Investors believe Tesla Inc. (NASDAQ:TSLA) pushing into electric trucks will be among its most successful strategies. The move is bound to be a winner according to two major investment firms. This week, analysts of Deutsche Bank and Morgan Stanley Research published arguments bullish on the potential of the electric truck industry. The electric vehicle space is in a season of supercharged growth and it is believed by many that climate change, among many other factors, will continue to drive interest and money into the market. Regulations regarding electric vehicles vary greatly from State to State.
Tesla Inc. will showcase and electric semi truck concept later this month. This week, two research and investment houses relayed their excitement over the venture. Rod Lache’s daily occupation involves research and analytics work for Deutsche Bank. He believes 10 percent of Class 8 semi trucks will be electrified over the next decade. At least 15 percent of trucks in segments classed 5 to 7 will be electric, too.
The Deutsche Bank analyst based this assertion on overall cost and use cases. His assessment considers weight, range and use scenarios as well. Factored into his analysis are operation and acquisition costs, too. The conclusion reached is that initial electric semi truck offerings will come with a 2.9 year repayment time. Payback periods will decline to less than 2 years moving into the mid 2020’s. The next 10 years should see products like Tesla’s incoming semi-truck move right “into the sweet spot” of what truckers deem affordable.
Lache finds that truck fleet owners prefer repayment periods of 18 to 24 months. Range will be the biggest concern among them, though. The analyst predicts initial range will be between 200 and 300 miles on a full charge. Long-distance haulers will obviously recognize this as a major restraint. However, the analyst points out that 20 percent of Class 8 trucks in America move less than 200 miles per day. This is the market that Tesla Inc. is gunning for in his opinion.
The young automaker has just over 15 years in existence. In that short time, the Elon Musk-led corporation used a combination of tech and automotive expertise to rise to the top of the car industry. That is at least true for the carmaker’s market cap and reputation. Tesla won over the transportation industry with unparalleled expertise in automotive, consumer tech and electric batteries. It has now acquired the reputation and investment trust to confidently push into the trucking space.
Lache claims Tesla is easily able to offer “significant competitive technology and cost advantages.” Tesla Inc. can now rely on high low volume production, which also extends to its electric motors and battery packs, for its 3 current cars. The latest vehicle is barely 2 months old, yet has secured nearly 500,000 paid reservations. Its attraction lays with its low price tag, enabled by increased production capabilities and economies of scale. The incoming Tesla Class 8 semi will have a similar advantage according to Deutsche Bank.
Lache believes the Class 8 semi trucks from Tesla Inc. (NASDAQ:TSLA) will range between $200,000 and $240,000 depending on distance capabilities. That is actually a lot “lower than expected.” This alone would make Tesla semi trucks very disruptive. Bearing that, he claims the 20 percent obtainable market is as good as theirs.
Data and research giant FTR Intelligence finds that the last year of Class 8 truck order totals to 231,000. Gunning for a 20 percent market share will rake in to $10 billion in annual sales.
Morgan Stanley research also has two analysts, Adam Jones and Ravi Shanker, who cannot hide their excitement over Elon Musk’s imminent move. A joint statement made by the two relays bullishness over the prospects of a Tesla semi truck.
It could prove to be “the biggest catalyst in trucking in decades,” the analysts say. The potential for mass adoption poses an even great disruption threat. Jones and Shanker claim Elon Musk’s advantage will once again be cost. They predict a self-driving, electric truck that can be as much as 70% cheaper to operate than conventional solutions.
Lache is also behind the idea of an autonomous truck. Trucking companies will find it difficult to overlook the benefits of reduced man hours. The electric automaker’s advantage in AI and self-driving vehicles already renders it a winner in the eyes of fleet owners. This is the opinion of Jones and Shanker as well, who say Tesla has a “significant advantage” here.
Tesla is believed to be on the verge of setting off a greater divide between the forerunners and tail players of several Industries. According to the Morgan Stanley researches, industries bound to feel the worst of the disruption include shippers, truck makers and their suppliers.
Another key question relates to regulation acceptance and compliance. Tesla semi trucks will need to match vehicle and road safety standards. Regardless of their independence of a driver, self driving cars need to feature most conventional control features. Those include items like brakes, steering wheels, as well as several other control qualities.
Jones and Shanker house no worries about Tesla’s regulation setbacks. They are merely temporary in their view, and self driving cars are gaining wider acceptance among state lawmakers. In light of this, “we do not believe that there are significant regulatory obstacles,” they said.
In fact, this week sees the U.S. House of Representatives passing laws of that permits autonomous, lightweight vehicles on public roads. The new legislation sets a control standard and removes the ability for individual states to set their own regulations. Next week will have the Senate Commerce Committee considering autonomous truck regulations.
Yet regulations will not be the only obstacle in the way of Tesla’s trucking ambitions. The idea of electrifying the trucking space is not unique to the company. Truck industry giants, Daimler. Fuso and Toyota are all set to unveil their own electric trucking solutions over the next several months.
For truck owners, the question of recharge periods might be a greater concern than anticipated. The transportation business is one of strict time constraints. Shippers opting for electric trucks will have to accept extended recharge periods. This means the consideration of extended down times, if they can afford to do so. The likes of Tesla Inc. have to understand that a significant portion of the transport sector will not give up the convenience of a quick diesel refill very easily.
Also, the 200 to 300 mile assertion made by Rod Lache falls far below that of Jones and Shanker’s. The Morgan Stanley analysts predict Tesla Inc. will not produce short-range trucks with massive recharge periods. Accepting that the trucks will need a long time to recharge their batteries, usually overnight, the Elon Musk company will likely instill its semis with 600 to 700 miles of range.
Also just a Tesla truck fantasy?
Reports assure that the maker of the Model S is already talking with potential truck customers. Tesla Inc. (NASDAQ:TSLA) will probably start taking reservation orders on the nights of the semi truck’s unveiling. Reservation costs are predicted to be between $4000 and $7,000. Troye Clarke is the CEO of Navistar International, a forerunner within the market of truck component suppliers. He makes it very clear to investors that the industry is in transition.
“There will be electric trucks on the road,” he asserted.