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Tesla Semi-truck: What will be the ROI and is it worth it?

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Elon Musk’s announcement that a Tesla Semi will be arriving as early as September is the first step to what will eventually be a reinvention of an entire industry. We’ve discussed before what, exactly, that means, but given that the man in charge of the Tesla truck program is Jerome Guillen who has a history with Daimler (specifically Freightliner) and large Class 8 semi-trucks, it’s not hard to see where Tesla plans to go with this. That leaves only the question of how far, literally, they plan to take it. In tractor-trailer operations, there are two basic types of freight moving: short-haul and long-haul.

We’re going to look at each of these types of freight hauling and how the return on investment (ROI) for a battery-electric rig (such as that we expect Tesla to unveil) would be. If there is any. We’ll also consider what type of equipment this might entail, in a broad sense, and how that compares to current paradigms in tractor-trailer freight hauling.

Before we dive into that, a few words on what the trucking industry is like are needed. About 69.5 percent of the freight moved in the United States is moved on a commercial truck. The U.S. Department of Transportation (USDOT) also says that a staggering 92 percent of prepared foods are moved by trucks and 82.7 percent of agricultural products are moved by truck, as are 65 percent of pharmaceuticals. However you measure it, that’s a lot of goods being moved on highways and surface roads nationally.

Currently, the trucking industry is seeing a lot of change, internally, as technology improves the way that freight hauling operates. The Internet and faster communications, for example, has begun to erode the traditional consignee-broker-hauler paradigm in which someone with goods to haul contacted a freight broker who then contracted a freight hauler to move the goods, skimming a percentage off the top for the connection. The middleman is often cut out in today’s trucking, with many trucking companies having load brokers on staff.

Electronics and global positioning have also changed how trucks operate, with computers more efficiently organizing load and truck movements to minimize empty movement. The USDOT says that about 29 percent of all truck movement is pulling an empty trailer to or from a freight drop-off point, costing about $30 billion annually. That number, while high, has been dropping for some time and drops exponentially as networks of computers get more efficient at organizing trucking and trucking companies consolidate into larger and larger fleets.

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Finally, we should note that the longer the average trip (load to delivery) is for a tractor-trailer, the faster the truck’s ROI for the owner. Shorter hauls have higher per-mile maintenance costs than do longer hauls. Even discounting the cost of fuel, that becomes true as equipment maintenance costs beyond engine and fuel are still higher with shorter distances. There are several reasons for this, including how often brakes are used, how much time is spent not working (idling or sitting), and higher incidences of accidents. To name a few. Many short-haul operations are undertaken on less than ideal roads and in areas where any kind of breakdown, including a flat tire, can mean hours wasted waiting for repair.

Knowing those things, we can look at potential ROI for both short-haul and long-haul Tesla electric semi-trucks.

Short Haul

Conventionally, short-haul operations are defined as being tractor-trailer shipments moving 250 miles or less and long-haul is defined as being those same types of shipments moving more than 250 miles. Each of these has sub-categories, of course, but in the main, those are the two major markets for large Class 8 semi-trucks pulling freight. It should be noted that the overlap between short-haul and long-haul is large, as many short-haul shipments are being carried to a distribution location where it’s reassembled for longer distance hauling.

Of the two operations, short-haul has the most diversity in terms of machines used and types of freight carried. It’s in this category that we find items as aggregate as grain freshly harvested from fields to stones to specialized equipment being carried. Sometimes by the same truck and driver over the course of a year’s work. It’s also in this category that we find specialized rigs meant for entering pit mines, climbing steep grades on primitive dirt roads, moving overweight and outsized items, and so forth. For the most part, trucks in this category are “day cabs” meaning they have no sleeper unit attached for the driver to use as a rest quarters when not at the wheel.

So far, the electrified Class 8 vehicles we’ve seen actually enter the market have nearly all fallen into the short-haul category. These have included battery-electric, hydrogen fuel cell, and hybrid units working as “yard dogs” moving trailers around a dock area, as portage trucks moving containers and freight out of port to staging areas or local distribution centers, and local area urban and suburban delivery vehicles. Currently, there is a large push in California to make all port vehicles (including container-moving trucks) as zero-emissions as possible.

