Elon Musk raises Cybertruck production concerns

Tesla (TSLA.O) CEO Elon Musk on Wednesday warned of difficulties in ramping up production of the automaker’s much-awaited Cybertruck electric pickup truck and announced that deliveries would begin on Nov. 30.

The world’s most valuable automaker produces electric sedans and sport utility vehicles but has missed out on the pickup truck segment, which is highly profitable and hugely popular in the United States.

The Cybertruck is expected to challenge Rivian’s (RIVN.O) R1T, Ford’s (F.N) F-150 Lightning and General Motors’ (GM.N) Chevrolet Silverado EV in the hot market for electric pickup trucks.

Elon Musk said he wanted “temper expectations” for the truck, adding the company could face “enormous challenges” in ramping up production and making it cash-flow positive.

“We dug our own grave with Cybertruck,” he said on an earnings call after the automaker reported a hit to its margins, partly due to the truck’s production ramp-up.

The company has said it had the capacity to make more than 125,000 Cybertrucks annually, with Musk adding there was the potential for that to lift to 250,000 in 2025.

More than 1 million people had reserved the truck, he said, which involves placing a small deposit.

Some analysts were skeptical about the likely sales, particularly in the near term.

“I wouldn’t expect Tesla to be selling or producing anywhere (around 125,000 vehicles),” said Seth Goldstein, an equity strategist at Morningstar. “But I think that they’re giving us an indication of the capacity they’re going to make available for the Cybertruck as production ramps up.”

The automaker is expected to announce pricing for the vehicle at an event at its Texas factory on Nov. 30.

The company, which built its first Cybertruck in July, had in 2019 expected to price the vehicle under $40,000, but electric vehicle prices have since risen due to an increase in battery raw material prices.

The rival R1T is priced from $73,000, while the F-150 Lightning starts from about $50,000.

EV demand has been on a downturn over the last year as higher interest rates push up financing costs and discourage consumers from making discretionary purchases.

Tesla, in response, has aggressively cut prices of its cars this year as it looks to grow its user base and take advantage of its ability to sell its high-margin self-driving software in the future.