The first details are coming out about the plans of Tesla Inc. and its Chief Executive Elon Musk to build an electric semi-truck.
“I don't want to jump the gun on the Tesla semi-truck unveiling later this year, but I think, it's going to be a good product, and will defy people's expectations on what an electric truck can do,” Musk said during a conference call with investors earlier this week.
The head of the Palo Alto, Calif., electric car company said he believes that all forms of ground transportation will eventually have electric powertrains.
“I really do not see any segment of transport that will not be electric, in fact I'm highly confident that all transport will go fully electric with the ironic exception of rockets,” said Musk, who is also chief executive of SpaceEx, a rocket manufacturer.
Musk believes electric heavy-duty trucks will be climate change fighters.
“It's probably 10 times as much hydrocarbon saved for a semi as for a pickup truck,” he said.
Tesla plans to unveil its heavy-duty truck prototype in September.
Components from Tesla’s Model 3 compact sedan, scheduled to go into production later this year, will be used in the semi-truck, Musk said.
“Most of that semi is actually made out of Model 3 parts,” Musk said.
The truck, for example, will use a combination of Model 3 motors. That will lower the cost of the truck because it will leverage the volume production of the sedan’s parts. Tesla plans to manufacture the big rig rather than contract or license production.
“It's going to have a very good gross margin,” Musk said.
He claimed it will be more profitable than traditional Class 8 trucks.
Musk said he is focused on building a semi-truck before a light duty pickup because he wants to demonstrate that electric transport can even work as a heavy-duty commercial vehicle.
But there’s also a Tesla pickup truck in the future.
“They’re not going to be widely separated in time,” he said.
Some Wall Street analysts believe there’s a business case for a Tesla heavy-duty truck.
It’s a big area of opportunity for Tesla, Alexander Potter, an analyst with Piper Jaffray & Co., wrote in a recent report to investors.
The North American market for trucks in the heaviest Class 8 weight segment is a $30 billion business. There’s even more opportunity for heavy-duty electric trucks in the smaller Class 5 to 7 trucks and abroad, Potter said.
“The market is clearly large enough to matter,” he said.
Tesla’s challenge is to make sure that savings from operating an electric truck justify what’s likely to be a more expensive vehicle.
“Namely, the incremental cost of an EV must be offset by reductions in fuel, maintenance, and other operating costs,” Potter said.
For a Class 8 ‘hub-and-spoke’ truck traveling 350 miles a day, Potter said fleets could justify paying $50,000 to $75,000 more for an electric daycab configured rig as long as operating expenses are 25 cents to 35 cents less per mile than a comparable diesel vehicle.
“This would be no small feat, but Tesla may be capable of achieving these goals,” Potter said.
Over the years, alternative technologies have failed to replace diesel trucks because of the limited refueling infrastructure, dropping oil prices and efforts aimed at increasing fuel efficiency for diesel trucks, Potter said.
But Tesla can learn from the errors made in the past.
“Tesla should focus its initial efforts on low-mpg fleets with fixed routes,” Potter said.
Ideal targets are fleets that facilitate urban pickup-and-delivery and shipping for relatively small loads of freight, he said.
Hub-and-spoke distribution routes as well as vocational and municipal fleets are also “low hanging fruit,” Potter said.
And traditional trucking companies are ripe for disruption.
Many manufacturers with old school methods will undoubtedly face the challenge of leveraging outdated production infrastructures while protecting margins and investing simultaneously in advanced technology, Potter said.