The 2022 Cybertruck Update We Didn’t Expect…
OK, so in all honesty I had been expecting to sit down here today and tell you folks some good news about the Tesla Cybertruck - like maybe some new information about the options packages, the price and delivery date. But…uh… clearly that’s not going to be the case. Now that’s not exactly to say that the news is all bad either, it’s just not the news that we were expecting to receive. Which in hindsight, probably tells us more about the perils of setting expectations on things that you have no control over, or the futility of trying to predict the future. But let’s not get too philosophical here.
What we will get into today is talking about the latest updates on the Tesla Cybertruck, what little of them there are. We do at least have a few known knowns and some known unknowns to discuss. And then we’re going to dig into the reasons why it actually doesn’t matter that Tesla isn’t expecting to build the Cybertruck anytime soon - and how that turns into a good news story after all. So let’s get going.
OK, so in the Tesla Q4 2021 earnings call on January 26th, we were very much expecting Elon Musk to give an updated product roadmap - and the reason for that is Elon himself saying, “Product roadmap update on next earnings call.” Which he wrote in a Twitter response to a post about the Cybertruck on December 3rd. So, it’s hard to blame us for putting two and two together and expecting some major Cybertruck news.
And, to be fair, Elon did deliver an update on the Tesla product roadmap - which is to say, we now know there is no Tesla product roadmap. That was basically the extent of Elon’s announcement - he said no new vehicles would be introduced in the year 2022.
To be more specific, Elon stressed that the fundamental focus at Tesla right now is scaling output - that means building more cars more quickly. And he said that trying to introduce a new model would not make any sense with that goal - because if they did that, then total output would actually decrease. Elon said that additional products require additional attention and resources and that means fewer vehicle deliveries overall.
And it’s hard to argue with the approach that Tesla is taking on this one - even through the height of the global chip shortage drama, the company was able to grow their annual deliveries in 2021 by 90 percent over their 2020 results. Nearly twice as many cars in a year. And that’s without delivering one single car from either of their brand new Gigafactories.
Elon said that throughout 2022, Tesla will be taking opportunities to develop parts and tooling to create the Cybertruck, and will be ready to bring that vehicle to production, hopefully next year. So, we know that this is still happening - there will be a Cybertruck some day. Just not any day this year, maybe in the next one. But he stressed that it will be dependent on whether the company is able to produce more cars or fewer cars with the Cybertruck included. I think what he’s getting at is, basically, Tesla will not sacrifice any other vehicle deliveries to facilitate Cybertruck deliveries. Elon won’t pull the trigger on Cybertruck until he’s sure that it won’t cause a dip in Model Y numbers at the same time.
We definitely got the feeling from this call that Model Y is the top priority at Tesla right now - just building as many of these cars as they possibly can, as quickly as they can. Obviously, it’s a very popular car, it's in very high demand; but Tesla also revealed that Model Y is a very high margin product - which would be fairly obvious - but they specifically mentioned that not only is Model Y more expensive than Model 3, it also has a higher profit margin per unit. Tesla says that they now have the highest operating margin of the entire automotive industry at 14 percent - This is the amount of profit per dollar that the company makes AFTER paying for the costs of production, like raw materials and labour.
Tesla revealed on the earnings call that the Model Y is currently being produced at both of the new GigaFactories, Austin and Berlin, and Elon says they’ve been making quite a few cars there already. Elon said that the Texas made Model Y will ship to customers in Q1 2022 with 4680 batteries in structural packs. Tesla has been working all through 2021 to grow cell supply, so the number of 4680 cells available will not be a constraint on production, Tesla says that they are building structural battery packs every single day.
Something that Tesla do expect to constrain production still in 2022 is microchips. Elon said that the chip shortage in 2022 is better than last year but it is still not fixed. He really stressed that there will continue to be multiple supply chain limitations that will be difficult to predict.
