https://www.bloomberg.com/news/articles/2017-11-15/what-tesla-s-semi-truck-must-do-to-seduce-truckers
[Another nail in the fossil-fuel industry's coffin.
video, images, links in on-line article]
What Tesla's Big Rig Must Do to Seduce Truckers
Elon Musk’s battery-powered semi may be a beast on the road, but does it
have what it takes to move a market?
By Tom Randall
November 15, 2017, 5:00 AM EST
Tesla Inc. is about to introduce its biggest product yet, at least in
terms of raw tonnage.
Tesla Chief Executive Elon Musk has promised to unveil an electric semi
truck on Thursday that will drive like a sports car and beat its diesel
counterpart in a tug of war. “This will blow your mind clear out of your
skull and into an alternate dimension,” he wrote on Twitter this week.
But none of that really matters.
Unlike the U.S. market for luxury sedans and SUVs, where Tesla has been
able to succeed against stylish, high-priced rivals with stylish,
high-priced electric vehicles, truck drivers and delivery fleets need to
make money with their big rigs. It’s an unglamorous and ultralow-margin
business in which one factor matters above all else: cost. And the truck
market is huge. In North America alone, the largest heavy duty freight
trucks—Class 8 semis—account for about $30 billion in sales each year,
or more than 250,000 new trucks, according to industry data tracked by
Bloomberg.
Tesla’s foray into commercial trucking is coming at an impossibly tough
time for the company. Its first mass-market car, the Model 3, is already
months behind schedule, and Tesla is spending a billion dollars a
quarter to get things up to speed. Skeptics will see the truck unveiling
as a distraction from the company’s biggest existential test yet.
But this isn’t a product launched on a whim. Tesla has been secretively
working on this truck for the past two years under the leadership of
Jerome Guillen, who ran development of Daimler’s vaunted Freightliner
semis before joining Tesla in 2010. He took over the truck program after
leading development of the Tesla Model S luxury sedan. (As far back as a
year ago, I spoke to a person close to the company who had already been
for a ride in one of Guillen’s Tesla Truck prototypes.)
The Tesla Truck is aimed squarely at one of the biggest unaddressed
segments of Musk’s self-declared mission “to accelerate the world’s
transition to sustainable energy.” Here’s a look at what it would take
in terms of cost and performance to shift freight from diesel to
electric and shake up the world of trucks.
Taking Diesel Out of Trucks Won’t Be Easy
Electric motors have clear advantages for hauling: instant power, zero
tailpipe pollution, supercheap fuel, and fewer moving parts to maintain.
In financial terms, these advantages are most easily realized in local
delivery trucks, which start and stop frequently and can return to a
central hub at night for charging. That’s why the pilot electric trucks
to come from more established competitors such as Cummins and Daimler
have ranges of 100 to 220 miles.
While Tesla hasn’t disclosed specifications for its upcoming truck, the
company appears to be aiming at something bigger: longer ranges and
possibly even true long-haul trucking routes. A Reuters report in August
that suggested Tesla would offer a truck with a range of 200 to 300
miles, perhaps short of long-haul status, became accepted wisdom among
Wall Street analysts. Musk, as he often does, took to Twitter to promise
something more: “Semi specs are better than anything I’ve seen reported
so far,” he wrote last month.
Class 8 trucks, which have a loaded weight rating of at least 33,000
pounds, come in a variety of shapes and sizes, from trash trucks and
cement mixers to city buses all the way up to tractor-trailers whose
drivers spend days and nights living on the road. The most common day
cab delivery trucks cost around $100,000, and big rigs with sleeper
cabins are about $150,000. While the Tesla Truck will likely address
more than one application, the battery size will say a lot about Tesla’s
real focus.
Batteries are the single most expensive component of an electric truck,
and the battery of a cross-country hauler could cost $100,000 even
before they build the truck around it, according to prices tracked by
Bloomberg New Energy Finance. The sticker price of any electric truck,
regardless of size, is going to be higher than its diesel equivalent
because of those costly batteries.
But that upfront investment can be offset by cheaper operating costs.
Running a truck on electricity saves tens of thousands in fuel costs as
well as savings of roughly 7 cents a mile on lower maintenance costs,
according to Bloomberg estimates. Then there’s Tesla’s wild card: Will
the truck, expected to roll out by 2020, come with some level of
autonomous driving? Tesla has been in talks with California and Nevada
agencies about testing semis that can automatically follow a lead
vehicle, a technique known as “platooning.” Platooning cuts fuel costs
by reducing wind drag. And if the autonomous driving system is good
enough to run without a driver, it could also dramatically cut labor
expenses, which add about 57 cents for every mile on the road.
For a Tesla Truck to truly begin to take diesel market share, savings
will need to offset the higher stick price in about two years, according
to the average estimate of six analysts surveyed by Bloomberg. With a
payback period much beyond two years, Tesla would need to establish a
track record of reliability and high resale values before any of the
major trucking fleets would take a risk on it, said Lee Klaskow, a
senior transport analyst at Bloomberg Intelligence.
A Sleeper Truck?
A rough way to gauge Tesla’s initial truck ambitions involves asking a
simple question: Would anyone sleep in this truck?
