A production line that would produce roughly about 500 Cybertrucks a day likely isn’t cheap and, considering the trends, a rather bold proposition.

In Conclusion

As per news reports from September, the pricing of the Cybertruck is proximate to that of the Model 3. This is quite likely a welcome development for the company’s sales teams: present delivery breakdowns seem to indicate that the consumer segments with a preference for the price point still find value in the company’s branding. This is likely not the case with its “pricier” models: as highlighted in past articles, Tesla has seen an erosion of market share in “premium EV” segment due to the measured yet aggressive entry of high-end legacy carmakers into the segment.

Tesla isn’t unique in that it’s a challenge to have a “basic” and “premium” model under the same marque: nearly every major carmaker tends to build out (or at least try to) a separate marque for the “premium” buyer segment. It isn’t presently clear if the company will do so. If it does, this means a deepening commitment to being in the “premium” space. A separate marque could bring out collaboration opportunities with other carmakers, upstart or not.

Overall, Tesla misses the analysts’ benchmarks for success since the positive trends in overall delivery growth didn’t translate into a commensurate growth in net income. Continuing with the “discounting” strategy would likely lead to further declines in free cash flows and, with it, the flexibility to plough cash into fueling growth of production capacities and new models for the market. It won’t be surprising if the company issues a significant amount of new “paper” (i.e. corporate bonds) over the next quarter or so.

The Federal Reserve’s latest “Beige Book”, released on the 18th of October, reveals that consumer spending is mostly mixed for a variety of factors. Foreign central banks are beginning to highlight significant risks with U.S. tech stocks, amongst which the likes of Tesla is included. The Bank of England’s Financial Policy Committee (FPC) meetings on September 26 and October 5 noted noted that assets such as U.S. dollar-denominated corporate bonds and U.S. technology equities are specifically vulnerable to inflation uncertainties and interest rate volatilities.

While Tesla does fine as a company which has a favourable position in a growing market, an unassailable (and historical) fact is that it won’t have a commanding position in said market forever; EVs are no longer a curiosity in the automotive space. Given the uncertainty of market conditions, the traditionally high overvaluations of the stock will likely be tested in both the short and long runs, depending on the company’s market share changes over the next 12 months.