In Modesto, California, some of the very first Tesla
Semis are hitting the roads.
The Tesla that you can see behind us is fully
operational. They're running up and down the road
within a 400-mile radius, delivering product to all of
our distribution locations and to our customers.
We use them the same way you would see any
traditional class eight vehicle delivering product.
PepsiCo, which owns Cheetos, Doritos and other Frito-Lay
products, preordered 100 back in 2017.
Walmart and FedEx have also placed preorders, but Pepsi
was the first customer to take delivery of the new
truck.
PepsiCo owns one of the largest private fleets in
North America, and that's one of the reasons we have
partnered with Tesla.
We have the 15 in Modesto that we're launching, and
then we have 21 in Sacramento.
And then we are working plans for the additional
units up to the hundred.
First announced in 2017, the Semi has been one of the
longest delayed products in Tesla's history.
What makes the Tesla Semi so different, and really Elon
Musk's introduction of it, is he really brought the
awareness to the broader public. He made trucking
sexy.
And it could also be its vehicle with the biggest
impact.
Even though trucks are only a small portion of all the
vehicles operating on California's roads, they're
responsible for the vast majority of carcinogenic
diesel particulate matter.
Although it's only 1% of vehicle production, it's 20%
of vehicle emissions, and it's over a third of all the
particulate emissions.
The need for alternatives to diesel is steadily rising as
stricter emission regulations are established.
In California, at the ports, you're not going to be able
to use an ICE engine truck in the near future.
Electric is an ideal solution for that.
But the launch of the new electric truck hasn't been
without issues. There have been a few sightings of the
Semi breaking down around Northern California.
We can have a concept vehicle, it can look great
on stage. It can look really compelling and
exciting and talk about a whole new future.
The realities are quite different.
Welcome to the Tesla Semi truck event.
I hope you like what you see.
We're confident that this is a product that is better in
every way from a feature standpoint, that wins on
economics against diesel trucks in a worst case
scenario, and that defeats rail in a convoy
scenario.
At the time, Musk said the Semi would go into
production in 2019 and made other promises about the
truck's capabilities.
It really shocked, no pun intended, a lot of the
population about a lot of the performance metrics.
But delays caused the original timeline to slip.
Five years later, the Semi has finally arrived.
We're incredibly excited tonight to actually deliver
our first production Tesla Semi trucks.
And yeah, we're looking forward to actually
delivering our first production trucks to
PepsiCo. Yeah, sorry for the delay.
Omitted from the event though were details around
the economics, million mile guarantee and Autopilot
features announced at the original 2017 unveiling.
When Elon Musk introduced the Tesla Semi, it was a big
deal. It felt like this was a revolutionary moment for
trucking. Fast forward five years when they delivered
the Tesla Semi to PepsiCo, it was actually a much
different sort of experience. It felt like
they were dialing it in.
They had promised these things and were going to
deliver them, but it just didn't feel like it had the
hype that we had a couple of years ago.
The trucks Pepsi received don't have autonomous
features activated yet.
The autonomous functionality of Tesla is not specced for
these vehicles. They have the hardware capability.
We'll get to that down the road as an additional
capability.
When it was announced, the truck was touted to have an
industry leading 500 mile range.
500 mile range.
And by the way, it's 500 miles at maximum weight at
highway speed. There have been some initial reports
that it can't handle the weight or the distance that
was initially promised.
And so it's more of a wait and see.
To start, Pepsi is delivering Frito-Lay
products around 425 miles per charge.
It's also delivering Pepsi out of its Sacramento
warehouse on 100 mile daily routes, going directly to
stores and 300 to 400 mile runs to other warehouses.
The contents that are the trailer can weigh about
45,000 lbs, is really the accepted weight.
And potato chips are made of a lot of air.
When we look at soda cans, aluminum and liquids,
these things weigh a lot and they will weigh out.
Pepsi wouldn't speak to the price of the trucks, but it
is estimated to cost around $180,000.
The cost benefit is still a bit of a question mark
because I think the price new of an electric truck
isn't quite settled yet.
I think it's safe to assume that it'll be at least
double the price of the equivalent diesel model.
First generation and early development has additional
research funding and all that.
That's where the partnership and support
comes in. But ongoing, we believe there is a positive
economic business case for electrifying the fleet.
But experts are predicting that electric trucks will be
cheaper to operate over time.
