The Tesla Cybertruck Has A Problem..

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Episode Transcript

(00:00):
On today's episode, Elon Musk signalspotential trouble ahead for the cyber truck rollout.
Tesla execs give more details on thedesign focus of the new twenty five
K Tesla car, and Giga Mexicopauses while the company rethinks its approach.
Tesla's cybertruck has had a wildly successfulyear, but it feels like things have

(00:22):
been slowing down right when the truckshould be heading out to buyers. And
during the Q three earnings call,CEO Elon Musk went over some specifics as
to when exactly customers should start gettingtheir cyber trucks and when the company could
expect them to actually make money.Like we said, the first half of
this year was spent in a cybertruckfrenzy. Any sighting of the vehicle spawned

(00:46):
a huge number of articles analyzing whatdetails in the leaks could mean. Meanwhile,
Tesla themselves were fairly open about theproduction process, merely hiding the stacks
of casted parts and internal leaks fromgigatexis. Overall, well, everything looked
good and the vehicle's prototypes seemed toshow that Tesla was on schedule to send
out their first deliveries in September,then October, and now as of this

(01:11):
recent earnings call, a solid Novemberthirtieth. So you can imagine why some
investors were shocked to hear Musks sayduring the earnings call that I just want
to temper expectations for cybertruck. Financially, it will take a year to eighteen
months before it is a significant positivecash flow contributor. That's more than a
little confusing. Right this whole time, we've heard that cyber Truck's pre production

(01:36):
has been going very well. We'veeven seen release candidates for well over a
month now, and all the discussionsaround the impending ramp up of production has
been centered around how the cyber truckwas designed for mass manufacturing. Production lines
were halted and retooled, and twogigantic nine thousand ton gigapresses were brought and
set up at Giga Texas. So, how does a vehicle with such a

(02:00):
strong pre production phase and over amillion pre orders take eighteen months to become
cash positive. Well, we didn'tget a direct answer on that from anyone
in the earnings call, but Elondid say a few things that point to
the answer. The biggest one beingthe infamous we dug our own grave with
cybertruck quote. Just after clearing upa question about the eighteen month timeline,

(02:22):
Elon says that the eighteen month estimateis a maximum, as in the longest
he and his engineers think it wouldtake to make enough cyber trucks to sell
to those pre order holders and startmaking a profit. He's clear to point
out that this would be a verydisappointing result, as he clearly believes that
they can ramp up production quicker thanthat, but eighteen months is a possibility,

(02:45):
so he has to tell the investorsthat. And here's where the quote
comes in. While Musk is attemptingto explain why production could be slower than
the company first anticipated, he saysthat we dug our own grave with the
cyber truck. Cyber truck's one ofthe those special products that comes along only
once in a long while, andspecial products that come along once in a

(03:06):
long while are just incredibly difficult tobring to market, to reach volume,
to be prosperous. And here's whythings got a bit confusing. Sure,
cybertruck was made for a smooth productioncycle, large parts of its frame being
made in those gigapresses are a goodexample of how Testlas streamlined the manufacturing of
their stainless steel truck, but we'restill talking about a completely unique vehicle here.

(03:30):
The cyber truck has probably the leastin common with any other vehicles in
the Tesla fleet, meaning it's alot harder to share parts, which is
one of the easiest ways to helpstreamline production. Add to that the extra
features like the cyber truck's forty eightfolt electric system or its newly announced eight
hundred volt powertrain, which will allowit to charge much faster and brings the

(03:52):
truck on par with vehicles like theLucid Air, which uses a nine hundred
volt architecture currently. Speaking of which, the eight hundred volt architecture is one
of the better takeaways from the cybertruck focused parts of the Earnings call a
powertrain like this is a huge upgrade, not just for recharge times, but
it also shaves weight off the vehiclebecause there's less copper in the system overall,

(04:14):
and the power transfer uses a lowercurrent, which makes the whole system
operate more efficiently. But it doesmake the cyber truck a little harder to
build for right now at least.Tesla executive said that currently Gigatexas has the
ability to produce one hundred and twentyfive thousand cyber trucks per year, and
that's not nothing. The confusion seemsto have been in the slight shifting of
expectations around the speed of the rampup, and given the hype around the

(04:38):
cyber truck, that's probably the mostpredictable problem Tesla could have right now.
As we said earlier, the harddate given to investors for the first deliveries
and therefore the cyber truck delivery eventwill be on November thirtieth at the latest,
so those first lucky owners will getto have their new trucks in time
for the holidays after all. OnOctober eighteenth, Tesla's third quarter earnings call

(05:00):
took place and we got a lotof details on the company's operations over the
summer, but we also got abit more detail on Tesla's upcoming twenty five
thousand dollars next gen vehicle. Duringthe meeting, CEO Elon Musk and other
Tesla executives seemed to confirm that thenew vehicle will be some sort of smaller
crossover, calling it a mini modelY, and while Elon was quick to

