Tesla’s Elon Musk Stays Committed to Electric Commercial Vehicles

August 09, 2018 by Jerry Hirsch, @Jerryhirsch

Tesla Inc. Chief Executive Elon Musk has ambitious plans for developing electric commercial vehicles, and based on recent comments to investors he believes it’s a market worth pursuing.

“We’re going to do the pickup truck, the Semi, the next-generation bus,” Musk said in a conference call with investors and stock analysts last week. “We’ve got lots of awesome ideas.”

Last year, Musk unveiled prototypes of an electric semi-tractor that uses common motors, screens, door handles and other parts from Tesla’s just-launched Model 3 compact sedan.

Fully loaded, the Tesla Semi is capable of traveling 300 to 600 miles per charge at highway speed, according to Musk. While distances within that range are generally considered regional routes, rather than a long haul, the truck would satisfy many freight requirements. Nearly 80 percent of freight in the U.S. is moved less than 250 miles.

“It’s going to be better than what we showed last year. There are a lot of improvements,” said Jerome Guillen, Tesla’s vice president of trucks.

Besides saying that the range on the biggest model will be 600 miles instead of 500, Tesla has not provided any new information about the truck.

That “leaves us wondering what other specs would beat the already high bar,” Ravi Shanker, an analyst with Morgan Stanley Research, wrote in a report to investors this week.

Other analysts are watching Tesla’s truck and bus plans with a hint of doubt.

“The uncertainty is no one knows for sure how many cars or semi-trucks Tesla will sell,” David Whiston, the autos analyst at Morningstar Research Services, told Trucks.com.

Whiston said that initially the semi-truck would probably be a low-volume product marketed to large motor carriers that have the budget to dive into new technology, as opposed to independent operators.

“Over time it could get big, but there will be plenty of competition too,” Whitson said. “Tesla’s challenge will be to keep getting capital to fund capacity expansion.”

Musk’s plan announced Tuesday to explore converting Tesla from a Nasdaq-listed company to a private business could complicate that. Tesla already has a highly leveraged balance sheet and history of negative cash flow, Alexander Potter, an analyst at Piper Jaffray & Co., said in a report to investors Wednesday. Previously, Tesla had tapped the public debt and equity markets to raise cash to fund operations and research and development.

The trucks will sell for $150,000 for the small range and $180,000 for the one with the bigger capability, Musk said. Environmental incentives in various states could slash the purchase price. A typical diesel semi-truck is $100,000 to $150,000 depending upon its purpose and configuration.

Musk has predicted that Tesla would be delivering 100,000 electric heavy-duty trucks annually in 2022. That forecast was widely met with industry skepticism. It would take Tesla from zero to a 5 percent global market share for heavy-duty trucks.  It would make Tesla’s semi-tractor business, about the size of Paccar Inc., the owner of the Peterbilt, Kenworth and DAF brands.

“It’s not clear where this Semi is getting made,” Whiston said. “They’ve got a lot on their plate car-wise.”

Although Tesla is road-testing prototypes of its Semi, when production might start is a question mark given the company’s trouble with manufacturing the Model 3.

“Probably the biggest limiter on our growth is how fast can we grow battery production. And especially cell production and the wholesale supply chain, I think, will be the fundamental determinant of Tesla’s growth,” Musk said.

Musk also indicated that the first truck to reach production would probably be a pickup rather than a semi.

“Probably my personal favorite for the next product is the pickup truck, and we are going to just do an amazing pickup truck,” he said.  The company also has its Model Y, a small crossover, under development.

When any of these will be available for purchase, however, is unknown, according to industry analysts.

“There was little/no mention of where/how/when Semi, Model Y and the pickup get produced,” Brian Johnson, an analyst of Barclays Capital Inc., wrote in a report to investors.

Still, there is a growing consensus that electric trucks, buses and commercial vehicles will become a viable business.

Daimler Trucks, Volvo Trucks, Navistar and other heavy-duty vehicle manufacturers are starting to field test and sell electric trucks and buses.

Daimler Trucks North America said it would begin testing a fleet of 20 electric heavy- and medium-duty Freightliner models at the Southern California ports in Los Angeles and Long Beach this year.

“We believe that electrification will offer a competitive solution for an increasing number of commercial vehicle segments as we look to the decade ahead and beyond,” said Jim Meil, an industry analyst for ACT Research and author of an industry report: Commercial Vehicle Electrification: To Charge or Not To Charge.

The segment’s growth will be a combination of advances in battery technology, environmental considerations and government policy, and the potential for significant operational cost savings, Meil said.

“Initial adoption will likely be in shorter-range hauls with frequent stops and starts, regular and predictable routes, and daily return-to-base for overnight charging types of operations,” he said.

The early adopters will use medium-duty and highly specialized Class 8 trucks that can operate with shorter ranges to meet limitations of battery storage technology.

“As battery technology advances with chemistry and design upgrades, performance will improve, costs will drop and a wider range of applications and duty cycles will open,” Meil said.

Electric trucks could grab a 20 percent share of the new medium-duty truck market and into the double-digit percentages for big Class 8 trucks by 2035. If oil and diesel prices rise significantly from current levels, the market take rates could reach one-third or higher, depending on the segment, he said.

Read Next: Navistar CEO to Tesla —We’ll Have More Electric Trucks Than You

2 Responses

  1. Ken Cova

    “Electric trucks could grab a 20 percent share of the new medium-duty truck market and into the double-digit percentages for big Class 8 trucks by 2035.”

    Head. In. Sand. The overall economics of moving freight with electrons will undermine moving freight with oil products *on the day the first truck comes off the line.* Purchasing executive heads will roll if they overlook this and continue to buy diesel trucks.

    It’s a binary analysis: Either you believe the trucks can’t actually meet the given specs, or you believe they will meet the specs, and therefore will overtake diesel marketshare just as fast as they can be manufactured. Economically the specs are so superior to diesel there isn’t a third, in-between option.

    Reply

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