Tesla recently unveiled their Semi-Truck in LA, which was slightly overshadowed by the unveiling of the roadster at the same time. However, the Semi has potential to be a billion-dollar product line for them going into the future.
The Tesla Semi is a heavy duty tractor hauler aimed at disrupting the shipping industry. The specs on the Tesla Semi are ridiculous:
It goes 0-60 in 20sec with an 80k lb load (3628kg)
On the top end, it goes up to 500 miles on a charge (804km)
It can go up a 5% grade at a constant 65mph (104kph)
The Tesla Semi has four independent motors controlling the powertrain which can be improved over time by software updates, giving it potential for over their updates that improve range and efficiency
The reported energy consumption is under 2kWh per mile, which if you multiply by the 500 miles of distance, give you an estimated battery pack of 1,000 kWh or 1MWh
Tesla reports a fuel savings of $200K and a year payback period, meaning, you’ll earn back the extra upfront cost in just two years time.”
The Tesla Semi is a Class 8 Truck aimed at tackling long haul routes. While the range is only 500 miles per charge, after 8 hours of driving, the drivers are required to take a 30min break, and coincidentally that’s the exact time it will take to recharge the truck with up to 400 miles of range at a newly announced MegaCharger. Yep, MEGACHARGER!
In the US trucks move around 70% of the countries freight and bring in over $700B in revenues. That’s a massive market. In comparison the cell phone market each year is under 80B. So almost a full order of magnitude smaller. This is due in large part to the rise in online shopping sites that promote couch-based consumerism. We’re all buying more stuff every day, and it has to get to us somehow.
Walmart recently reported they’ve ordered 15 of these new Semi’s, and at the event, there were many more partners in an exclusive VIP area that reportedly have also placed orders.
It’s unlikely we’ll know exactly how many until a future earnings call, but I’d say it’s safe to assume they have a couple of hundred orders already. Enough to fund the operation and manufacturing needed to produce them.
Tesla just recently unveiled the “expected price” of the trucks to be 150K for the 300mi version and 180K for the 500-mile version. Considering this likely has a 1MWh battery, this hints at a significant breakthrough in battery technology if they can sell them this cheap.
Previously statements from Tesla and others in the industry indicated that the price per kWh for a battery was around $145. So if you have a 1,000 kWh pack at $145 per kWh you’d be upwards of 145K before spending a dime on the cab itself. Not to mention the margin you need to cover the costs of producing the truck.
This leads me to believe there are a couple of possible explanations here:
1 – Tesla made a breakthrough in battery tech that allows them to either manufacture batteries for a dramatically reduced cost
2 – Tesla is selling these trucks at a loss
I’m inclined to go with #1 since Tesla is operating on a dangerously high cash burn ratio. So for the price of the truck alone, we’ll put this at 180K for our estimate.
With Diesel trucks, you have a lower initial price for sure, maybe around 120K. Then you have over 20K year on oil changes, tires, hard parts replacement, and other issues that arise. Certainly the Tesla truck won’t be 100% free of these things, all vehicles need new tires for example, but considering you’ll never have to replace the brakes.
Also the Tesla Semi has no engine, transmission, after-treatment system or differentials to upkeep – so it’s no stretch to say it requires significantly less maintenance. Besides those savings, however, the fuel savings alone are going to make the higher initial price worth it.
Tesla estimates over 1M miles the Tesla Semi will earn the owner 200K in savings, which is pretty good, but the fascinating thing here is that from day one the fuel costs alone will save them over 60%. This is assuming we have $2.50 gal for diesel and the truck gets 7mi to the gallon. That gives it a .36 cost per mile. At the event, Elon dropped a bomb about fuel costs also, that they’ll be locked in at $0.07 per kWh.
This is insane, and likely a major reason why the trucking industry will soften up their stance against Tesla. Diesel prices, along with gasoline price, fluctuate over time and make it difficult for trucking companies to control their costs and remain profitable.
Let’s unpack that for a second…
Trucking companies have three general cost categories for their trucks
– Fixed Cots
– Variable Costs
– and Salaries
Fixed costs don’t change regardless of how much you use your truck. Variable costs do change. For example, the more you drive the truck, the more fuel you need and the more maintenance you’ll have And lastly, we have salaries, these refer to the drivers but also to the people that keep the truck running smoothly and handle coordinating the loads, etc.
When it’s all said and done, Tesla estimates that from Day 1 you’ll see a 20% lower cost of ownership, and as Elon put it – “this is from day one”
And while it’s hard to say how accurate those numbers are, they win in the long run regardless of how you tweak them. All this doesn’t take into account the convoy option in which one driver leads a convoy of two driverless semis. Yep, that’s 80K lb traveling at 65mph without a person behind the wheel. As scary as that may sound it’s not really that crazy if you consider they’ll likely only use this method on known routes with excellent road conditions. And in the end all they’re really doing is following the front truck, not really “driving” on their own or having to make too many complicated decisions.
In this scenario Tesla puts the true cost of ownership of a regular diesel truck at 2x the cost of a Tesla Semi. These numbers make sense considering one of the most expensive costs is the driver, and you’d be cutting that by 2/3 in this scenario.”
I’m sure by now you’re dying to get your hands on one right? Well, like all new Tesla models, you’re going to have to wait. Elon reported that production begins in 2019, but as we’ve heard before, I would add at least 6/mo to that and maybe even more. The reason I say that, besides their history of delays, is that they don’t have a place to make the truck yet.
Elon famously said that the Fremont plant is bursting at the seams, and they’re in the middle of production hell right now trying to get the model 3 out the door.
Let’s not forget that the model 3 is the reason for Tesla’s existence and the keystone to their entire mission, so yeah, that’s def the priority right now.
So how will they build it?
We don’t have any hard answers yet, but most people I’ve talked to with knowledge in this space agree it would make sense for them to buy an old plant in North America and retrofit. Or perhaps have large portions of the truck built by someone else, a common practice in the industry.”
Given the dramatic cost savings for fuel, maintenance, repairs, and potentially drivers the Tesla Semi could be far more expensive than the expected price of 180K and still make a lot of sense for companies looking to save money in the long run.
Of course, many large companies have short-sightedness due to how the stock market works and executive compensation tied directly to quarterly earnings so it may be a challenge to get them to think long term here.
This will likely slow adoption however it sounds like Tesla already has a healthy backlog of orders.As we’ve seen this could be a major win for shipping companies however the likely larger up-front price tag may force them to tread lightly into the EV shipping market which is rapidly growing.
Overally I think the new Tesla Semi truck looks great, and we didn’t even talk about all the features. Most of all I’m excited about the reduction in emissions. We’ll monitor this closely to see how it is working (or not) for Tesla
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