Investor's Corner
Is the trucking industry ready for Tesla? Experts weigh in
When Tesla CEO Elon Musk tweeted that Tesla will unveil an electric semi-truck in September, many in the trucking industry, and even Wall Street, took notice.
Electric vehicles will make up just 1 percent of the entire trucking market by 2020, but the EV trucking industry will grow to 10 percent just a decade later, according IHS Markit, an industry research firm. The percentages of all-electric trucks abroad will be slightly higher, with markets like the European Union, Japan, and China taking the lead.
“There is a certain amount of hype to Tesla’s announcement,” said Antti Lindstrom, an analyst at IHS Markit. “It doesn’t seem that long-distance trucking is ready for electrification right now.”
What will Tesla need to do to create a viable long-haul all-electric trucking industry?
Obstacles that Tesla will need to overcome for all-electric trucking success
Of all the freight transported in America, 70% is transported by the trucking industry, according to Apex Capital. Yet, if Tesla is to break into the trucking industry with all-electric vehicles, it will need to overcome a number of barriers.
Price is probably the number one factor of concern for all-electric long-haul trucks, as an all-electric semi- compared with a diesel truck will likely be much more expensive. “Tesla cars don’t need to prove an economic case to their buyers; Tesla trucks will,” Michael Baudendistel, a Stifel Financial Corp. analyst, wrote in a recent investor report. Yes, Teslas have been targeted thus far to a wealthy segment of the population, but, just as that will change with the introduction of the Model 3, so, too, can Tesla design a reasonably priced big rig when fuel versus charging costs are taken into consideration.
Tesla would have to create a marketplace for electric trucks. “Given the happily consolidated nature of the domestic truck manufacturing market, the prospect of a new competitive threat, from a company with previous success in disrupting established industries nonetheless, is undoubtedly unwelcomed news,” states Baudendistel. This year, however, Mercedes-Benz Trucks is bringing the world´s first all-electric heavy-duty truck to market in a small release. Moreover, Piper Jaffray analyst, Alex Potter, released a note this week revealing that he was downgrading the engine and truck manufacturers Cummins and Paccar — partly as a response to Tesla’s impending semi truck reveal. With Tesla’s proven history, the trucking sector can’t be that far behind for the company. Indeed, as early as 2011, Tesla was invited to testify at the Congressional hearing titled, “The American Energy Initiative.” Tesla spoke then about the need and timing for alternative energy vehicles, especially those powered by electricity. Tesla demonstrated how an entrenched culture like that of the U.S. automaker could be disrupted; trucking manufacturers today have every right to be paying attention.
“We have intentionally departed from the traditional automotive industry model by both focusing exclusively on electric powertrain technology and owning our vehicle sales and service network… If, however, you believe in the power of American innovation to fundamentally change and improve our individual lives and our larger societal interests, then there is no question the time is right to step up and support the development of a viable EV market in the U.S. and to encourage in word and deed the American companies fighting to establish EVs in the marketplace.”
Where would all-electric trucks go for service and repair? “This has been an inconvenience for Tesla cars,” Baudendistel told Trucks.com. “For trucks, though, if the wheels ain’t turnin’, you ain’t earnin’.” Tesla has demonstrated its ability to respond to current owner needs as they became apparent. As early as 2015, the company won an automotive repair satisfaction survey. It launched a Mobile Tire Service program to better serve owners who end up on the side of the road with a flat tire. In anticipation of the Model 3 release, Tesla will be expanding its mobile service capability to include sending technicians to an owner’s home or office for minor repairs. Tesla has the capacity to create a comparable response service and repair program for long-haul all-electric trucks.
The highway charging network for heavy-duty vehicles does not exist; there is no place to charge a long-haul electric truck. “You can’t put the cart before the horse,” Baudendistel said. “Widespread adoption hinges on the availability of fueling stations, and the infrastructure built for Tesla autos was not designed for Class 8 trucks.” Electric trucks currently in use for redistributing cargo require a far smaller range than a long-haul big rig and can be recharged at a central facility. They don’t require a network of charging stations along the nation’s highways. But with the vast Supercharger network that Tesla already has in place, it seems sensible to assume that Tesla would provide adequate comparable charging for fleets of all-electric trucks.
