There's a truth in Detroit for Ford Motor Company (F 1.58%) and General Motors, and that's that trucks are king. The dirty little industry secret, if you can call it a secret, is that full-size trucks cost only marginally more to produce than a passenger car, yet the former can sell for two to three times as much.
Full-size truck sales are the backbone of Detroit automakers, but as the industry transitions to electric vehicles the scene may be set to change. In fact, the EV industry might have a truck problem, and that would be horrible news for auto investors.
Disappointing results
Long, long ago Tesla (TSLA 3.85%) CEO Elon Musk essentially mocked stereotypical trucks noting their stale design. Perhaps that's why the young EV maker swung for the fences with the Cybertruck's controversial design.
Tesla Cybertruck. Image source: Tesla.
But the unique design didn't stir up sales as much as it stirred conversation. Originally predicted to reach annual sales between 250,000 to half a million units, the Cybertruck has been a commercial flop. It reached only 40,000 U.S. registrations last year, and while that was good enough to be the top EV pickup truck, it was a fraction of original estimates. Because Tesla doesn't break out its sales per model, registrations can serve as a proxy to sales.
Ford's highly anticipated F-150 Lightning also disappointed compared to initial hype. Ford noted before the truck's launch it had 200,000 reservations and anticipated producing 150,000 trucks annually. Its actual results were a more modest 24,695 registrations in 2023 before growing to 32,893 in 2024.
Rivian (RIVN 1.70%), which only offers the R1T, R1S, and its electric delivery van, relies on its truck for a substantial chunk of its business, but also saw less-than-thrilling results. Rivian last reported its backlog in late 2022 at 114,000 for the R1T and R1S combined, and not only did its registrations of 11,311 feel lackluster in 2023, they actually declined to 9,876 last year.
What's the problem?
The problem facing investors and their love of truck profits is twofold. On one end, we have the consumer issue, which is the stigma that electric powertrains are forced to their brink when it comes to performance and towing. Consumers that use their trucks as tools sometimes have difficulties with the concept of EVs performing at the required level.
On the other end, the business case also gets more difficult for trucks that require towing power. Towing requires immense power and thus larger batteries which, as the most expensive component of an EV, pushes the cost up significantly. That eats into the precious juicy margins that full-size trucks have historically presented.
The head of Rivian's rival company, Lucid, had this to say when discussing the potential of Lucid making an electric truck: "I really think that it's very tough to make an electric pickup truck work today," Lucid CEO and CTO Peter Rawlinson said, according to InsideEVs. "Not one that's usable and cost-effective."
At the end of the day, it's important for investors to note that trucks are struggling in the EV industry. Full-size trucks have long been the backbone for automakers that thrive in the segment. Full-size trucks haul profits like few other segments can. But without a great deal of battery technology progress or cost reduction, the day of lucrative full-size truck profits could be over for automakers in the near term.
