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Tesla Semi: analysts see Tesla leasing batteries for $0.25/miles in 300,000 electric trucks for $7.5 billion in revenue

Tesla CEO Elon Musk announced that the company plans to unveil its electric semi truck, called ‘Tesla Semi’, in September, which is sooner than most industry watcher anticipated.

Now analysts covering the company are weighing in the new trucking business in their valuation of the company and coming up with business models that Tesla could use for its battery-powered trucks.

Morgan Stanley came out today with a detailed note exploring the business of Tesla Semi and the analysts, Adam Jonas, who covers Tesla for the firm, and Ravi Shanker, a logistic analyst, believe that Tesla will go with a battery leasing model.

They see Tesla releasing a truck with a relatively short-range for a semi truck ~200 to 300 miles, but they could use battery swap stations to quickly swap the batteries for charged ones and get the vehicles quickly back on the road. They explain in the note:

“We believe TSLA could sell its autonomous, electric semis without batteries, which would then be separately leased to customers. With a ~250-300 mile range, these batteries could then be swapped out at battery swapping stations (TSLA’s passenger car battery swapping demo took 90 seconds but we conservatively estimate that a truck battery swap would take at least 5 minutes) built at Tesla Supercharging stations and truck stops around the country.”

In order to work smoothly with a service that relies on having different battery packs everywhere, the Morgan Stanley analysts predict that Tesla will introduce a battery leasing service to both reduce the entry cost to buy a Tesla Semi, and maintain a control on the batteries while reducing the cost of ownership:

“This makes economic sense for TSLA, in our view. We estimate that a trucking carrier spends about $0.50 per mile of fuel (@ $3/gal of diesel and 6 mpg) and does about 100,000 miles/year per truck. If Tesla charged $0.25/mile to lease the battery out, (a) the carrier can reduce its total fuel bill by 50% (fuel is 35% of total costs), and (b) TSLA could generate revenue of $25,000 per truck per year or ~$7.5 bn at a run-rate, once TSLA achieves 10% share of the truck parc. If we consider the fact that the powertrain in Class-8 trucks today is about 50% of the $150,000 cost of a new tractor, the $75,000 savings in buying a truck without a powertrain would be worth almost $0.20/mile over the life of the truck ($75,000 / 4 years avg. life cycle * 100,000 miles/yr for public TL carrier). With this in mind, TSLA could charge as much as $0.45/mile and the truck carrier would still save 50% in fuel costs (but with equal purchase cost vs. today). With the 1 mile/kWh range as assumed earlier, to give a truck a 250-300 mile range would need a 250-300 kWh battery which we assume would cost TSLA approx. $25,000-30,000 each (@$100/kWh).”

Here’s a breakdown of their leasing model:

Morgan Stanley says the investment needed for Tesla to bring its electric truck to market “may not be significant”. They say that the battery and autonomous driving technologies are already being developed for the automaker’s passenger electric cars and they think Tesla could handle a ” low production run rate (only 25,000 units/yr @ 10% share)” at its current facilities.

The biggest single investment could be a brand new network of 1,500 battery swapping stations, which they estimate would cost about $750 million. They see Tesla Semi coming to market in 2019-2020.

I wouldn’t bet on battery swap since as we learned last year, Tesla is working on a Supercharging technology with a 350+ kW power output. If they have that, the speed advantage of a battery swap almost completely disappears.

Let us know what you think in the comment section below.

Featured Image: Walmart’s WAVE Concept aero truck.

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