Yes, at this time, recharging electric vehicles is time consuming. “Battery swapping and refueling overnight are both options which would require significant additional investment in infrastructure and logistics,” Baudendistel said. Tesla considered but then discarded the idea of battery swapping with its electric cars. However, with the Electrify America initiative that Volkswagen is spearheading as a result of its diesel malfeasance court settlement, recharging times may drop considerably and quickly as R&D expands. Additionally, unlike an all-electric bus, with its long wheelbase and battery storage underneath, wouldn’t the height and breadth of a semi-truck be the right design for a battery pack that is replaced at a convenient stopping point? Tesla may reconsider battery swapping if the contextual conditions are right.
The trucking industry has expressed concern that batteries needed to power a semi- would be heavy, take up cargo room, and compromise range. Daniel Murray, vice president of research for the American Trucking Research Institute, told Trucks.com, “No one has clarified for us how much extra battery weight will accrue, which, of course, decreases revenue weight.” Baudendistel added, “We believe at least 600-800 miles of range is needed for the truck to be competitive in the line-haul market. We have heard indications that the Tesla semi’s range will be 200-300 miles, which would limit its addressable market.” Just this month, however, Panasonic’s President Kazuhiro Tsuga admitted the battery trade-off between energy density and safety is prodding his company, which partners with Tesla, to look at alternative battery power sources. And this year’s Battery Symposium in Japan, once a showcase for fuel cells and LIB cathode materials, saw a shift to discussions about solid-state, lithium-air, and non-Li-ion batteries. Thus, the current state of batteries for all-electric vehicles may look entirely different in a decade and may fit the needs of Tesla all-electric long haul transportation.
Diesel fuel is inexpensive these days, which limits the costs associated with current big rig transport. “The very low fuel prices we see now and will for a long time are making most alternative-fuel vehicles appear to be very expensive,” Murray said. That perspective may be a bit short-sighted, however, as, in August 2016, the EPA and NHTSA jointly finalized standards for medium- and heavy-duty vehicles through model year 2027. They are intended to improve fuel efficiency, cut carbon pollution, reduce the impacts of climate change, bolster energy security, and spur manufacturing innovation. Clearly, these are comparable goals to Tesla’s as outlined in the 2016 Master Plan Part Deux. Evolution toward all-electric long-haul transportation as spearheaded by Tesla may fulfill many of the upcoming standards so that fossil fuel costs become irrelevant.
Elon Musk as the world’s biggest advocate of electric-powered transportation
Yes, there are many reasons why an all-electric Tesla long-haul truck will be difficult to integrate into the current transportation sector. Then again, as Baudendistel concedes, “If nothing else, Elon Musk—and by extension, Tesla—is a great disrupter.” Tesla’s innovations, from company-owned stores, over-the-air vehicle updates, and autonomous driving features, to name just three, have forced the automotive and technology industries to new levels. So, although many in the trucking industry are skeptical, it has rarely been wise to bet against Elon Musk.
“We are keeping a watchful eye on Tesla as a new entrant,” Baudendistel admits. Even with obstacles to be overcome, he says, “Still, we wouldn’t count Tesla out long-term.”
Elon Musk
Tesla locks in Elon Musk’s top problem solver as it enters its most ambitious era
The generous equity award was disclosed by the electric vehicle maker in a recent regulatory filing.
Tesla has granted Senior Vice President of Automotive Tom Zhu more than 520,000 stock options, tying a significant portion of his compensation to the company’s long-term performance.
The generous equity award was disclosed by the electric vehicle maker in a recent regulatory filing.
Tesla secures top talent
According to a Form 4 filing with the U.S. Securities and Exchange Commission, Tom Zhu received 520,021 stock options with an exercise price of $435.80 per share. Since the award will not fully vest until March 5, 2031, Zhu must remain at Tesla for more than five years to realize the award’s full benefit.
Considering that Tesla shares are currently trading at around the $445 to $450 per share level, Zhu will really only see gains in his equity award if Tesla’s stock price sees a notable rise over the years, as noted in a Sina Finance report.
Still, even at today’s prices, Zhu’s stock award is already worth over $230 million. If Tesla reaches the market cap targets set forth in Elon Musk’s 2025 CEO Performance Award, Zhu would become a billionaire from this equity award alone.
Tesla’s problem solver
Zhu joined Tesla in April 2014 and initially led the company’s Supercharger rollout in China. Later that year, he assumed the leadership of Tesla’s China business, where he played a central role in Tesla’s localization efforts, including expanding retail and service networks, and later, overseeing the development of Gigafactory Shanghai.
Zhu’s efforts helped transform China into one of Tesla’s most important markets and production hubs. In 2023, Tesla promoted Zhu to Senior Vice President of Automotive, placing him among the company’s core global executives and expanding his influence beyond China. He has since garnered a reputation as the company’s problem solver, being tapped by Elon Musk to help ramp Giga Texas’s vehicle production.
