I have been wanting to finish this video for sometime,
as I think that the Semi Truck is an under valued product.
I think its potential is absolutely huge. Let's go through the economics of the semi truck,
and as to what it could mean for Tesla, and the rest of the world.
Now we were not expecting to see the Semi Truck deliveries until sometime in 2022
or possibly even rumors of 2023. Which was understandable due to the sheer amount
of batteries these trucks require, which would require the necessary 4680 to reach
volume production. Otherwise there is such a massive opportunity cost of up to perhaps
10 Model Ys that could be sold with the equivalent batteries.
I believe the last we heard was on the Joe Rogan show, where Elon said the Semi Truck would use
a 500 KWh battery pack, for the entry level model, supposedly achieving 300 miles of range.
There is also a 500 mile range version which was at one stage rumored to have a battery pack as
large as 1 MWh, but I believe it wont likely be that big, as I believe these estimates were
calculated before the break-through technology of the 4680 batteries,
and it's now thought that it will be closer to 700 KWh batteries. Still, that is a lot of battery.
But we just had a strange interview on CNBC, with PepsiCo CEO,
Ramon Laguarta, and Jim Cramer. The CEO said verbatim in regards to the Tesla Semi Truck "we
are getting our first deliveries this Q4". Now that is what he said. This was very
unexpected. Perhaps Tesla have enough 4680 batteries from Kato Rd, to deliver
some Semi Trucks to PepsiCo, and perhaps they wanted to trial the trucks first for a while,
before they scaled up. Perhaps Laguarta meant Q4 2022 instead. But this was positive news,
and appears to have even affected the stock price. The Semi Truck is a big deal.
But as the Semi Trucks have to use 4680 batteries, as they need something much more energy dense,
particularly when they are carrying such huge payloads,
I believe up to 80,000 lbs for that vehicle class.
On Battery Day we saw there will be two versions of the 4680 batteries,
one with manganese, and one without. The version without will be more expensive,
but more energy dense. Which is the version that will be used for the Semi Trucks, as
energy density is so important with this vehicle. Therefore this creates a huge opportunity cost.
I mean we are talking about 10 times a many batteries for one truck, as a Model Y would
require. Something like $1/2 million of Model Y sales, or sell one semi truck for around
$150-180k. Even if the margins are higher on the semi truck, the gross profit is still going to a
lot smaller. I mean Tesla are probably close to $200,000 gross profit on $1/2m Model Y sales,
and they aren't even collecting that much from the sticker price of one Semi Truck.
Although the Model Y could be substituted with other batteries, the cybertruck likely not. So
it could be an opportunity cost of about 7 or so Cybertrucks. This is a dilemma. But it's also the
reason Tesla are have target production of 250 GWh a year of 4680 batteries just in Berlin.
With presumably something similar in Texas, and again complimented by the Kato Rd facility,
and likely the Giga-Nevada facility within time too.
Especially now we are hearing more progress
with Panasonic over 4680 batteries. Yea, Tesla have plans to make a lot of batteries.
But these will take time, and supply chain issues, haven't exactly made it the easiest.
But there will come a time, when eventually Tesla make so many batteries
they can finally start launching some more of these models we have been waiting for.
I wouldn't have thought there was much point in releasing any new models when the current models
are selling so well, and on top of that, make larger profit margins. Or another way to look
at it, is profit per battery sold. Right now the best return is the Model Y, excluding the S and X,
as Tesla can ramp up supply to meet demand for those models, within time. But the Model Y,
we are not even close to meeting demand, even despite price increases.
Alright anyway, you all understand, I don't need to keep explaining opportunity costs.
But perhaps Tesla want to start releasing the Semi Trucks in small quantities already.
Perhaps this 12,000 tonne Giga Press we are hearing about is for the semi truck.
Eventually within time Tesla will have enough batteries to
start production for the Semi Truck. It is rumored to built near the first
Gigafactory in Nevada. It's likely 4680 batteries will be produced there also,
and it makes sense to keep the battery manufacturing close to the vehicle manufacturing.
Let's get into the economics then. An average semi truck costs about
$165,000. Tesla's are between 150 and 180,000, so more or less the typical price of a semi truck.
But Tesla claim on their web site
that "Electric energy costs are half those of diesel. With fewer systems to maintain,
the Tesla Semi provides $200,000+ in fuel savings and a two-year payback period."
Well the savings alone cover the actual price of the Semi Truck. Meaning this
is obviously a great product for any company that uses trucks. Hence why companies like
PepsiCo are so interested in it, along with Anheuser-Busch, who have also made an order.
These companies are aiming to become zero-emission, so obviously these trucks
help with these targets, but in addition to that they are saving in fuel, maintenance and downtime.
Now a truck driver likely doesn't have the luxury of being able to recharge their truck at home,
with free solar power. They will no doubt have to use Tesla's supercharger network for the majority
of their charging, and as time is money, they would want the fast charger available to them.
Wait, superchargers, no, they will take too long to charge such a big battery,
that is a lot of downtime, time is money.
