Commentary
There are a significant amount of truckers that own fleets because they love their “toys”. They accumulate the best in breed trucks and spend hours perusing the grounds of the truck shows trying to find the latest in equipment. They are in trucking because they love it.
These true breed truckers are at home in the shops and working with the manufacturer and supplier engineering teams. They are first adopters and love being on the cutting edge. You see their face grace the ads in CCJ, Transport Topics, and Fleet Owner vouching for a supplier’s latest innovation and boasting about their orders.
For them, putting down a deposit on a Tesla Semi is perfectly acceptable. For everyone else, it’s irresponsible.
Fleets have multiple stakeholders that have a vested interest in its success. Bankers, investors, shippers, and employees are all vested in the long term success of the operator. Giving Elon Musk a loan for years is dead weight.
Never in the history of trucking has a product from a truck manufacturer been more over hyped. And yet, all data about Tesla’s ability to actually deliver a Semi that remotely matches the claims of its CEO in the time it was promised suggests they will significantly over promise and under deliver.
The claims made by Elon Musk that the Semi will achieve a range of 400 miles has been questioned by many. The batteries alone to achieve such a range are expected to increase the weight of the truck by over 10x. Plus, the batteries lose a significant amount of their range in the cold.
The next challenge that remains unresolved is the about the power grid and energy consumption required to power the vehicle. A recent report in FreightWaves featured an Oxford study that suggested the energy equivalent to charge the vehicle will require the same power as 4000 homes.
Assuming this is the case, you can expect surge pricing to be rolled out by utilities to mitigate the demand volatility. While this might seem foreign to most energy consumers, a large amount of the US grid is already traded on a spot market with an active forward and futures market. You can bet that down line utilities will want to recover their exposure. All of this will make a Tesla fleet owner regret their purchase, as it will likely fail to achieve the cost savings promised by Musk.
There is also a lot of doubt about whether an electric truck is actually more environmentally friendly, based on production of batteries, and accelerated electricity charging. This is before considering the humanitarian impact of cobalt mining, a mineral used in electric vehicle batteries.
And even if by some miracle Musk were to defy physics and markets through innovation or government kickbacks, one should be incredibly skeptical of his ability to deliver a truck in a reasonable timeline.
Elon Musk is the Napoleon of the auto industry.
He has taken on the most powerful empires in the auto industry, using innovation, cunning, and pure force of personality to challenge their strong hold. He has been counted out and nearly bankrupt a few times. Plus, his innovations will forever alter how the auto industry operates.
But he has stretched his resources too thin and has given the rest of the industry a chance to fight on their turf. High tech luxury cars have always been Tesla’s thing.
Tesla carved out an amazing brand for itself that proved consumers would appreciate and demand an expensive electric vehicle, disregarding things like range and wait lists to get their hands on them.
Governments also helped fund Tesla’s rise through subsidies, tax credits, gas taxes, and emissions requirements- all of which made the decision to purchase a Tesla a slight luxury vs. an enormous economic burden.
But Musk was far more ambitious and wanted to own the whole sector. He also knew to maintain investor enthusiasm, he would need to promise a much larger prize. And thus he introduced the Model 3.
Pre orders defied every forecast and expectation that anyone had. Despite a lack of a sophisticated supply-chain, staff that were prepared for such a large influx of orders, or even the production capacity, Tesla kept promising large production numbers that were not achievable for their infrastructure.
In July, Musk predicted that Tesla would be able to make 20,000 Model 3s a month by December 2017. In the past three months, Tesla has actually only produced 2425 model 3s. Most of the new deliveries went to employees, pushing back deliveries for customers with deposits on file.
The Model 3 will be Musk’s Waterloo moment and with it his Semi ambitions will be finished or significantly delayed. A WSJ article from January 3rd had the best quote to describe Tesla’s current financial shape:
“While Mr. Musk’s boisterous talk isn’t new, the stakes have grown larger for the company, which had $22 billion in liabilities and negative cash flow at the end of the third quarter.”
All of which raise questions about the financial viability of a company that continues to disappoint.
As a fleet owner, you have a fiduciary responsibility to your stakeholders to ensure that any funds are spent wisely. Giving Tesla and Elon Musk a free loan for the next few years is not the best use of those funds, as you are unlikely to see the Semi in the market for years after it was planned for delivery. If you want to help the electric truck market, there are tons of choices from others manufacturers that already have the infrastructure and setup to deliver.
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