Elon Musk generated a storm of publicity yesterday with one tweet: “Tesla Semi truck unveil set for September. Team has done an amazing job. Seriously next level.”
What a bad idea.
Tesla has plenty to do without this new product introduction; the company faces significant operational challenges in introducing the Model 3, which it is touting to be its first mass production car.
The company is aiming to dramatically increase production from 76,000 vehicles in 2016 to 500,000 in 2018, and it needs to start getting significant output from its battery factory.
Tesla is now valued at more than Ford Motor Company; if Tesla does not deliver on its promises surrounding Model 3, its stock price will drop like a rock.
But even without the Model 3 deadline, it would still be a bad idea.
Trucking is a low-margin business. Tesla offers high priced cars — there is no market for ‘premium’ priced trucks.
But even if Tesla could price close to what other truck makers are pricing, battery-powered trucks are likely to have a limited range. Long-haul truckers typically travel over 400 miles per day. Industry experts are estimating that the Tesla truck will have a range of about 200 to 300 miles. In a low-margin business, asset utilization is critical. Having trucks that are limited in the loads they can carry would be a constraint. Extra money can be saved in route scheduling if a dispatcher does not have to reserve certain routes for certain trucks. Further, there are already reports of long waits at battery recharging stations on the Interstates.
You might think that shippers would be willing to pay more for loads with low carbon emissions. Most large companies have sustainability programs. But that is not what I hear from logistics service providers. They tell me that large shippers usually ask about emissions, but when it gets down to making the decision of who to work with they are unwilling to pay any extra to go green. Small and medium-sized companies don’t even ask.
For Tesla stockholders, a move into this market is not something they should welcome. Carriers are hardheaded business people. They must be to survive. There will be no trucking company buying premium-priced trucks to prove they are green or make a fashion statement; the green their survival depends on is the shade of green you find on a dollar bill.
