No Kidding: The Tesla Semi Launch Is About To Change Everything
I’ve been eagerly awaiting the Tesla Semi since the first article that I wrote for CleanTechnica four and a half years ago, and I’ve been eagerly revisiting my notes from when I wrote that first article. I then saw that Zachary Shahan just published an article titled “The Tesla Semi Is Going To Change The World” and figured he covered most of my thoughts. And … he didn’t! If you haven’t read his article, read it first, as it forms a sort of companion piece to this.
Zach came at the launch of the Tesla Semi from the belief that it would change the game on how the general public thinks of electric vehicles. (Editor’s note: The credit for that thought goes to a reader, though. Their comment inspired the article. —Zach) And, to be clear, I don’t think that’s wrong — The Tesla Semi will continue to normalize a series of extremely capable vehicles that remain woefully misunderstood by a significant portion of the general public. In fact, while a single data point doesn’t make a trend, at Christmas this year, one of my relatives was looking at getting a new car and my son asked why they hadn’t considered an electric vehicle. One of my other relatives, who knows that we have been fully electric now for over four years, quickly jumps in and says that to drive an electric car, you need a special charger, you can’t park it on the street because it always needs to be charging, you can’t take it far distances, and it takes days to fully recharge. (Editor’s note: Oy. …)
Seeing the Semi once won’t change his mind about the capabilities of electric vehicles. But seeing it a ton will.
And I think you’re going to see the Tesla Semi a ton, because I think the Tesla Semi is at the point that everything changes — regarding fleet vehicles.
Looking Back on the Semi Announcement
When the Tesla Semi was announced, competitors claimed that the specs and stats that Tesla claimed were impossible and would remain so for the foreseeable future, and it was even stated the claimed specs for a Class 8 semi truck would break the laws of physics. While production of the Tesla Semi has started significantly later than what I was hoping for (when it was announced, Tesla expected to start production of the Tesla Semi by late 2019), it is now here and ready.
Clearly, we’re three years late on the start of Semi production. Tesla has claimed that was due to battery constraints, but until we see the final product, it’s hard to know if the design significantly changed since the point it was announced, or if battery constraint really was the largest problem that production faced.
Before we get to modern comparisons, though, let’s look back at a couple of other things. In 2018, the President of Transportation at DHL Supply Chain, Jim Monkmeyer, stated he believed the Tesla Semi could be paid back in just a year and a half of use. There was another article that I remember vividly that I can’t find — if you can, please drop it in the comments — where it was stated that the cost differences with the Tesla Semi would be so significant that companies that didn’t switch to them could find themselves priced out of the transportation market almost immediately.
With that background, let’s see what has changed in the three years of the delay.
What Has Changed?
The first thing that a lot of trucking companies would like you to believe is that Tesla is late to the semi game. In fact, Renault and Coca-Cola trolled Pepsi by noting that they had already put Renault E-tech D and E-Tech D Wide trucks into service. But … those trucks go about 125 miles per charge — and I cannot seem to find information on if that is loaded or not. Don’t get me wrong, that’s great for last-mile deliveries and an important part to the overall EV ecosystem that would be needed by a transportation system, but it wouldn’t allow you to run longer routes. The lack of a Class 8 solution means businesses looking to eliminate diesel from their fleets wouldn’t be able to smoothly transition out of it.
The Tesla Semi, with it’s 500 mile range, is the proof-of-concept that a business needs to have to prove it’s time to start to the transition to fully electric deliveries, since it will prove that anything in the fleet can be electrified.
Secondly, and perhaps most importantly, the money savings will be considerable. If you don’t follow oil costs at all, gasoline has had a pretty wild ride over the past year but has settled in around $3.50 a gallon lately. As I type this, AAA says the average price for a gallon of gas on November 11, 2022 was $3.546. On the other hand, diesel has had a bunch of headlines lately worrying that it may be running low, with pricing considerably more than gas. In fact, the cheapest state to purchase a gallon of diesel in right now is Texas, where it costs $4.475. In total, 31 of 50 states report gas diesel prices more than $5 per gallon.
Why is that important? When Tesla unveiled the Semi, this slide was shown:
Now, it’s important to note that Tesla doesn’t show all of its operating cost assumptions, so we can’t figure out exactly what the different in diesel pricing is, but it’s important to note that this slide assumes $2.50 per gallon of diesel. So, let’s try a quick breakdown in how much fuel savings alone will be. I found this site that states the average miles per gallon for various semi trucks. If we assume it’s correct, many diesel trucks pay more than $1 per mile in fuel costs alone. If we use what it claims as the most efficient semi, the Freightliner Cascadia Evolution, which gets 10 miles per gallon, that puts the operating costs at nearly $0.50 cents per mile. Tesla has stated the Tesla Semi will use less than 2 kWh per mile, so let’s assume a rate double the 7 cents claimed above. That puts the Tesla Semi at $0.28 cents per mile in fuel costs, or just above half the costs of the most efficient semi, and significantly more than the older, less efficient trucks.