Any range less than 400 miles is likely meant for local and regional
deliveries, the sort of thing done by UPS and FedEx or the type of
hub-and-spoke model used by giant retailers such as Wal-Mart Stores Inc.
to move goods from distribution centers to stores or warehouses. If
Tesla wants to go after the longest routes to replace what are known as
“over-the-road” trucks, which feature sleeping cabins for multi-day
driving stretches, the company will need a range of at least 500
miles—or else a way to charge an electric truck that’s faster than
anything in use now. The battery needs for each of these categories
would be different, and so would the costs.
Here are two scenarios for how a battery-powered truck would compete
with the diesel equivalents for both local deliveries (trucks known as
day cabs) and long-distance hauling. These are both ambitious
assumptions, suggesting unprecedented range and industry-leading battery
prices. But only by offsetting the higher upfront cost can Tesla achieve
the magical two-year payback period and convince truckers to ditch diesel.
[https://www.bloomberg.com/news/articles/2017-11-15/what-tesla-s-semi-truck-must-do-to-seduce-truckers]
Finding the Electric Truck Advantage
Tesla could lower the sticker price.
Pairing smaller batteries with an accelerated charging technology, such
as an upgraded Supercharger or a battery-swap program, would bring down
costs and make it easier to compete with diesel rigs. But that, too,
would come at a cost. Fast charging incurs what the electric utilities
call demand charges—significantly higher commercial rates for power
hogs—which could wipe out much of the fuel savings promised by an
electric truck. Another option would be for Tesla to lease the trucks or
even just the batteries, to spread the sticker price over several years.
The other source of potential savings to trucking companies is the
maintenance, which costs roughly 19 cents per mile driven in a standard
diesel truck, according to company data compiled by Bloomberg. Electric
vehicles don’t need oil and fluid changes, and the brakes won’t need to
be replaced as often because of regenerative brakes that convert kinetic
energy into stored battery power. The chart above reduces maintenance
costs by about a third for electric trucks. However, there’s no way to
know for sure how to assess the maintenance savings until more electric
trucks are on the road.
Musk has said his goal is to produce electric powertrains that can run a
million miles without breaking down. Still, Tesla has no track record of
being able to deliver such savings for an industry that tests the limits
of a vehicle by hauling 80,000 pounds in the heat and cold, every day of
the year.
Big Trucks, Small Margins
The video above, of an apparent Tesla prototype, is the first hint of
what the company is going for. It shows a Class 8 semi, which is the
biggest segment of medium- or heavy-duty truck. It’s also the toughest
for newcomers to crack. Margins are small, and trucking companies such
as Swift, Ryder, and J.B. Hunt succeed by “sweating their assets,” said
Bloomberg Intelligence’s Klaskow. In other words, the biggest players
are good at keeping their trucks in excellent driving condition and
optimizing time on the road. They’re also averse to messing with the
supply chain.
“This is not a proven technology for trucking,” Klaskow said. “I think
electrification is the future, but I don’t think it’s the future of
tomorrow, or next week, or 2020. It’s going to take time before people
are comfortable with it.”
So Tesla is going after a tough market, but electric vehicle analyst
Nikolas Soulopoulos of Bloomberg New Energy Finance points to some of
Tesla’s specific advantages. Take, for example, the exhaust system on a
Class 8 truck. Emissions controls must be tailored to meet the local
pollution requirements in every country the vehicles operate, sometimes
at great expense to the truck maker. Electric trucks won’t have to
bother with emissions, since they don’t produce any.
Another potential edge comes from battery adaptability. While Class 8
diesel trucks typically deploy the same engine for widely varying jobs,
making it sometimes oversized for the job, Tesla might be able to offer
a smaller battery pack for a truck making urban deliveries and a larger
pack for trucks dedicated to reaching a regional distribution center.
“This is a very big advantage,” Soulopoulos said.
Perhaps Tesla’s biggest advantage over other truck makers is that its
semi will share some core parts with the Model 3. Musk disclosed during
an earnings call in May that the semi uses “a bunch” of Model 3 motors,
which sit in line with the truck’s axles. These relatively cheap
electric motors will give the semis unparalleled electric torque for
getting quickly up to speed with a heavy load.
While traditional trucking companies have the advantage of letting their
profitable diesel programs subsidize development of electric
drivetrains, that ultimately means one business line will cannibalize
the other. For Tesla, the risks are all upfront. The cost of getting
into trucking adds a financial burden during an already fraught period
in the company’s history. But longer term, the sharing of electric
motors and battery cells should drive down the price of those components
for both vehicles. In fact, every time the global supply of batteries
doubles, the cost of making them drops by 19 percent, according to
Bloomberg Energy Finance data.
For Tesla, Musk said, trucks are “just a very compelling product that
has a low unit cost.”
Before Tesla started making electric cars, the belief among major oil
companies and energy analysts was that oil demand would only continue to
grow for the foreseeable future. Now, with the shift to electric
passenger vehicles becoming clear, the conventional wisdom is that the
freight industry will sustain oil demand for decades to come. Trucks
currently account for about a fifth of the world’s oil demand, and the
International Energy Agency projects an increase of 40 percent by 2050
if business proceeds as usual.
The truck unveiled in California this week may offer the first
indication of whether Tesla will do to the trucking industry what it’s
already done for the automotive industry: change what people think is
possible.