Tesla (TSLA) stock rallied sharply on Wednesday after CEO Elon Musk tweeted that the EV manufacturer’s hotly anticipated “Cybertruck” is set to be unveiled in Los Angeles.
The positive reaction in Tesla stock was not surprising given how vital the new electric pickup truck is to the company’s outlook.
In the United States, light truck sales are now almost 70% of the entire market for vehicles. Cracking this sector with the futuristic Cybertruck is essential if Elon Musk is going to succeed in making the company profitable and sustainable long term.
TSLA has been trading much more firmly since its impressive recent quarterly earnings in October sent the stock soaring. Wall Street had been expecting the company to post a loss of more than $200 million, but instead, Tesla flipped the script with a profitable quarter of $342 million.
While the excitement surrounding Tesla’s foray into the pickup truck market is evident, there are a couple of significant hurdles for the company to overcome. Firstly, the Cybertruck is by no means a fundamentally unique product. There are plenty of U.S. manufacturers who are diving into this lucrative market with an electric offering. Secondly, there is the fact that Elon Musk needs to try and roll out his Model Y SUV at some point; it’s difficult to see where his new truck comes in, given they are also desperately scaling up Model 3 production.
In addition to all this, will the truck’s bold appearance limit its mainstream appeal?
One big potential positive for Tesla stock amid all of this hype is the idea that the Cybertruck might have military capabilities. A lucrative contract with the Ministry of Defense would undoubtedly be of great use as the vehicle manufacturer tries to stabilize its finances. Unfortunately, the SpaceX CEO poured cold water on these hopes on Twitter, contradicting some of his prior statements.
Unfortunately for TSLA bulls, Elon Musk is well known for over-promising, and markets struggled to push the stock much higher than the initial bounce. There is no question that the Cybertruck looks to be visually spectacular, but the timeline for its arrival remains dubious at best.