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The good news for battery-electric truck makers and those who aspire to become them is that, according to the USDOT, about half of all of the shipments (by value) is moved less than 250 miles. That accounts for about 80 percent of the weight being moved around the country. The bad news is that in this segment, less is paid per ton for that freight to be moved and, according to the American Transportation Research Institute, this segment only accounts for about 25 percent of the trucks on the road. Equipment age also tends to be higher in this category, with trucks being used for more years (and generally fewer miles) than compared to long-haul trucks.

Nikola One all-electric Semi truck

In terms of cost, outside of maintenance, the most expensive items for a tractor-trailer, whether short- or long-haul, are fuel (38 percent), driver wages and benefits (34 percent), and truck-trailer lease payments and insurance (14 percent). These costs are about the same no matter what the truck is used for in most conventional operations, short-haul or long. Maintenance is about six percent higher in short-haul operations when compared to long-haul and insurance is usually a bit higher(1.5 percent), but not by so much that it can’t be averaged between them without skewing the numbers.

We can safely assume that a battery-electric semi-truck will have a higher price tag than its diesel-powered counterpart, which itself averages about $150,000 new. How much larger the electric truck would be is mostly conjecture, but we can probably be considered conservative to say it’s up-front costs will be at least 50 percent higher ($225,000) due to the expense of the batteries. Morgan Stanley’s report on electric and autonomous trucking assumed $75,000 for 500 kWh of battery storage, translating to roughly 150 or so miles of range in a fully loaded (80,000 pound) semi-truck. Given the current lithium crunch and the likelihood that economies of scale will take a lot of time to come to fruition, it’s easy to predict that more than half the Tesla Semi’s cost would be in batteries should it aim for a 250-mile range.

Over time, of course, that larger up-front price tag would be returned with fuel savings. In short-haul operations, about four years (250,000 miles) would be required to pay off $100,000 in battery premium with fuel savings. There are, however, other costs that would rise with the higher price of the rig. A higher-priced rig will have higher lease payments and higher insurance costs for replacement. This would stretch the ROI of the short-haul truck, by roughly another year, making it a five year investment return. If the truck stays in operation for the typical usage cycle in this segment, however, that would mean the truck pays for itself in about two thirds (70 percent) of its intended lifespan. Some percentage of the maintenance would also be lower in cost due to the nature of the electric truck, but much of it (tires, drivetrain, brakes, etc.) remains stagnant, further whittling at that ROI timeframe.

By and large, most forward-thinking fleet managers would jump at that. With one point of caution: by nature of their business and the long timeframes involved, most fleet managers are averse to change on a large scale. A few EV trucks here and there to prove out the technology and make the suits and ties happy are one thing. Jumping whole hog into the change is quite another. It would take some time (likely years) for fleet managers of short-haul fleets to decide that battery-electric trucks (or any type of unconventional powertrain) is a healthy decision. That, more than anything, will be the major delay towards adoption of something like a Tesla Semi.

Long-Haul Operations

Assuming that a Tesla Semi could be capable of hauling freight for 500-1,000 miles on a charge (the average long-haul trip is 600 miles per day), it would jump into a segment of trucking that accounts for more ton-miles than any other type of freight movement and that is growing faster than any other segment of commercial transportation in terms of both value and weight being moved. Further, the average turnover for a tractor in the long-haul business is 6.6 years (ATRI numbers) and the average mileage is over 110,000 miles per year per truck. ROI is typically faster as well, given the lower costs versus the miles driven.

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Coming up with an ROI for a long-haul electric semi-truck is much trickier here and may be nearly impossible without knowing more about the EV truck to be used. At this stage, a battery-electric Tesla Semi would be nearly impossible for long-haul given the size and thus weight of the batteries required. So something involving very fast charging, battery swapping, or similar would be required. That adds costs to the equation that we cannot easily quantify without knowing what those logistics are.

