches and pains. Although the truck sold well after its launch last year, sales have increased recently. It has been put to the test. Ford reported in the third quarter that Lightning sales fell 46% year-over-year to 3,503 cars sold.
This prompted Ford to temporarily cut a position at its F-150 Lightning electric pickup truck plant in Detroit. While Ford didn’t imply that call for a problem, the Wall Street Journal reported that a United Auto Worker (UAW) official connected to the Lightning’s Rouge meeting plant claimed that “it doesn’t take a genius to realize that our Lightning sales have dropped.
Cost is perhaps the most important factor for Ford right now. “Consumers might be hesitant to pay 24% more for an EV pickup truck [compared to a gas-powered pickup truck], which may cause [automakers] to rethink their EV pickup strategy until it can make them more competitive,” online food shopping site CarGurus told Yahoo Finance. CEO Kevin Roberts. Roberts notes that the average value of a new directory on CarGurus (CARG) at the end of September for an F-150 Lightning is about $76,000. while a regular F-150 with a gas engine costs about $61,000.
Ford’s rival, GM (GM), has also heard rumors that demand for electric pickup trucks is drying up. GM said it would delay the conversion of its Orion assembly plant in Michigan, which is finished to be reused for production of the Chevrolet Silverado EV. and GMC Sierra EV pickup trucks, and that it would delay production until the end of 2025 to “better manage capital investments,” while aligning with EV conversion demand.
“Evolving demand for electric vehicles” is the key word here, as GM has begun deliveries of its Silverado EV pickup truck for advertising customers.
“Brands like Chevrolet, Ford, and GMC have made assumptions about what percentage of their long-term pickup truck sales would be electric pickup trucks. It’s clear that those assumptions weren’t realistic, given the existing, short-term demand for those models,” iSeeCars longtime industry analyst and observer Karl Brauer told Yahoo Finance.
Brauer noted that electric trucks, compared to popular EVs, charge earlier and require an even more dedicated area for garage and charging. “Now, integrate your committed features into the real world, with shorter levels even before loading passengers, payload, or towing, and your prospective buyers become infrequent compared to traction trucks,” he said.
Ford recently addressed its pricing issues with new incentives in the form of $7,500 cash rebates for Lightning trim levels. While Ford is already spending billions on its EV efforts, price cuts like those will only further impact Ford’s already negative EV margins.
All is not lost for the electric pickup industry, when you think of traditional pickup trucks like Rivian’s R1T (RIVN) pickup truck.
Rivian, with its newly launched R1S pickup truck and SUV, has recently noticed an increase in deliveries, though it has raised prices after selling its first orders cheaper. Rivian delivered 15,564 vehicles in the third quarter, beating Wall Street estimates and more. 23% compared to the second quarter. Rivian also showed its production target of 52,000 units through 2023 as it tries to meet demand for its trucks.
Rivian has never tried to cater to the work truck market like Ford and GM; Rivian targeted coastal and higher-income buyers who were more interested in recreational activities. Although Rivian is not profitable, the company has reduced prices and expects to make a gross profit through 2024.
Brauer says Rivian’s good fortune illustrates the variation in market appetite between electric SUVs, adventure trucks, and electric pickup trucks. “The overwhelming majority of truck buyers buy their cars to meet genuine demands that no other vehicle can meet. As it turns out, electric pickup trucks aren’t yet capable of meeting those needs.
“Tesla’s visitor profile is all about early adoption, which ensures a lot of initial excitement for their first truck.
But. . . Tesla buyers are truck buyers by nature. And truck buyers, as we now know, are EV buyers by nature. After the initial avalanche, Cybertruck sales will be comparable to sales of the Model S and Model X — a fraction of Tesla’s total volume.
As Ford and GM look to invest in their EVs for the long term and try to cater to the desires of buyers for professional and recreational electric pickup trucks, they face other issues that may curb their EV ambitions. GM, Ford and Stellants are still concerned about acrimonious contract negotiations with the UAW.
“The uncertainty over the UAW strike and the potential charge of the next hard work contract may cause [GM, Ford and Stellantis] to keep a close eye on spending until a new contract is reached,” CarGurus’ Roberts said.
One company that targets this adventure and recreation user, and doesn’t have a surplus contract with the UAW, is the aforementioned Tesla, and that could give it an edge in the electric pickup truck war that’s unfolding.
“The elephant in the room is the next Cybertruck,” Roberts said. “If it’s a success, we’ll most likely see OEMs [OEMs] more competitive with launches. “
ISeeCars’ Brauer predicts an initial reaction to the Cybertruck, but mass adoption is unlikely.
“Tesla’s visitor profile is all about early adoption, which ensures a lot of initial excitement for their first truck. But in terms of long-term demand and sales volume, it’s not going to be the Model Y,” Brauer said. “Tesla buyers are not, by nature, truck buyers. And truck buyers, as we now know, are not natural buyers of electric vehicles. After the initial avalanche, Cybertruck sales will be comparable to sales of the Model S and Model X — a fraction of Tesla’s total volume.
Tesla and former rivals Ford and GM expect pickup truck buyers to embrace electric pickup trucks as costs come down and charging infrastructure improves. This may not happen soon enough, as valuable capital is being allocated to products that consumers need now, or at least in the near future.
Pras Subramanian is a journalist for Yahoo Finance. You can see him on Twitter and Instagram.
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