But, at the same time, having said that - Tesla are forecasting that production rates at their established plants, Fremont and Shanghai, will continue to grow comfortably above 50 percent year over year. So, having built around 900,000 cars last year, the company expects those same two plants to build something like 1 point 4 million cars this year. PLUS all of the cars from Austin and Berlin. That’s bonkers. Even if we assume a low production volume from the new Gigafactories at first, let’s say the two combined only make 500K vehicles in 2022 - that’s still approaching 2 million cars delivered this year.
Elon said that new factory locations are coming; they’re looking right now, but not ready to make an announcement. We’ll probably know by the end of this year where the next GigFactory will be built.
Oh yeah, one more thing that Tesla will not be doing in 2022 is anything related to the much hyped 25K vehicle. When asked about that one, Elon said, “We’re not currently working on that car - at some point we will, but we have too much on our plate.” So, there, we can knock it off with the rumor mill, because the car is not coming any time soon, if ever.
So, that’s a lot to take in - it’s obviously more good news than bad news, but it does kind of leave us wondering, is Tesla still working on any cool, new stuff? Or did they just sell out and give up on everything except more crossover SUVs?
No. That’s not the case. Elon really stressed that there are two future product releases from Tesla that he is very bullish on - the Tesla Bot and the feature complete Full Self Driving software.
Early on in the call, Elon Musk said that over time, Full Self Driving will become the most important source of profitability for Tesla. By which he means more money coming in from autonomous software than from selling cars. Elon said that the numbers on robotaxis are ‘nutty good’ from a financial standpoint. He said FSD will be the biggest asset value increase in history, creating a profound impact on safety, while accelerating the world’s transition to sustainable energy.
Now, before I say this next thing, we want to acknowledge that it has been stated before by Elon many times over the past few years and never come true, but here it is again. Elon Musk said that he is completely confident that Full Self Driving will be achieved, and predicted that it will happen by the end of this year with a safety level significantly greater than a human driver. He also clarified that he considers a human driver safety level to be a low standard, not a high one.
When asked about the attachment rate for Full Self Driving, Elon said that long term, every Tesla will have FSD. So, to me, that says that eventually this will become a standard feature, just like Autopilot is today. He went on to say that the widespread use of FSD will reduce the pain and cost of travel so dramatically that there will be a crazy number of autonomous cars on the road. Robo taxis will become so common that they will be cheaper than taking a bus or a train.
Elon went on to stress, again, that FSD is not just some little feature in a car, but probably the most profound software upgrade in history, saying, “I don’t know how to quantify this financially, except it’s some big number.”
And one more thing that we need to talk about from this call, Elon Musk said that, in terms of priority - the most important development at Tesla is the humanoid robot. Yeah, the Tesla Bot seems to have leapfrogged the 25K car and maybe even the Cybertruck in terms of production priority. With Elon saying the Bot has the potential to be more significant than the vehicle business over time.
Of course, this all comes back to his views on the economy and population decline./ According to Elon’s philosophy, the foundation of our economy is labour - capital is just distilled labour. So what happens if we experience a permanent and substantial decrease in the supply of labour? Well, at that point, the economy loses all meaning, and chaos ensues. At least, that’s the way Elon see’s things; but all signs point to him being right about this one. And if he is right, then the Tesla Bot will be the direct answer to the shrinking labour supply - our greatest defense against chaos.
What effect did all of this weirdness and uncertainty have on the Tesla stock price? It sank like a stone. Tesla shares lost 11.5% of their value in the day following the earnings call. Which is not surprising; big ticket investors don’t like product delays and they don’t seem to like Elon’s theorizing about self-driving cars and robots either - it freaks them out. And that’s fine, these short term dips have been part of the Tesla story the entire time. In the long term, it won’t matter if the Cybertruck was a year late or two years late. If Elon is even close to being correct with his predictions, then we are still in the early days of something genuinely world changing. And that’s pretty damn cool.