When you take everything into account, a diesel truck
will be 20% more expensive than a Tesla Semi per mile.
If you have a predictable charging cost, you can
eliminate the expense of fuel and the more volatile
pricing that comes along with fuel.
The big cost savings that a lot of people are seeing as
they transition to EVs is the amount of maintenance is
significantly lower than traditional vehicles.
Obviously many fleets are thinking about it from that
perspective, that total lifetime cost is
significantly better.
Diesel vehicle storage tanks are cheaper and the fuel is
more expensive, electricity is more affordable,
batteries are more expensive. There's always a
constant dynamic between those two.
And so we like to diversify our portfolio of solutions.
Starting in 2019, Frito-Lay has been transforming its
Modesto facility to demonstrate the sustainable
benefits of zero and near zero emission technologies.
This project has delivered a 91% reduction in greenhouse
gas, and we're using this as a showcase to then
cascade to our other operations.
PepsiCo partnered with the California Air Resources
Board to make it all happen, matching its $15.4
million in incentives to purchase vehicles, including
Tesla Semis, to add to its fleet of over 80,000 assets.
We developed what's called the Zero and Near Zero
Emissions Freight Facilities pilot program
back in the 2019 time frame.
And this Frito-Lay facility won one of those grants for
a complete transformation of this facility to zero
emissions.
We thought it would make a smart move to make the
deposit, partner with Tesla.
So we put a deposit down several years ago for 100
units when they first announced. We thought it
would have great application. We had the
experience from the last ten years with other EV
products.
Pepsi received its first Tesla Semis in December and
already has them in use.
It takes us a couple of weeks between up fitting,
logoing, labeling and driver training.
We'll continue to scale that up where over the next
several months, most of the drivers will be certified
and trained to drive the Tesla vehicles.
The trucks have replaced routes previously being
served by diesel.
This vehicle right here with a 400 mile range enables the
driver to leave from Modesto and return home
without stopping and charging anywhere along the
route.
Our average length of haul for over the road is about
425 miles, so we believe across the entire portfolio
at Frito-Lay and Beverages that the Tesla Semis will
meet our delivery needs based on our network.
To charge the trucks, Frito-lay installed four
Megachargers, Tesla's latest charging technology.
What you can see behind me are our four Tesla
Megachargers. They're capable of charging 750
kilowatts. These trucks here take about an hour to
charge, which will give us about 400 miles of range.
The local utilities, the Tesla infrastructure team,
we had to bring additional power into the site.
Although Pepsi wouldn't allow us to interview the
drivers, O'Connell says feedback has been positive.
They like not needing to fuel the vehicles.
They come in and plug them in and can leave them.
And they like the overall performance.
In addition to the Tesla Semis, Frito-Lay Modesto is
also using electric trucks from BYD and Peterbilt.
We have six of these Peterbilt electrified route
trucks that are charged onsite and used by our sales
team to deliver our product to any of our stores in the
community here in Modesto.
We have several hundred of those vehicles in several
locations that we've implemented.
The company is also using compressed natural gas
trucks.
This is a fully operational class eight CNG vehicle.
We have 37 of them in operations here in Modesto.
We have the same complement of range that you would see
in any diesel tractor.
Competition in the electric truck space is heating up.
As the Tesla semi enters service, it comes at a time
when several truck manufacturers are embracing
the transition to electric and alternative fuels.
All the traditional diesel truck manufacturers also
have electric truck offerings. So your
Freightliners, Kenworths, Peterbilts, Volvos, Macks,
International, they all have electric trucks that
are out there already.
Volvo just recently launched its VNR Electric Semi, a
class eight truck with a 565-kilowatt battery capable
of up to 275 miles of range.
Daimler has announced plans to develop its own
heavy-duty electric truck, the Mercedes-Benz eActros
LongHaul, that will have a range of around 310 miles.
Freightliner, also a part of Daimler, has the
eCascadia, a class eight semi with a 315 and
475 kilowatt version, offering up to 250 miles of
range.
One of the advantages that other OEMs have over Tesla
is that they know how to sell into the over-the-road
trucking business and into the class eight environment.
They've been doing it for years. They have a lot of
experience. They know what fleets want.
They know how they spec trucks. They know what
drivers want. They have maintenance networks that
exist across the country.
