The Fuel Economics of a Tesla Semi
Not rocket science honestly. It's cheap and every freight company should buy them.
Let’s do some basic math to see what it would cost to run a 500 mile range Tesla Semi. We first start with some stats.
Battery pack size : 900 kwH (based on reported efficiency of 1.7 kwH / mile & 93% efficiency)
Fully loaded weight : 81,000 lbs
Truck weight (estimated) : 27000 lbs
Weight capable of hauling : 54000 lbs (roughly 7000 lbs less than ICE diesel truck)
Median kwH pricing in USA : $0.166 / kwH (source).
Now let’s look at similar numbers for a diesel semi (Freightliner brand with 40% market share). We look at the Cascadia model :
Fuel needed for 500 miles : 50 gallons
Weight capable of hauling : 60,000 lbs
Diesel price per gallon : $5 (was $3.60 a year ago)
Crunching the numbers :
Tesla Semi
Total fuel / energy cost for 500 miles : $149.40 ($300 if prices of electricity doubles)
Total fuel / lbs for 500 mile trip : $0.00276 / lbs ($0.0055 / mile if electricity doubles)
Freightliner Cascadia
Total fuel cost for 500 miles : $250 ($180 if prices drop to $3.60 and $115 if prices drop to $2.30 / gallon)
Total fuel / lbs for 500 mile trip : $0.004166 / mile ($0.00191 / mile if diesel costs $2.30 / gallon)
Annualising the Numbers
Assuming the average truck drives 45,000 miles a year, electricity costs $0.166 kwH, diesel costs $5 / gallon :
Tesla Semi Energy Cost : $13,446
Freightliner Cascadia : $22,500
Making Sense of it All
Clearly these numbers are based on today’s elevated energy prices and some estimates might be off relative to actual driven miles and haulage weights. However, the easy conclusion appears to be that electric trucks will be cheaper to fuel for trips below 500 miles.
It is well documented that electric cars are cheaper and easier to maintain than ICE vehicles. Assuming this is true for large semi-trucks, we can safely assume that additional savings will be made from cheaper maintenance costs too.
It seems to be an easy conclusion to make : Electric Trucks are simply much cheaper than their diesel cousins and pay for themselves in the long run.
TLDR : Freight companies might likely purchase electric semis once they finish ammortising capital costs of older diesel vehicles. Pepsi will likely demonstrate how their fleet of Tesla Semis reduce freight costs which will make other companies purchase them as well.
Tesla Semi Revenue
Freightline sold 71,000 trucks in 2020 and Mack sold 14,000 trucks.
Average MSRP (Mack) is : $140,000 for sleeper model, $100,000 for day cab
Assuming Tesla Semi sells 10,000 units a year and eventually hits 70,000 a year and each truck costs $150,000 for the 500 mile version, here’s what revenue will look like :
Tesla Semi Revenue (10,000 unit) : $1.5b
Tesla Semi Revenue (70,000 units) : $10.5b
Assuming 16% operating income, Tesla Semi operating income could be :
$240 million (10,000 trucks)
$1.68b (70,000 trucks)
Assuming Tesla trades at 30x operating income :
Market Cap addition (10,000 trucks) : $7.2b
Market Cap addition (70,000 trucks) : $50b
Risk Reward
At an extra $50b, we’re looking at an increase of 8% to Tesla’s current market cap. It does feel a tad bit too low. Assuming Tesla takes the whole freight truck market and sells 300,000 trucks a year, that’s an extra $214b added to the market cap of Tesla which represents a 35% increase.
There is meaningful upside if operating income / truck increases more than 16% (say 20%) and the market gives a 50x multiple (today’s valuation). In this scenario, at a 300k run rate, the additional market cap generated will be : $450b (73% increase over today’s market cap)
It depends on how long it takes to materialise if at all. 300,000 trucks a year from 1 company alone sure sounds like a lot of trucks.
I’m far more bullish on Tesla making and selling 20 million cars instead and I think that’s where most of the value will come from. Tesla makes $12.5b selling 1.4 million cars. At 20 million, that’s $178.5b in operating income.
Assuming multiples contract to 30x, that’s $5.35 Trillion (8.6x upside)
Assuming multiples contract further to 10x, that’s $1.78 Trillion (2.89x upside)
Adding on the Tesla Semi to this will definitely sweeten the deal.
I leave it to you to decide if this Risk-Reward is worth owning Tesla stock at today’s prices.
Note : I am not a financial advisor and this is my personal portfolio. Do not blindly follow and do your due diligence. You can lose money by investing in the stock market. All my writing is opinion and NOT advice.
I have been wrong on some firms. Peloton for example didn’t grow as intended and management tore through the balance sheet with little discipline. This is par for the course in investing. You win some, you lose some. Had you blindly followed my work on Peloton, you’d have lost over 80% of your capital. Proceed with caution.