Anheuser-Busch’s Order Is A Shot In The Arm For Tesla’s Trucking Ambitions

by Trefis Team
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Anheuser-Busch InBev has reserved 40 of Tesla’s (NYSE:TSLA) upcoming electric Semi trucks, in what is likely the largest order for the new truck to date. While the financial impact of the win is likely to be limited for Tesla, we believe that scoring early orders from high-profile customers is crucial, as it looks to build early awareness around the new vehicle, which is only expected to begin production in 2019.

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We have a $206 per share price estimate for Tesla, which is well below the current market price.

Early Orders Are Important From A PR Standpoint

Anheuser-Busch intends to use the trucks for deliveries to its wholesalers within a 500-mile radius, which is in line with the range specified by Tesla. The company said that it is looking to lower its environmental impact with the purchase, while also improving efficiencies and driver safety. The Semi truck has received a fair amount of interest thus far, notching total reservations of over 117 units from customers including Walmart, DHL, and Canadian supermarket chain Loblaw. This number excludes an order from J.B. Hunt Transport Services, which indicated that it reserved multiple trucks without providing a specific number. While the impact of these early orders is likely to be very limited for Tesla from a financial standpoint, it is valuable from a PR perspective. As Tesla will charge between $150k to $180k per truck, the revenue from 117 reservations is likely to stand at just about $20 million, which is not material relative to the company’s ~$11 billion in projected 2017 revenue. However, these initial orders could make other large companies take a look at the Semi for their trucking needs.

Long-Term Success Will Hinge On Economic Viability

That said, the long-term success of the truck will depend on its economic viability for customers. While the truck is expected to have lower maintenance expenses and running costs compared to diesel trucks, Tesla has not provided any details on the payload of its new truck – and this is likely to be a metric closely watched by the trucking industry. While Tesla says that the Semi is capable of hauling a gross weight (including vehicle weight) of about 40 tons, the size and weight of the battery could restrict overall weight carrying capacity. For instance, we estimate that the battery weight alone could come in at about 7 tons, although this should decline as battery technology improves (related: Why Battery Improvements Will Determine The Success of The Tesla Semi). Overall, if Tesla is able to provide a compelling economic case for customers, the Semi could provide a meaningful upside to its revenues. For instance, the North American Class 8 truck market is valued at at least $30 billion, with unit volumes of roughly 250,000 a year, per Piper Jaffray. If Tesla is able to capture even 5% of these volumes in the next five years, it could add incremental revenues of almost $2.25 billion, assuming an average selling price of $180k.

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