What we can easily project is that the cost-benefit for a Tesla Semi in a long-haul scenario would not likely be nearly as compelling as it is for a short-haul fleet manager. A typical over-the-road truck sees about a million miles during its lifespan with a cost of about $400,000 in fuel and $100,000 in maintenance (ATRI) during that time. Most fleets own the truck for about seventy percent that time (700,000 miles), on average. So the cost of a truck, in terms of purchase price, fuel, and maintenance over its expected fleet lifespan is about half a million dollars ($280,000 fuel + $70,000 maintenance + $150,000 purchase = $500,000). This might begin to look very close to break even on a higher-priced EV truck by comparison, which would very likely save on fuel but would have higher up-front costs in balance. Further, those fuel savings might not be as good given the likelihood that logistics like battery swapping or more frequent stops for plugging in would be required.

Conclusion

A Tesla Semi would likely have a good return on investment for any fleet manager who is willing to look over the long-term and consider the cost-benefit. For the short-haul manager, however, the potential ROI is far more provocative than it would be for the long-haul manager. We can see a clear business case for a Tesla Semi for a large proportion of the short-haul industry, though we do caution that it will likely take some time for those in the industry to cast anything but a dubious eye towards an unconventional powertrain.

Aaron Turpen is a freelance writer based in Wyoming, USA. He writes about a large number of subjects, many of which are in the transportation and automotive arenas. Aaron is a recognized automotive journalist, with a background in commercial trucking and automotive repair. He is a member of the Rocky Mountain Automotive Press (RMAP) and Aaron’s work has appeared on many websites, in print, and on local and national radio broadcasts including NPR’s All Things Considered and on Carfax.com.

Investor's Corner

Tesla investors may be in for a big surprise

All signs point toward a strong quarter for Tesla in terms of deliveries. Investors could be in for a surprise.

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(Credit: Tesla)

Tesla investors have plenty of things to be ecstatic about, considering the company’s confidence in autonomy, AI, robotics, cars, and energy. However, many of them may be in for a big surprise as the end of the $7,500 EV tax credit nears. On September 30, it will be gone for good.

This has put some skepticism in the minds of some investors: the lack of a $7,500 discount for buying a clean energy vehicle may deter many people from affording Tesla’s industry-leading EVs.

Tesla warns consumers of huge, time-sensitive change coming soon

The focus on quarterly deliveries, while potentially waning in terms of importance to the future, is still a big indicator of demand, at least as of now. Of course, there are other factors, most of them economic.

The big push to make the most of the final quarter of the EV tax credit is evident, as Tesla is reminding consumers on social media platforms and through email communications that the $7,500 discount will not be here forever. It will be gone sooner rather than later.

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It appears the push to maximize sales this quarter before having to assess how much they will be impacted by the tax credit’s removal is working.

Delivery Wait Time Increases

Wait times for Tesla vehicles are increasing due to what appears to be increased demand for the company’s vehicles. Recently, Model Y delivery wait times were increased from 1-3 weeks to 4-6 weeks.

This puts extra pressure on consumers to pull the trigger on an order, as delivery must be completed by the cutoff date of September 30.

Delivery wait times may have gone up due to an increase in demand as consumers push to make a purchase before losing that $7,500 discount.

More People are Ordering

A post on X by notable Tesla influencer Sawyer Merritt anecdotally shows he has been receiving more DMs than normal from people stating that they’re ordering vehicles before the end of the tax credit:

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It’s not necessarily a confirmation of more orders, but it could be an indication that things are certainly looking that way.

Why Investors Could Be Surprised

Tesla investors could see some positive movement in stock price following the release of the Q3 delivery report, especially if all signs point to increased demand this quarter.

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We reported previously that this could end up being a very strong rebounding quarter for Tesla, with so many people taking advantage of the tax credit.

Whether the delivery figures will be higher than normal remains to be seen. But all indications seem to point to Q3 being a very strong quarter for Tesla.

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Elon Musk

Tesla bear Guggenheim sees nearly 50% drop off in stock price in new note

Tesla bear Guggenheim does not see any upside in Robotaxi.