(05:24):
stress that the design will be cool, he said that the point of this
vehicle will be a simple, cheapcar meant to get a person from A
to B. He says, quote, just to be clear, it will
be cool, but it's utilitarian.It's not meant to, you know,
fill you with magic. It willstill be beautiful, but its utility,
which is about what we expected fromearlier conversations about this cheaper vehicle. But

(05:47):
the biggest point made about the newplatform during the Q three call was that
the design will be centered around easeof production. The main goal of the
design team will be to optimize thisnew ev for cheap and easy automation,
with the wider aim of achieving ahigher throughput rate of manufacturing that is unheard
of in the auto industry. Andthat would be because Tesla is anticipating this

(06:11):
being a popular car and because Elonwants to use the design to launch another
attempt at the Robotaxi idea, somethingmade easier with a cheaper vehicle platform to
go along with that, The executivesmade mention of gigatexis being the intended location
for the start of production. Aswe found out back in September with the
releases from Elon's biography. This makesmore sense when you factor in the company's

(06:34):
new approach to Gigamexico, saying thatthe sload pace for the new facility will
help design its new production systems alongsidethe development of the new vehicle, so
that once the next gen car isready to roll, Gigamexico will be ready
to produce it at high volumes.That said, it's more than likely that,
just like with other new vehicles inTesla's fleet, the Mini Model Y

(06:57):
will probably start the design and prototypingprocess at the Cato Road facility, and
reports are that the line there isalready being retooled. It's pretty clear that
Tesla itself is very excited for thisnew vehicle. Sales for their other cars
aren't doing poorly. The company isstill the biggest seller of evs in the
US, but they're not wrong inthinking that a truly affordable car will do

(07:19):
extremely well in pretty much every market, and with prototyping on the horizon,
we might get lucky enough to spotsome of these small cars in California sometime
next year. Tesla apparently has hada difficult time in getting the construction of
their new gigafactory started in Mexico,and now it looks like true construction won't

(07:40):
be starting until twenty twenty. Tesla'snew facility in Nuevo Leon, Mexico,
has been the subject of some excitementever since it was announced back at the
Investor Day event in March. Duringthe presentation, it was announced that a
strip of land near Santa Caterina hadbeen chosen and survey work was already beginning.
This new facility, they said,was where Tesla intends on showcasing much

(08:01):
of their new manufacturing processes and wherethey want to produce their new twenty five
thousand dollars vehicle platform. But thingshave changed since March. First, the
environmental surveys took a little bit moretime than expected. The land Tesla had
purchased was a forty two hundred acreplot of arid desert, and a lot
of work was going to be neededto get the water Tesla would be needing

(08:24):
to manufacture vehicles there. But whenlast we looked in on the project,
it seemed that all of those problemshad been solved. The permits had been
signed, and the local Mexican governmentwas eager to get things started. Heavy
vehicles were spotted preparing the site forconstruction, and it looked like we'd be
seeing steel go up inside of themonth. But that was back in August.

(08:46):
Something has changed that is making Teslahesitate, and luckily the third quarter
earnings call happened on October eighteenth,with CEO Elon Musk explaining what the hold
up in Mexico is interest rates.It seems that with the global economy the
way it is right now, Teslais reconsidering its approach to building their new
facility. Musk said that the companyis definitely still going to build a Mexico

(09:09):
gigafactory, but that the question isreally just one of timing. Normally,
of course, once a Tesla projectbreaks ground, it's a full sprint to
finish construction. With gigashang Hi,for instance, construction began in January twenty
nineteen, and by December of thatyear cars were rolling off the line.
Knowing that Tesla is being cautious heremakes some previous decisions make more sense.

(09:31):
Though. Back in September, wegot the news that Elon had changed the
initial production location of the new twentyfive K model to Giga Texas, and
at the time it made sense consideringTesla's best and brightest engineers were working there
already for the cyber truck rollout.Now we know it was also because the
company was unsure if they could affordto build and activate Gigamexico at the pace

(09:54):
they had originally planned on. Butit's not all bad news. Like Elon
said, Tesla is still planning onbuilding the factory in Nuevo Leone, and
we don't have to take their wordfor it because the Santa Catarina government is
planning on helping the company along withover one hundred and thirty million dollars worth
of infrastructure improvements. One of theharder parts of building this facility was that

(10:16):
Tesla was going to have to shoulderthat burden, bringing in water, electricity,
gas, internet service, and payingto have the roads reinforced and widened
so they can even get materials tothe site in the first place. That
is pretty normal for a company todo, and it's often included in their
investment offer to a location. Butit looks like the local government really wants

(10:37):
to see this facility built, sothey're offering to foot that bill, so
it looks like plans for Giga Mexicowill have to at least slow down while
the company waits for a more solidfinancial footing. But it's a good thing
they have plenty of other factories tomake their new vehicle at