The idea of an all-electric class 8 truck is being met with a lot of skepticism in the trucking industry. With the current status of electric passenger cars barely breaking the 300-mile range, they have difficulties envisioning a truck capable of towing tens of thousands of pounds of cargo and still achieving a decent range.
It’s in this context that Elon Musk announced in a tweet last week that Tesla plans to unveil ‘Tesla Semi’, its all-electric truck, as soon as September 2017. An analyst now warns the industry that they shouldn’t laugh at Tesla’s plan.
Piper Jaffray analyst Alex Potter, who helped Tesla’s stock reach new highs last week by giving it a new $368 price target, downgraded other truck makers today partly due to the Tesla Semi announcement:
“Commercial vehicle makers – and their suppliers – would be wise to stymie their laughter and take these tweets seriously. We are downgrading truck stocks CMI and PCAR (both from Overweight to Neutral) partially because we think their valuations already reflect cyclical optimism, but also because we think TSLA’s impending arrival could pressure valuations.”
While Musk didn’t reveal anything new about the truck itself, his announcement of an unveiling in September hints at an updated timeline to production. As we reported in our article about the timelines of Tesla’s current 8 vehicle programs, it’s not impossible for the vehicle to enter low-volume production as soon as next year – roughly a year after its unveiling.
Potter is not factoring Tesla Semi in his model just yet, but he sees “a revenue opportunity in excess of $100B/year”. He wrote in a note to clients:
“It can be difficult to determine payback times for EV trucks. First, we don’t know how much Tesla’s Class 8 vehicle will cost – or how well it will perform. But just as important, each fleet has different needs. The number of miles traveled can vary widely – from 200k miles annually for “slip- seated” long-distance haulers, to only 10k/year for some vocational fleets. In addition, diesel fuel economy (which is important for calculating cost savings vs. a base case) can range from 4mpg up to 10mpg+, depending on duty cycle, route characteristics, etc. We have yet to examine likely EV paybacks for different fleet types – so stay tuned – but regardless, the market is clearly large enough to warrant attention: in North America and Europe alone, we think the heavy truck market likely represents a revenue opportunity in excess of $100B/year (vs. TSLA’s estimated 2017 revenue of ~$11B).”
As usual, we suggest taking analyst notes with a grain of salt. While it’s clear that they have the ability to move the market with Tesla reaching new highs last week after Piper’s note, they don’t always have great track records. Potter has only been covering Tesla since last year:
Featured image: Fan rendering of the upcoming Tesla Semi by Germany-based designer Jan Peisert