Tesla yesterday announced its move into the huge US pick-up truck market as the electric vehicles maker unveiled its latest model – the Cybertruck. The angular vehicle’s launch strategy will mark a divergence of Tesla’s historical route to market, which is to release new models at a higher price, which is then driven down as production volumes increase. This time Tesla will launch their new model within an initial price range that is competitive with best-selling pick-up truck models from the likes of Ford and General Motors. The Cybertruck will have three versions with basic models starting within a $39,000-$69,000 range.
The approach recognises that pick-up truck buyers and drivers are a more ‘practical’ demographic than perhaps the average buyer of Tesla’s car models. The US pick-up truck market is huge, with the 3 best-selling vehicle models in the country last year pick-up models. But it’s also a market dominated by a smaller number of established brands, a more conservative buyer persona and a high percentage of sales coming in the shape of companies buying vehicle ‘fleets’.
To be successful, Tesla’s Cybertruck had to be price competitive. But the extent to which the company has bought into that reality, with all three models starting at around $10,000 less than expected, took markets by surprise yesterday. On the positive side, it’s hard to argue competitive, mass market, pricing isn’t the only way that the Cybertruck will successfully take significant market share. However, with Tesla recently enjoying a rare moment of market approval after managing to record a surprise profit over the third quarter, there will be worries that the attractive pricing of the Cybertruck models will again put the company’s margins under significant stress.
As a completely new sub-market for Tesla, there will be a lot of interest around how the company’s new pick-up models fare in a market where buyers are notoriously brand loyal. Developing a Tesla pick-up model has, however, been a passion project for CEO Elon Musk. He is banking on an increasing interest in electric vehicles and a design that makes a strong impression allowing Tesla to barge its way in to a fresh market.
One trend strongly in Tesla’s favour is that pick-up trucks are moving into the mainstream, following a similar pattern to the evolution of the SUV market over the last decade or so. The vehicle style is becoming popular with suburban drivers who don’t necessarily practically need a pick-up. But that hasn’t proven a barrier to the increasing popularity of SUVs for urban use. Having maintained steady growth over a number of years now, pick-ups now account for 18% of all new vehicle sales in the USA.
The Cybertruck’s body has been made from the same steel that SpaceX, Mr Musk’s other company and one focused on making modern space transport affordable, uses for its Starship rockets. Musk claims it can deflect a 9mm bullet. The pick-ups will also be able to tow 14,000lbs — less than what Mr Musk alluded to earlier this year but still more than major competitors. The launch videos shown yesterday showed the Cybertruck out-pulling a Ford F-150 and beating a Porsche 911 for speed.
Dan Ives, an analyst for Wedbush Securities is quoted in the Financial Times as commenting:
“It’s a wow factor in terms of design and the price point is eye-popping. They needed to have a game-changer product. This is the way to go.”
Tesla are not, however, without competition in the all-electric pick-up niche. Rivian is a start-up completely focused on developing electric truck models and has been backed by investment from Ford and Amazon. Last year it showed off its new R1T pick-up model. Priced at a starting point of $69,000, the R1T is aimed at the top end of the pick-up market but also has a more traditional design of the kind that is familiar with existing truck buyers.
Rivian will also have a head start with shipments of the R1T due to start from late next year. That is likely to give it close to a year on the Cybertruck. While no launch date has been announced but production is not expected to begin until 2021. GM will also launch an EV pick-up next year while Ford already has a hybrid version of its F-150 nearing production and is also planning an all-electric model.