Tesla are using megachargers for the semi trucks, and we are seeing
them being installed currently at Giga Nevada. And not surprisingly,
a megacharger, will charger at the power of 1 MW, living up to its name.
It is expected that it could charge up to 400 miles in just 30 mins.
Remember that's 400 miles for a semi truck, not the same as a passenger vehicle.
If it meant that all Semi Trucks had to charge with Teslas Megachargers,
then that means, that Tesla should receive 100% of all the profits from these vehicles charging,
unless the truck owners are eventually able to set up their own in-house Megachargers.
Alright, this is starting to look a little better, so despite the relatively low
initial purchase price, these trucks will continue to earn Tesla income. The web site
says the trucks use 2 KWh per mile. If Tesla charges 25c per KWh, then that's an additional
50c a mile these trucks drive. I think on average a semi truck drives about 45,000 miles, so there
is an additional $20,000 or so a year income just from charging. Isn't this company amazing? Yes
Now this is Tesla, the company that thrives itself on total vertical integration. Well what is the
biggest expense of running a semi truck? It is in fact the cost of the driver. Apparently the
average salary for a US truck driver is around $70,000 a year. To me this seems very obvious,
that Tesla's technology can remove this cost. Do you think FSD is just for private passenger
cars or Robotaxis? Think of the value that Tesla can offer with FSD in their semi trucks.
Well we don't need to think about it, as we know its $70,000 a year. That's right $70,000
a year for a driver that is allowed to drive up to about 70 hours a week. That is some serious value.
Except last time I checked there were 168 hours in a week. Tesla semi trucks don't need to sleep,
they don't need to take rest. They just need to charge for 30 minutes every 400 miles or so,
which might be about 6 hours of driving, along with changing payloads, and anything else,
perhaps the a semi truck is available for driving 80% of the time.
Thats 134 hours a week, or twice what a truck driver is likely doing.
Therefore it might be regarded that the annual saving of not having a driver
could be around $140,000, of course there are likely other human associated costs too. But lets
just stick with that $140,000, this is in addition to the saving of fuel, which also just doubled.
Why have the annual fuel savings doubled? Because the semi truck is being used twice as much.
These trucks can run 24 hours a day 7 days a week,
and don't even have to worry about gas stations being open in the middle of the night.
But that this level of FSD may not be ready for years. In the meantime Tesla already has their
convoy system working. Supposedly lower cost than train freight. Several semi trucks run
in a convoy, and will drive in the most efficient way due to them being streamlined. The front truck
takes the most air resistance, making the ones behind in the convoy even more fuel efficient.
But I guarantee you that FSD in a semi truck will not be as cheap as $200 a month. I think
Tesla could add an extra 0 on to that to be honest. Which would mean that including charging,
and if we think Tesla trucks will do twice as many miles as a typical driver, maybe 90,000 miles a
year. So what we are up to $60-70,000 income a year from Tesla Semi Trucks after the sale.
Bear in mind 90,000 miles a year is only about the equivalent of and average of 10 miles an hour. Of
course these batteries are going to be able to do over a million miles a year, hopefully more.
But perhaps eventually the real business will be semi truck Robotaxis,
within time. Tesla is best as a service company, and that would
be where the vertical integrations gets to the end user level. Transport as a service.
Now there are not really any megachargers on any highways yet.
It is obviously a necessity to have mega chargers along all popular semi truck routes.
This will take time, the infrastructure does need to built. A supercharger is going to be
slow to charge such large batteries. I mean perhaps they could initially charge
overnight when there is still a driver when he is sleeping, but not sure really.
These megacharger stations, will have the attention of a driver for 30 mins,
which means Tesla will be able to up sell at these stations with diners, or shops. In fact
all land around any supercharger station does have extra value for the same purpose, you have Tesla
drivers stopping to charge, who want something to do for 10 minutes, and of course Tesla has
a great opportunity here. Especially if they ever wanted to get into the restaurant business.
Tesla is in affect adding value to all land with a circumference of any charging station.
The entire electric semi truck is a classic example of creative destruction. Due to Tesla
creating its own industry of private transport, away from the conventional internal combustion
model. Then Tesla didn't have to face the usual regulation to keep them out of the ICE industry.
The legacy autos didn't seem to take electric autos seriously, or perhaps they just became
arrogant and complacent that they have managed to stop so many auto start ups in the past.
But this meant that Tesla got to lead the way in innovation in a new industry,
without regulation from the legacy industries to stop them. As if they
are able to operate in a free market, which is always how we see the most innovation.
However creative destruction means businesses go under, and we lose jobs.
Apparently in the US alone there are 3.5 million truck drivers truck drivers jobs that are at
risk. Although it's not going to happen overnight. Tesla has only just reach a run rate of 1 million
passenger cars a year, using each requiring 1/10 the amount of batteries. But I would say
Tesla will not have any problem selling maybe hundreds of thousands of these trucks a year.
Well whats really happened here? The cost of transportation has decreased by perhaps
1/5. It is suddenly that much cheaper to transport anything by truck.