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tesla showroom
Credit: Tesla

Tesla bear Guggenheim is still among the biggest non-believers in the company’s overall mission and its devotion to solving self-driving.

In a new note to investors on Thursday, analyst Ronald Jewsikow reiterated his price target of $175, a nearly 50 percent drop off, with a ‘Sell’ rating, all based on skepticism regarding Tesla’s execution of the Robotaxi platform.

A few days ago, Tesla CEO Elon Musk said the company’s Robotaxi platform would open to the public in September, offering driverless rides to anyone in the Austin area within its geofence, which is roughly 90 square miles large.

Tesla CEO Elon Musk confirms Robotaxi is opening to the public: here’s when

However, Jewsikow’s skepticism regarding this timeline has to do with what’s going on inside of the vehicles. The analyst was willing to give props to Robotaxi, saying that Musk’s estimation of a September public launch would be a “key step” in offering the service to a broader population.

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Where Jewsikow’s real issue lies is with Tesla’s lack of transparency on the Safety Monitors, and how bulls are willing to overlook their importance.

Much of this bullish mentality comes from the fact that the Monitors are not sitting in the driver’s seat, and they don’t have anything to do with the overall operation of the vehicle.

Musk also said last month that reducing Safety Monitors could come “in a month or two.”

Instead, they’re just there to make sure everything runs smoothly.

Jewsikow said:

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“While safety drivers will remain, and no timeline has been provided for their removal, bulls have been willing to overlook the optics of safety drivers in TSLA vehicles, and we see no reason why that would change now.”

He also commented on Musk’s recent indication that Tesla was working on a 10x parameter count that could help make Full Self-Driving even more accurate. It could be one of the pieces to Tesla solving autonomy.

Jewsikow added:

“Perhaps most importantly for investors bullish on TSLA for the fleet of potential FSD-enabled vehicles today, the 10x higher parameter count will be able to run on the current generation of FSD hardware and inference compute.”

Elon Musk teases crazy new Tesla FSD model: here’s when it’s coming

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Tesla shares are down just about 2 percent today, trading at $332.47.

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Investor's Corner

Elon Musk issues dire warning to Tesla (TSLA) shorts

This time around, Tesla shorts should probably heed his words.

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Credit: Tesla

Elon Musk has issued a dire warning to Tesla (NASDAQ:TSLA) short sellers. If they do not exit their position by the time Tesla attains autonomy, pain will follow. 

Musk has shared similar statements in the past, but this time around, Tesla shorts should probably heed his words.

Musk’s short warning

The Tesla CEO’s recent statement came as a response to Tesla retail shareholder and advocate Alexandra Merz, who shared a list of the electric vehicle maker’s short-sellers. These include MUFG Securities EMEA, Jane Street Group, Clean Energy Transition LLP, and Citadel Advisors, among others. As per the retail investor, some of Tesla’s short-sellers, such as Banque Pictet, have been decreasing their short position as of late.

In his reply, Elon Musk stated that Tesla shorts are on borrowed time. As per the CEO, TSLA shorts would be wise to exit their short position before autonomy is reached. If they do not, they will be wiped out. “If they don’t exit their short position before Tesla reaches autonomy at scale, they will be obliterated,” Musk wrote in his post.

Tesla’s autonomous program

Tesla short sellers typically disregard the progress that the company is making on its FSD program, which is currently being used in pilot ride-hailing programs in Austin and the Bay Area. While Tesla has taken longer than expected to attain autonomy, and while Musk himself admits to becoming the boy who cried FSD for years, autonomy does seem to be at hand this year. Tesla’s Unsupervised FSD is being used in Robotaxi services, and FSD V14 is poised to be released soon as well.

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Elon Musk highlighted this in a response to X user Ian N, who noted that numerous automakers such as Audi, BMW, Fiat-Chrysler, Ford, GM, Honda, Mercedes-Benz, Volkswagen, and Toyota have all promised and failed in delivering autonomous systems for their vehicles. Thus, Tesla might be very late in the release of its autonomous features, but the company is by far the only automaker that is delivering on its promises today. Musk agreed with this notion, posting that “I might be late, but I always deliver in the end.”

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