Tesla’s Cyber Truck Fiasco
At some point, you have to feel bad for the people working at Tesla. I suspect these are driven, smart people working very hard. So, it is sad to see one of their biggest new products potentially heading to legendary status as one of the great innovation fiascos of all time.
Cyber Truck
Elon Musk introduced the Cyber Truck concept in 2019, and Tesla launched the vehicle after many delays in November 2023.
Functionally, the Cyber Truck is a good vehicle. Motortrend did a review of the Cyber Truck and concluded that it “…is fairly good at performing the tasks truck owners desire.”
There are two notable things about the Cyber Truck. First, it has a distinctive shape, which is immediately recognizable and different from any other car or truck on the road. Some people love it and some people don’t.
Second, it is expensive. The base price is $80,000, but variants can go well over $100,000. The Ford F-150 Lightning, another electric truck, starts at about $60,000.
Results
Interest in the Cyber Truck was high. After Musk unveiled the concept in 2019, more than 250,000 people apparently put down $100 deposits.
The more recent results? Dismal. In Q1, Tesla sold 6,400 Cyber Trucks, which is down more than 50% from Q4 and far below expectations.
There are two problems.
Issue one is the obvious problem that sales are wildly short of forecast. Elon Musk projected sales of 500,000 trucks a year and Tesla built capacity to make 250,000 trucks a year. At the current sales rate, Tesla will sell 25,600 trucks this year, 95% below Musk’s vision.
Issue two is that sales are falling. When launching a new product, you always want to see sales build as awareness increases, distribution improves and word-of-mouth marketing kicks in. When people love a product, they tell others about it. Look at the revenue figures of a successful new product and you’ll see growth year after year.
A new product’s customer base shifts over time. Initial buyers are variety or innovation seekers; these are people eager to try new things, willing to take a risk and highly motivated. Later, the target market becomes a more mainstream group, and the innovator segment fades away.
A decline in sales in the early days of a new product launch is scary; it suggests the new product has stalled out and either its appeal is limited to innovation seekers or that buyers have been disappointed with the ownership experience.
A sharp fall for the Cyber Truck is a massive warning for Tesla.
What’s Next
So, what do you do now, if you are managing Cyber Truck?
The first step is to understand why sales are down. You could spend a lot of money on market research, but I suspect it isn’t too complicated: the design is polarizing, the truck doesn’t have a rugged image likely to appeal to typical pickup truck drivers, and Tesla has become a toxic brand.
The second step is figuring out a plan to fix things. That is more difficult. What do you do? The easiest move is to cut the price to broaden its appeal. This isn’t likely to work: it will damage margins and hurt resale values. A lower price also won’t attract people who are turned off by Musk’s political activities or the Cyber Truck’s design.
Creating desire for the truck is an option. Perhaps Tesla could engage influencers to boost appeal with certain segments. Perhaps there could be special events for the Cyber Truck owners. Narrowing the target and tailoring marketing efforts is a classic way to revitalize a product.
Ultimately, I think Tesla might need to redesign the Cyber Truck. I am not an operations expert, but I suspect the production facilities could be converted to produce a less polarizing truck. Just copy the Ford F-150 and bring Tesla’s impressive technology. That would likely sell better.
Still, a complete redesign would be a tough decision. It would cost hundreds of millions to retool the factory.
More significant, perhaps, people, especially people like Elon Musk and others in Washington, don’t like to acknowledge that they made a big mistake.
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