It opens up new businesses that before were not feasible to be transported at the previous prices.
It also means items are cheaper for everyone, and they simply spend more. Labor prices would
not changed either. This would simply mean higher standard of living for everyone.
Transporting via road is the most expensive form, this changes things so much. Possibly
even other nations perhaps in sub-Saharan Africa where transportation is so difficult,
and rivers are dry for almost half the year, making life very difficult.
The Semi Trucks also have a large surface area, they may be able to have trailers
that have solar panels on the top, it might help extend range another 5 or 10% perhaps.
It all makes a difference, anything that can help it get more range, and reducing cost.
Of course all the economics for the semi truck can be applied to the van.
But there are a lot of semi trucks in the world to replace,
and even if Tesla only make 100,000 a year, then that is still consuming a large amount of nickel,
due to them having such large nickel content in the cathodes with so many batteries in each truck.
Now I am sure some of you are going to comment that this is not possible,
but hear me out. My favorite future Tesla product to come,
their in-house LFP battery. Could that work in a semi truck, or could it at least work
in some semi trucks that will at least serve a good proportion of required applications?
If Tesla's current 100 KWh batteries weigh around 1200 lbs,
then at 500 KWh, that's 6,000 lbs. Now bear in mind we are not adjusting for 4680 batteries here,
which obviously be lighter again. LFP weighs about twice as much as nickel batteries,
taking that 6,000 lbs to 12,000 lbs. Of course again, we are not taking into account Tesla's
own in-house LFP batteries which will again be more energy dense.
So we have an additional 6,000 lbs of weight, meaning the payload has a 6,000 lbs less
weight possible. Not a huge deal, relative to 80,000 lbs. Now this may not be for a while,
but we really should be looking at this company 5 to 10 years out,
give it some time for their products to mature, and technologies to reach a certain threshold.
But if its fully FSD, then we don't need a cabin for the driver,
leaving more room for extra batteries if necessary, and no driver
might save a further 200 lbs too. Of course still done in a way with lower center of gravity.
And even if this reduces the range of the truck significantly does it matter? Even if
these trucks only get 200 miles of range, and need to charge for half an hour every 3 hours or so.
Yes, a major inconvenience for a driver to have to stop and start, but a robot doesn't care. It can
still reach its destination. Yes, Tesla obviously need to place more mega chargers, closer together,
to allow for the range discrepancy. But within 5 years time, I am sure there will be plenty.
Therefore I think it possible that perhaps Tesla could make an LFP version of the semi-truck within
time. Which may mean they are less battery constrained in ramping up semi trucks. It may
also mean that the precious nickel can be reserved for other applications perhaps more like aviation.
And perhaps with extra efficiencies like solar panels and convoys,
and further evolved batteries, motors and power trains, this is a possibility.
But maybe only for certain applications, perhaps it wont be suitable for transporting liquids,
as those payloads are so dense.
That lower center of gravity with the batteries makes the semi trucks so much safer than
traditional ones too, as they wont flip, but not only that due the trucks having four independent
motors, well they also are able to prevent jack knifing. I think jack knifing is actually the most
dangerous element of driving a truck, and often fatal. Tesla have managed to prevent jack knifing.
Not only that, look at how much data Tesla collect just on our driving behavior, well imagine all the
data they can get for fleet management. The fleet industry is huge too, and Tesla will be
able to offer more data than on the vehicles and driving than any other logistics type company.
Make no mistake the semi truck business is going to be huge for Tesla. And the residual
income to come from the sale is mind blowing. Even if they only brought in an extra $50,000
a year in FSD and charging, well with just one million on the road, then that's $50 billion.
The only cost being the electricity from charging, which inevitably will become a one off capital
cost with solar and battery. So almost all profit. Of course Tesla should have millions on the road,
and they may reach a value of $100,000 a year as a service perhaps.
Well that's another $200 billion a year in what is most likely going straight to EBIT.
Not to mention the initial sale. That is huge.
Throw a p/e ratio of even 20 on it, and we have another $4 trillion valuation.
What about competition? Well I think everyone is struggling enough with making passengers cars
as it is, not to mention FSD required to this level, and Nikola has probably tainted any semi
truck competition for sometime anyway. But I can think of one competitor.
This competitor might even make semi truck superfluous, or at least less necessary. It
will be tough for Tesla to find enough scarce nickel to replace all semi trucks in the world,
despite the enormous demand there will be. But there is another alternative,
which is suitable for popular distribution routes.
And as you probably guessed, that would be the Boring Company. Now the boring company can move
freight much faster and cheaper than even rail. It doesn't have to stop for any traffic lights,
or get caught up in any congestion. It just goes straight from a to b, at a really fast rate.
Boring company does have as much potential as Tesla, it could be huge,
and solves a lot of problems. In fact it would be able to
compete with plane for a lot of items products too even, let alone just rail or road. This
might end up being the solution. Semi trucks just require such big batteries.
Anyway its very exciting to think me might actually soon see them
in use. Thanks