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Tesla’s delayed announcement regarding its electric semi truck will be made on the 16th of November. Ahead of that we review what is known and what some of the likely options are to Tesla.
- Tesla’s own freight needs could provide initial volume, truck autonomy test bed, green supply chain
- Battery swapping unlikely
- Vocational and bus market could hold key
Tesla’s Own Logistics Could Provide Semi Truck Test Bed
Elon Musk has, if nothing else, proven adept at reusing technology and ideas throughout his companies. At the top is his own personal brand that sustains momentum across his ventures, but there are more tangible examples such as the sharing of components – the Model S inverter technology is shared with the Supercharger and battery technology is shared between the vehicles and its Powerwall energy storage product).
Tesla has a growing logistics need which could provide a captive market for its trucks to help scale production of its truck business and get driving miles to collect real-world data to improve its truck-based autonomous driving systems.
Some of the rationale that might drive this decision include:
- The primary driver is likely the need to provide a ‘real world’ test bed for the truck and its autonomous systems. Even allowing for secretive testing, the trucks have very little ‘real world’ miles to help fine tune engineering/production issues – traditional semi trucks drive hundreds of thousands of miles over their lifetimes. It’s unlikely that freight operators are going to want to use significant volumes of Tesla trucks without more evidence of reliability and efficacy. Furthermore, to build reliable, effective autonomous vehicle software it is necessary to ‘train’ them using data gathered from real world vehicles. By deploying trucks into its own fleet Tesla would be able to collect data quickly and efficiently to hone its self-driving software.
- Tesla’s stated aim is to “accelerate the advent of sustainable transport”. Rationally, it makes sense to use an electric semi-truck within its own supply chain to reduce the use of diesel trucks and trains. This is more in tune with its corporate philosophy and will likely appeal to Tesla’s Evidence for this can be seen in Tesla’s warehouse expansion at the Oaks Logistic Center, where all three buildings are LEED Silver certified.
- Currently, Tesla ships batteries and other parts by rail from its gigafactory to its Fremont production facility. The distance between Tesla’s gigafactory and Tesla’s Freemont production facility is anywhere between 258 miles and 269 miles depending upon route. The new Oaks Logistic Center is closer still. Based on the various reported ranges of the Tesla semi-truck and equivalent vehicles from other manufacturers, this would be achievable on a single charge. This would provide ample distance to test the electric truck and also trial/road test vehicle platooning.
Battery Swapping Seems Very Unlikely
It has been suggested that battery swapping may be a viable solution for Tesla’s electric semi-truck (here), supposedly given credence by the fact that Tesla has filed a patent for battery swapping in its cars (here).
We do not believe that battery swapping is an effective solution for cars or for trucks. Here is our rationale relating to trucks:
- Battery swapping technology/facilities are very capital intensive. Tesla has already invested heavily in a supercharger network and it seems unlikely that they will invest heavily for a second time in ‘refuelling’ infrastructure. It also seems unlikely that they could convince facilities that receive Tesla trucks to invest in this technology.
- Fleet operators often operate trucks from more than one vendor. Fleet operators or logistics providers might be willing to invest in battery swapping technology if the cost/justification could be amortised across more than one vehicle provider. Since no other truck OEM is promoting electric vehicles with battery swapping capabilities the risk of investing with subsequent low usage seems too high to bear.
- Battery technology is advancing at a pace that would jeopardise any sort of RoI on battery swapping. Tesla’s battery partner, Panasonic, recently stated it expects to achieve a 30% improvement on energy density with existing technology. It is very likely that the capacity, and therefore range, of batteries will improve sufficiently in 5-7 years to invalidate the need for battery swapping.
- There are multiple electric bus manufacturers who already use overnight, plugin charging or fast, route based charging to power their vehicles, not battery switching.
- Despite the recently filed patent, Tesla has moth-balled the single battery swap station it built because of low usage.
A better approach for Tesla might be to offer fleet operators discounted or free charging through the Supercharger network. If – and it’s a big if – Tesla can make good on its commitment to ramp solar capacity, fleet costs could be lowered significantly.
In its announcement in 2016 about its Master Plan Part Deux, Tesla stated that it had interest in heavy-duty trucks and high passenger-density urban transport (buses). Although it states it believes these will be autonomous and smaller than traditional buses, it is curious that Tesla doesn’t pursue the current opportunity for electric buses, this despite Musk recently being lukewarm on the idea.
The market for electric buses is growing strongly, driven by demand for non-polluting public transportation in a wide range of urban areas. This is likely to be a long-term trend as more cities recognise the impact of poor air quality and legislate against polluting vehicles. There are numerous truck and bus OEMs supplying to this market already, often utilising powertrain and chassis components across vehicle types. It is reasonable to assume that the technology developed for a Tesla semi truck could be re-configured for a passenger vehicle.
Proterra, an electric bus start-up reports significant total cost of ownership savings for electric buses versus diesel, CNG and hybrid. This will appeal strongly to municipal transport providers
Tesla may feel it is too much of a distraction, or that it cannot add value, but a play for a growth market with strong long-term demand may appeal to shareholders. It’s also noteworthy that, in the US at least, there is sizeable government and state funding available to purchase electric buses. Tesla has shrewdly used government funds in the past and there is no reason it shouldn’t here.
There wasn’t much fanfare when Peterbilt Motors demoed an electric refuse truck earlier this year. However, vocational vehicles used in urban environments – refuse trucks, utility vehicles – are likely going to need to be electric in the future to meet strict urban emission and noise restrictions. Tesla could leapfrog the competition by developing a range of electric urban, vocational vehicles based off its semi-truck platform. This would give it significant differentiation in the truck market and, again, would appeal to urban authorities looking for ways to improve air quality. Tesla could also bring value through more sophisticated use of technology in the vocational market, an industry which is quite traditional and slow to adopt new features/functionalities.
Trucks and buses are major contributors to air pollution, particularly in urban areas. Whilst they don’t attract the attention that passenger vehicles do, the benefits of electrification and autonomy are just as great, if not more so. Based on early reports, Tesla seems to be aiming for a mid-range truck capable of city activity or limited inter-city activity.
Class 4-8 truck sales are in the range of 450,000 to 500,000 units per year in the US alone (Tesla’s likely primary market). Capturing only 5% of this market would represent 25,000 units annually or, based on a retail price of US$150,000, close to US$4bn in sales per year from the US alone.
Of course, this pre-supposes that Tesla will pursue a traditional ownership model. The cost of purchasing, maintaining (service, parts), fuelling and providing a driver for a traditional Class 8 truck easily exceeds US$1m over a ten-year period.
Electric vehicles are cheaper to service, maintain and fuel than their diesel counterparts. Driver costs could be reduced in the longer term using autonomy. By disrupting the truck aftermarket with a subscription-based fright model could see Tesla drive far higher revenues whilst simultaneously lowering the total cost of ownership for fleet operators.
Finally, if Tesla is serious about its ambitions in the truck market it will need to focus on executing deliveries and/or availability of service on time. To date, buyers of its cars have been, to a degree, tolerant of delays because they are excited about a new product. Tesla will find the logistics market much less forgiving.
Image Source: Tesla