With this in mind, Tesla’s recent filing seems to suggest that the company is locking in its top talent as it enters its newest, most ambitious era to date. As could be seen in the targets of Elon Musk’s 2025 pay package, Tesla is now aiming to be the world’s largest company by market cap, and it is aiming to achieve production levels that are unheard of. Zhu’s talents would definitely be of use in this stage of the company’s growth.
Investor's Corner
Tesla analyst teases self-driving dominance in new note: ‘It’s not even close’
Tesla analyst Andrew Percoco of Morgan Stanley teased the company’s dominance in its self-driving initiative, stating that its lead over competitors is “not even close.”
Percoco recently overtook coverage of Tesla stock from Adam Jonas, who had covered the company at Morgan Stanley for years. Percoco is handling Tesla now that Jonas is covering embodied AI stocks and no longer automotive.
His first move after grabbing coverage was to adjust the price target from $410 to $425, as well as the rating from ‘Overweight’ to ‘Equal Weight.’
Percoco’s new note regarding Tesla highlights the company’s extensive lead in self-driving and autonomy projects, something that it has plenty of competition in, but has established its prowess over the past few years.
He writes:
“It’s not even close. Tesla continues to lead in autonomous driving, even as Nvidia rolls out new technology aimed at helping other automakers build driverless systems.”
Percoco’s main point regarding Tesla’s advantage is the company’s ability to collect large amounts of training data through its massive fleet, as millions of cars are driving throughout the world and gathering millions of miles of vehicle behavior on the road.
This is the main point that Percoco makes regarding Tesla’s lead in the entire autonomy sector: data is King, and Tesla has the most of it.
One big story that has hit the news over the past week is that of NVIDIA and its own self-driving suite, called Alpamayo. NVIDIA launched this open-source AI program last week, but it differs from Tesla’s in a significant fashion, especially from a hardware perspective, as it plans to use a combination of LiDAR, Radar, and Vision (Cameras) to operate.
Percoco said that NVIDIA’s announcement does not impact Morgan Stanley’s long-term opinions on Tesla and its strength or prowess in self-driving.
NVIDIA CEO Jensen Huang commends Tesla’s Elon Musk for early belief
And, for what it’s worth, NVIDIA CEO Jensen Huang even said some remarkable things about Tesla following the launch of Alpamayo:
“I think the Tesla stack is the most advanced autonomous vehicle stack in the world. I’m fairly certain they were already using end-to-end AI. Whether their AI did reasoning or not is somewhat secondary to that first part.”
Percoco reiterated both the $425 price target and the ‘Equal Weight’ rating on Tesla shares.
Investor's Corner
Tesla price target boost from its biggest bear is 95% below its current level
Tesla stock (NASDAQ: TSLA) just got a price target boost from its biggest bear, Gordon Johnson of GLJ Research, who raised his expected trading level to one that is 95 percent lower than its current trading level.
Johnson pushed his Tesla price target from $19.05 to $25.28 on Wednesday, while maintaining the ‘Sell’ rating that has been present on the stock for a long time. GLJ has largely been recognized as the biggest skeptic of Elon Musk’s company, being particularly critical of the automotive side of things.
Tesla has routinely been called out by Johnson for negative delivery growth, what he calls “weakening demand,” and price cuts that have occurred in past years, all pointing to them as desperate measures to sell its cars.
Johnson has also said that Tesla is extremely overvalued and is too reliant on regulatory credits for profitability. Other analysts on the bullish side recognize Tesla as a company that is bigger than just its automotive side.
Many believe it is a leader in autonomous driving, like Dan Ives of Wedbush, who believes Tesla will have a widely successful 2026, especially if it can come through on its targets and schedules for Robotaxi and Cybercab.
Justifying the price target this week, Johnson said that the revised valuation is based on “reality rather than narrative.” Tesla has been noted by other analysts and financial experts as a stock that trades on narrative, something Johnson obviously disagrees with.
Dan Nathan, a notorious skeptic of the stock, turned bullish late last year, recognizing the company’s shares trade on “technicals and sentiment.” He said, “From a trading perspective, it looks very interesting.”
Tesla bear turns bullish for two reasons as stock continues boost
Johnson has remained very consistent with this sentiment regarding Tesla and his beliefs regarding its true valuation, and has never shied away from putting his true thoughts out there.
Tesla shares closed at $431.40 today, about 95 percent above where Johnson’s new price target lies.