They're just much better positioned today than what
Tesla is to sell into this environment.
But even with so much activity in the space, it's
still in early stages.
To introduce an electric vehicle that can solve the
mission that's required of these vehicles.
It takes many years, many designs and a lot of testing
and a substantial amount of investment. We're in the
very early part of that cycle and it's going to take
a few years before we see these vehicles become
commercially viable.
For trucking to go fully electric, it will require
significant charging infrastructure development.
There's a huge amount of infrastructure that needs to
be built. We think about it as the kind of
infrastructure that gets built once a century.
You had the railroads two centuries ago, you had the
National Highway Network a century ago, and the scale
is very similar to that.
Charging sites for heavy-duty trucks are much
more demanding than your average EV.
If you have 20 semi trucks charging all at one time,
that's almost the same amount of power that it
would take to power 20 big box stores.
Think of that kind of scale of power required.
The reliability is also very important.
Fleet, for them, time is money and they have to know
that their vehicles will be able to move when they want
them to.
Electric trucks also have a weight problem.
Compared to diesel, they're much heavier, impacting the
total load that they can transport.
The total weight, and that includes the truck, trailer
and the cargo, is 80,000 lbs i the United States.
They have allowed through some of the new regulation
for electric vehicles to go to 82,000 lbs, but that's
the maximum gross weight that a vehicle can have.
For Tesla, scaling manufacturing of its new
truck will be an uphill battle.
We'll be ramping up Semi production through next
year. As everyone knows at this point, it takes about a
year to ramp up production.
We're tentatively aiming for 50,000 units in 2024 for
Tesla Semi in North America.
That sounds extremely high when you think that 240,000
class eight trucks built total, Freightliner builds
maybe 50,000 of those.
So they're talking about competing with the big dogs
in the existing commercial truck space.
To meet this ambitious goal, the company just announced
it will expand its Gigafactory in Nevada with a
new 100 gigawatt hour cell factory and a high volume
factory to manufacture the Semi.
The numbers I saw, maybe 500 this year will be built.
500 this year I can definitely see.
50,000 in 2024, I guess we'll have to wait to see on
that one.
Despite the progress being made, not all trucking can
go emission free.
If you look at diesel in terms of the power you can
produce in the engine, on a weight basis, it produces
far more power than what an electric powertrain will do.
So because of those trade offs, you're effectively
dealing with these compromises that you don't
have to make with diesel.
Eventually, though, regulations may force most
freight operations to abandon diesel.
The more stringent EPA regulations are coming out.
There's going to be another level of diesel emissions
regulations going into effect in 2027.
This is going to be an all of the above solution to
meet EPA requirements.
So we'll see some hydrogen fuel cell trucks out there.
We'll see plenty of natural gas trucks out there
probably.
In the U.S., California has been one of the most
aggressive states in driving this.
California has a regulation called Advanced Clean
Trucks, which requires manufacturers to sell an
increasing proportion of their sales as zero
emissions and ultimately getting to fully zero
emissions by 2045 in all sectors of the heavy-duty
trucking industry.
And with some of the country's largest ports, it
is putting significant pressure on the industry to
adapt.
It is the epicenter of North American import
and export supply chain.
And so what that means is that if California forces
the industry to go carbon neutral and eliminate the
internal combustion engine, it means that automotive
manufacturers and manufacturers have zero
recourse against that. They will have to do this,
because if they don't, they won't be able to sell
vehicles into the industry, into one of the most
important markets in the entire world.
Operationalizing any type of fleet portfolio,
electrified, natural gas, renewable diesel, there are
challenges, but you can really make it all work
without making as big a trade offs as people think.
The next 5 to 10 years, you'll start to see a pretty
significant inflection in the S-curve for adoption,
especially for commercial vehicles, given that total
cost of operation is significantly more
beneficial than ICE vehicles. I'd say by the end
of the decade, I would say at least 50% of commercial
fleets would be electrified.
We know we have the technology and we have the
policies in place.
It's just a matter of getting the coordination to
happen and continuing to make progress.
You've got to give Elon Musk credit.
This guy promises an enormously exciting future
with really transformational
technologies. And he's a world-class visionary that
really is trying to set the tone for everything.
And he's put everybody on notice and eventually they
may get there. We may get to a point where we actually
see the performance metrics that he's promised and the
economics that he's promised.
But we're not there yet.