Tesla’s Semi Truck Could Bring In $2 Billion In Revenues By 2025

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Tesla’s (NASDAQ: TSLA) all-electric Semi truck, which was unveiled in 2017, could go into limited production as soon as the end of next year. The Semi, which is priced starting at $150k for the 300 mile model and $180k for the 500-mile model, will cater to the Class 8 segment of the trucking market. Class 8 trucks are Heavy trucks with a weight limit of over 33k pounds. While it remains unclear if the trucking industry will take to Tesla’s offering, considering the range flexibility and payload capacity of diesel trucks, Tesla does have an interesting value proposition, especially in terms of lower running costs. We estimate that the vehicle could bring in revenues of as much as $2 billion for Tesla by 2025. For perspective, the company is expected to post revenues of around $24 billion in 2019. Below, we provide an overview of the U.S. trucking market and size up the potential revenues of Tesla’s new offering.

View our interactive dashboard analysis on Sizing Up The Potential Of Tesla’s Semi Truck

Overview Of The Class 8 Truck Market In The U.S.

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  • Daimler’s Freightliner Trucks leads the market with 91k sales in the U.S. in 2018, followed by Kenworth (37.4k), Peterbilt (37k), and Navistar’s International brand (34.3k).
  • We estimate that Daimler’s Freightliner has the largest revenue share of the U.S. Class 8 truck market (~$11 billion in 2018), followed by Kenworth ($4.7 billion), Peterbilt ($4.6 billion), and Navistar’s International brand ($4.6 billion).

The Pros & Cons Of Tesla’s Semi Truck

Energy costs for the Tesla Semi will be less than half that of Diesel trucks, although there are concerns about payload and range

  • While upfront prices of the Semi are higher compared to diesel trucks ($150k to $180k versus $125k), Tesla is looking to justify its pricing by citing its lower-running costs.
  • For instance, the Tesla truck is estimated to use under 2 Kilowatt-hours (kWh) of power per mile, implying a energy cost of about $0.24 per mile, assuming that the price per kWh of electricity is $0.12.
  • In comparison, diesel trucks have fuel costs of close to $0.60 per mile, assuming diesel price of $3 per gallon and diesel truck mileage of about 5.3 miles to the gallon.
  • Considering that the average U.S. trucker does 68k miles a year, this could translate into savings of over $22k per year.
  • However, it remains to be seen if the trucking industry will embrace these new vehicles considering range anxiety (500 miles for the top version).
  • Moreover, the payload of the truck also remains unclear, and this could be a concern, as the weight of the battery could restrict overall weight carrying capacity.

Sizing Up The Revenue Potential of The Tesla Semi

  • While Tesla has multiple vehicles set for launch over the next few years (Model Y, Cybertruck), it indicated that it could begin production of the Semi in “limited volumes” in 2020. Considering this, we assume that 2021 will be the first full year of sales for the Semi.
  • We assume that Semi garners 0.5% of the combined volumes of top 5 Class 8 truck manufacturers by 2021, with the number rising to 4.5% by 2025. This translates into volumes of 1.1k units, growing to 10.7k units.
  • Assuming an average selling price of $180k in 2021, including options, rising to $190k by 2025, Tesla’s Semi Revenues would stand at $200 million in 2021, growing to $2 billion by 2025.

For more details and charts on the Revenue Potential of the Semi, view our dashboard analysis.

 

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