Cybertruck has finally been unveiled. After being told it was going to “blow your mind” (boy, was Kimbal right!) and consequently having my mind blown with what I still assert is a ludicrous design, I finally got around to asking the real question: is this going to be any good for the company? $TSLA fell a hair over 6% the day after the unveiling (on a day where the S&P 500 ticked ever-so-slightly up, and automotive companies like $F and $GM both rose by about 2%), so clearly the initial reaction from investors wasn’t favorable. Indeed, I decided during the unveil that I’d be selling all of my shares the next morning for two reasons:

1. Pricing. Cybertruck is incredibly cheap for what it offers. Even if it won’t be available until 2021 (2022 for the tri-motor version), I worried that margins would be low on a vehicle that offers 500 miles of range [1] for $70k, or 250 miles of range (in a pickup body, which implies a higher battery capacity) for $40k. Even though pickup trucks are the cash cows of Ford and GM, I wasn’t sure that Tesla would be able to achieve the same gross margins as the company was accustomed to (especially when the Standard Range Plus Model 3 is $39,000).

2. Design. Simply put, if a design is called “polarizing”, someone’s probably trying to avoid using the word “ugly”. I used the words “ludicrous design”, which again is my way of saying “ugly”. A large part of what made Tesla successful as it grew where other companies failed was that its EVs didn’t look dorky or different for the sake of being different; the Model S looked familiar and approachable. Tesla’s Model X and Model 3 certainly have a fair number of people that can rightfully complain about certain styling cues or quirks (e.g. the bulbous rear-end on Model X, the strange lip on the Model 3), but ultimately the cars look similar to other vehicles in their class. Cybertruck, however, does not look like another pickup truck, and I worried that its design would limit its appeal to the buying public.

the morning after

And so, I liquidated my position. Since that reactionary decision, however, there’s been a ton of information that I realized wasn’t in the actual presentation. We learned more about the function of the design (and how much more simple production would be) thanks to a MotorTrend article, that 200,000 people (and counting) have given Tesla $100 for a mere spot in line, and that the vast majority of those line-waiters have stated the desire to purchase dual/tri-motor trims. Perhaps I was wrong to worry about pricing and margins - in the next few years, surely Tesla will be able to continue driving down the cost of battery/vehicle manufacturing and find margins there.

However, I’m still not sure about whether the design is right. 200,000 people may have given the company $100 for a spot in line, but $100 isn’t all that much money for a minimum-$40,000 vehicle and I don’t know what the actual conversion rate will be in a field that’s bound to become more competitive (it is, however, the best gauge of demand that we have to go off of.) Customer demographics are incredibly important here to determine if Tesla made the right call in designing a Blade Runner retro-futurist Thing (i.e. Cybertruck) instead of just a normal-looking pickup truck with an electric powertrain and a minimalistic cabin (what I’ll call a “Tesla F-150”). From what I can tell, much of the functionality (e.g. Tesla Armor Glass, the versatile bed, the usual crazy performance numbers) isn’t inextricably linked to the weird design, and Tesla could have put many of those things into a Tesla F-150.

So, the questions in my mind include:

1. How will the current, existing customer base for pickups react? Will Cybertruck steal market share from other pickups?

2. How will non-pickup-drivers react? Will Cybertruck grow the market overall for pickups?

3. How will current Tesla owners react? Will there be cannibalization?

ford, gm, and fca are sleeping well

Ultimately, I don’t think Ford, GM, and FCA are going to worry anytime soon about Cybertruck stealing market share from the F-150 or Silverado. Pickup truck brand loyalty is insanely high, and most of the existing pickup market is dominated by Detroit, despite Toyota and Honda both trying to break into the market:

Generally speaking, I just don’t think that the current pickup truck buyers - mostly men, mostly representing heavier industries (e.g. construction, agriculture, etc.) - are going to see the appeal in a trapezoid-on-wheels. Besides, if the Mach-E is anything to go off of, Ford’s inevitable electric F-150 will be a solid product when it finally launches, and I’m betting that more traditional pickup buyers will prefer a more traditional design.

But would a Tesla F-150 have been able to crack the market? Autopilot and an insane powertrain are great selling points for sure, but would current pickup buyers have actually switched from their current vehicles? Even for the Ram 1500, F-150, and Silverado, loyalty doesn’t crack 50%, which means that over half of all pickup buyers aren’t buying the same car again. There are so many different arguments that could be made on both sides.

growing the market

Will Cybertruck attract new customers? Unfortunately, I don’t know how many of the 200k line-waiters are from people who don’t currently own pickup trucks. If I’m being logically consistent with the previous section, then most of them are probably new to the pickup segment. However, we don’t know what the conversation rate will be like from $100 deposit to actual $40/50/70K check, and we don’t know the full number of non-pickup-owners that would be interested in Cybertruck.

From people that I’ve talked to, nearly everyone that thinks the Cybertruck looks good (these people exist!) is on the early-adopter side of the spectrum for technology in general, which implies that people that have never owned a pickup truck (much less thought about getting one) are interested in Cybertruck. I’m not getting the best sample, since nearly all of my friends are EE or CS-types, and disproportionately from well-off backgrounds in urban and suburban parts of Texas. At the same time, this raises a major concern: what if the strong initial demand comes only from early adopters? That is, what if early adopters have product desires so different from the rest of the market that Cybertruck will fail to cross the chasm?

While a Tesla F-150 wouldn’t pull in as many non-pickup-owners as Cybertruck will, I feel confident saying that it’ll have more long-term mass-market appeal. The Cybertruck design is polarizing, and most people wouldn’t be caught dead in the rendering-in-progress.

cannibalization

It seems ludicrous to assume that a pickup could steal sales of a sports-sedan. After all, who would want a nimble, quick sedan and instead get a heavy, large pickup? To be clear, I don’t think that many people would. However, there is likely a not-insignificant portion of Tesla buyers that merely want a Tesla, as opposed to a Model S/3/X/Y. These buyers may wonder why they should drop $39,490 on a Model 3 Standard Range Plus when they could spend an additional $410 and get a vehicle that’s far more utilitarian (both in terms of seating and storage), has similar handling, and has similar autonomous driving capabilities.

Again, I don’t think that the person of people indecisive between a pickup truck and a sports sedan is large. I do, however, think that the number of people who just want any Tesla is nonzero, and I wonder if that represents a threat to Model 3 demand. In any scenario, I don’t know if Cybertruck pricing makes sense yet within the Tesla product portfolio. I also don’t know enough about trucks to make comparisons to Ford/GM/FCA products, so it’s unclear to me which trim packages align with Cybertruck.

so, was cybertruck the right call?

I don’t know, and I don’t know that anyone does. I do know breaking into the market requires getting noticed with a product that isn’t a duplicate what of your competitors offer you, especially when brand loyalty is high. I know that Cybertruck’s ability to cross the chasm is something that worries me, and yet I wonder if a Tesla F-150 would have received traction in the first place. I’d love to hear what y’all think.

[1] If you’re towing something heavy, I expect range to dip drastically, and I can imagine that that’s what drove Tesla to offer a 500-mile-range variant. Based on this video, towing could realistically half the range (and maybe more), so imagine the 500-mile-range more as “200-ish-miles-when-towing”.