USA TODAY International Edition
After Musk show, questions linger
2 new vehicles are cool, but will people buy them?
HAWTHORNE, Calif. – Another Elon Musk extravaganza has birthed two new electric Tesla products: a futuristic semi-truck that looks like it’s straight out of a Transformers movie and a sports car so quick that drivers might consider buying a G-suit.
Once the post-party euphoria died down, Tesla investors were left with reality. Starting with the fact the Tesla and SpaceX CEO’s contrarian bravado extends beyond Mars for SpaceX and underground, drilling tunnels under cities to speed traffic with The Boring Company. Now he wants to make electric trucks.
Musk’s Martian and underground ventures benefit from serious slack. We don’t expect them anytime soon. But Tesla is quite another matter. It’s a publicly traded transportation company that is trying to get its bearing as a purveyor of mainstream electric vehicles, not just fast four-door toys for the rich.
Specifically, Tesla is in the midst of what Musk has called “production hell” on the new Model 3 sedan, an entry-level vehicle — Musk’s vision posits it as the popular Volkswagen of the electriccar revolution — that carries on its slim fenders the responsibility of quintupling Tesla production to 500,000 electric vehicles a year.
Wall Street still doesn’t seem too worried. Over the past year, Tesla’s stock had jumped 70% to $315 and spiked briefly on Thursday’s dual announcements. (It fell 2% Monday to $309). But while investors continue to cheer Musk’s bullish game plan, there are signs that mistakes with the Model 3 could quash the party.
“Tesla’s announcements underscore the company’s incredible level of innovation and ability to disrupt industries,” Bernstein analyst Toni Sacconaghi wrote in note published shortly after the unveil of the Tesla Semi. “That said, we continue to view the near-term risk reward for Tesla as neutral to somewhat unfavorable, due to the uncertainty surrounding the company’s execution on the Model 3.”
It’s worth breaking this down a bit and looking at the pros and cons of the truck and sports car. Let’s start with the Tesla Semi, and why it might, or might not, revolutionize the long-haul trucking industry.
Beyond playing up its Batman-DoesTrucking looks, Musk took great pains Thursday to explain how the vehicle would on a vital per-mile basis cost less to operate than a conventional dieselpowered tractor-trailer. That’s good, because trucking is about efficiency and making money, not hood-ornament bragging rights at the diner counter.
Musk also said the Semi’s batterypowered range would be 500 miles, which would allow for regional roundtrip deliveries without recharging.
That’s also critical, because a proposed network of Megacharging stations — which would take a depleted truck from empty to 80% charge in a mere 30 minutes — surely would be as difficult and costly to set up as the company’s network of Supercharging stations for its sedans and SUVs.
But what about long-haul truckers who might find a Tesla Semi the answer to their money-making dreams but worry about being stranded on a lost highway? For them, Megacharging is a must, not a nice-to-have. That’s a massive financial and logistical undertaking in and of itself. In fact, Sacconaghi notes that could be a $1 billion proposition.
There’s also the matter of reliability. Today’s trucks run on diesel engines that have more than 100 years of proven tech behind them. They might not be as green as an electric vehicle, but they are dependable. Tesla’s big rig, which is anchored to myriad Model 3 parts, would have little room to go through the growing pains Tesla’s Model S and X cars have endured.
“In contrast to Tesla’s current buyer bases, the priority for truck drivers and fleet operators is reliability and uptime,” Autotrader analyst Michelle Krebs says. “The truck is a tool for making money. When a truck is out of commission, money is lost.”
Finally, there’s the price — or lack thereof. Although trucking giant J.B. Hunt and retailer Walmart both announced Friday that they had placed orders for the Tesla Semi, these are companies that can afford to perhaps swap a few million dollars for the public relations boost that comes with being on the cutting edge of green-vehicle tech.
But can the average trucker who’s paying off his or her $150,000 Class 8 truck afford to trade for a Tesla? That might be a tougher sell, or at least one that might have to come with guarantees along the lines of Musk’s promise that the Tesla Semi’s mechanicals will be good for a million miles.
In sum, the truck is Hollywood cool and comically fast (0 to 60 in 5 seconds, decent sports-car fast), but there is a lot of economic calculus that has to go on before fleets of them hit the road.
As for the new Tesla Roadster that Musk also revealed, call it the ultimate “halo car,” the term automakers give to a vehicle that borders on the absurd and is there less to make money and more to lure consumers to the brand.
For some context, this reporter was driven in a $3 million Bugatti Chiron by a race-car driver who pinned the throttle to 100 mph in around 8 seconds. Tunnel vision and a punch to the chest ensued. And the Roadster, at a “mere” $200,000, comes billed as faster than the Bugatti.
So what would one do with such a beast? There’s nowhere to drive it to its potential beyond a track.
Tesla could well afford, with its $52 billion market cap, to throw a few million at a racing team. Not so crazy: Porsche recently withdrew from a legendary race that made the company’s name, the 24 Hours of Le Mans, in order to next year compete in the new electric-car racing series, Formula E. And as with the past 100 years, success in any form of racing has trickled down not only to upgrades to production cars but also sales in showrooms.