Tesla is starting delivery of the CyberTruck. The CyberTruck competes with some of the most profitable and popular USA made vehicles. Ford, GM, and RAM (Dodge/Stellantis) profit margins are dependent on their vehicles in this class. The market target of this strategy is clear, and so are larger targets.
EkaLore has looked at the transformation of Ford, service offerings from GM, and the pricing tactics by Tesla. In this release EkaLore looks at possible larger targets for the CyberTruck product lines.
Tesla has not hesitated to use pricing pressures to force responses from competitors. In the highly competitive Chinese marketplace for EV/NEV’s Tesla’s price reductions (not increases!) forced price adjustments in EV/NEV and traditional competitors. Volume shipments, of Telsa vehicles, in the EU markets from new product production in Germany creates pressures for EU traditional global manufacturers in their ‘domestic market’. Opening additional production capacity in Shanghai, Fremont, Austin, and Brandenberg GigaFactories pressures competitors in all of those markets.
The competitive pressure brought by Tesla causes multiple changes in strategies for traditional global manufacturers:
1) Pricing pressures for EV/NEV vehicles.
2) Margin stress for fleet profits
3) Time to market stress for EV/NEV product lines
4) Supply chain problems for existing and future product lines
5) Marketing and Sales costs thru traditional networks
Pricing pressures for EV/NEV vehicles will continue in the mid-term as Tesla has discussed an ambitious target of a USD$25000 vehicle to be manufactured in a new GigaFactory in Mexico for the North American marketplaces and export.
Margin stress from CyberTruck sales will be hard felt by traditional competitors. Typical profit margins for pickup and light duty trucks have been at USD$10000 (or above) per vehicle. Losses of USD$15000 (or more) per vehicle have been mooted as a change. Thus, for manufacturing 50000 vehicles a traditional competitor could see a swing of USD$1.25B in margins. The more a traditional competitor sought to build volume manufacturing in the short term the larger the margin losses will grow.
Tesla is years late bringing the CyberTruck to market. Ford, GM, and RAM are maturing concept vehicles into deliverable vehicles on updated production lines. If the Tesla CyberTruck does generate a real delivery backlog from the pre-order queue, then the CyberTruck may put pressure to bring competitive products to market in volume before the EV/NEV pickup volume cannibalizes sales of traditional internal combustion engine vehicles. Tesla has taken its time bringing the CyberTruck to market giving competitors time to conceive and built competitors – where all may lose money together.
Battery materials and production are critical supply chain elements for EV/NEV’s in the competitive class. The rules coming in for tax credits, subsidies, and other regulatory requirements put a premium on raw material sourcing, subassembly production, and low cost manufacturing. Traditional manufacturers have already seen production problems, sourcing issues, and rising costs in manufacturing. Additional logistics costs for subassemblies, from higher energy and handling costs, also put a premium on highly cost-efficient manufacturing processes in the final assembly part of the supply chain. Battery materials, at scale, are an unsolved problem with billions in investment, on a global scale, chasing the largest single component cost in an EV/NEV. Supply chain issues are less for Tesla with scale already reached for battery materials and production. The competition for these materials creates additional pressures on manufacturers.
In the next segment EkaLore will look at the effects of the Tesla strategy on traditional global manufacturers.
For more on Alien Invasions of markets see http://www.ekalore.com
For creating or defending an Alien Invasion contact us at http://www.ekalore.com
Comments