No matter which way you break it down, this means some extreme savings when it comes to operation. Estimates for the average distance a semi truck travels are all over the board. I’ve seen anywhere from 45,000 to 125,000 miles (72,420 to 200,000 km) in a year. Using those numbers, if you’re in a Freightliner Cascadia Evolution, you can expect to spend $22,500 to $62,500 a year in diesel fuel costs! The Tesla Semi clocks in at $12,600 to $35,000, a savings of $9,900 to $27,500 in fuel costs alone. And if we’re looking at replacing an older truck that gets 5 mpg, in the 125,000 mile scenario, the Tesla Semi would save you a whopping $90,000 in a single year.
None of that matters if the cost puts the Tesla Semi out of reach, however, and that’s where we don’t know what the final cost will be. In the past, Tesla stated the 500 mile variant would cost $180,000. The Freightliner Cascadia Evolution itself is hard to nail a price down on — I tried pricing one out and it didn’t give me a total. I found this site that states that a new Freightliner costs between $140,000 and $160,000, before immediately stating in the next paragraph that they start at $160,000 and can go over $200,000.
If that’s all correct, it puts the Tesla Semi somewhere between $20,000 and $40,000 more than the most efficient new Class 8 semi that you can get. In the worst case, with those figures, fuel savings will be able to overcome the higher upfront cost in just over four years. But wait! At least in the US, the Inflation Reduction Act will give a tax credit of $40,000 for any Class 8 electric trucks. That means, if pricing holds, a new Tesla Semi and a Freightliner Cascadia Evolution diesel semi will be equal in cost at purchase, and save a lot of money in operation.
This matters in a wholly different way than how we look at cars. People choose different cars for lots of reasons. For instance, if you’ve got a family of 6, you’re not getting a Model 3 since there aren’t enough seats. Maybe you want something sporty, or something practical, or whatever. This isn’t how the shipping industry works — they want to know what it will be like for their bottom line. This is what drives purchasing decisions.
Conclusion
I would hope after seeing my math that you agree — the moment the Tesla Semi is delivered, so long as it delivers what it claims, it renders every other truck on the market obsolete. The running costs of a Tesla Semi compared to the most efficient diesel semis on the market today will deliver hundreds of thousands of dollars to the bottom line of shipping companies over the life of the truck. I expect nothing less than a seismic shift in other company’s electric semi offerings, and an extremely fast transition that will blow away all forecasts.
The fallout of that transition will be immense. To put it into perspective, this could cause a huge decrease in shipping costs, helping to deliver on the goals of the Inflation Reduction Act. The transition will massively affect pollution, as even though semi trucks make up only 4% of the vehicles on the road, according to this article, they are responsible for half of nitrogen oxide emissions in the US, nearly 60% of the fine particulates emitted, and about 7% of overall greenhouse gas emissions in the US. They won’t all come off the road immediately, but I’d be surprised if you see many diesel semis roaming the streets in 10 years.
It’s rare for any one product to change the world, but when I was watching the Tesla Semi reveal, I felt like I did when I watched the original iPhone reveal, except I watched that years after it came out. The Tesla Semi is a product that could change everything we know about transportation. And I think it will. I’m extremely excited to see the unveil December 1st.
*Disclaimer: I am a Tesla [NASDAQ:TSLA] shareholder. Research I do for articles, including this article, may compel me to increase or decrease stock positions. However, I will not do so within 48 hours after any article is published in which I discuss matters that I feel may materially affect stock price. I do not believe that my voice could or should influence stock price by itself, and I strongly caution anyone against using my work as your sole data point to choose to invest or divest in any company. My articles are my opinion, which was formulated using research based on publicly available data. However, my research or conclusions may be incorrect.
**Disclaimer Part Deux: I forgot to put my disclaimer in my previous article, “Twitter Isn’t Tesla,” and at least one commenter noted they thought it was a puff piece written so that I could sell out of my Tesla position after getting a bump from my article. I apologize for forgetting to add my usual disclaimer to that article, but I have to date never sold any of the Tesla shares I own. I will again point out this is the internet, though, and you should not use that piece as your sole data point to invest or divest in any company. My Tesla position is worth significantly less today than it was even a few months ago, so if you’re using this as advice, go do a lot more research.
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