On April 13th, Elon Musk tweeted, "Tesla Semi truck unveil set for September. Team has done an amazing job. Seriously next level."
The tweet shored up a sagging stock price and resulted in bullish research notes from two analysts who wildly overestimated the impact on Tesla, Paccar, Cummins and the trucking industry.
Battery-powered semi-tractors may be useful in low-speed, short-haul duty cycles, but they can't work in high-speed, long-haul duty cycles because the batteries are too bulky, heavy and expensive.
While childhood memories of regulators, dreamers and critics may favor substituting electric drive for stinky, smoky, dirty diesel engines, the problems we learned about as children no longer exist.
The battery-powered semi-tractor Tesla plans to unveil in September will almost certainly be way too heavy for the work and a decade too late for the emissions problems.
On April 13th, Tesla's chairman Elon Musk tweeted, "Tesla Semi truck unveil set for September. Team has done an amazing job. Seriously next level." A few days later, Piper Jaffrey’s Alex Potter downgraded Cummins and Paccar, citing concerns over the new competitive threat from Tesla. Then, Morgan Stanley's Adam Jonas jumped on the bandwagon and speculated that autonomous heavy-duty trucks could add $2.5 billion a year to Tesla's top line.
It's clear to me that none of the players in this evolving melodrama understands the trucking industry, its operational requirements or its environmental challenges.
Calculating the energy needed to propel an 80,000-pound tractor-trailer down the road at highway speeds is complex and based on the interaction of three key variables:
- Rolling resistance;
- Aerodynamic resistance; and
- Grade resistance.
Mercifully, the basic numbers are well understood, and publications like Caterpillar's "Understanding Tractor-Trailer Performance" make the data accessible and understandable for non-engineers like me. Last week, using Caterpillar's published horsepower data and standard conversion factors, I cobbled together an Excel spreadsheet that restates the well-known horsepower requirements in terms of kWh per mile. My goal was to find out how big an electric semi's battery pack would have to be. I found the analysis fascinating. This graph summarizes my conclusions, but you can download the spreadsheet from my Dropbox if you're really interested.
While a 5,000-pound Model S can travel about 3 miles on a flat road for each kWh of battery capacity, my detailed calculations show that takes about 2.8 kWh per mile to propel an 80,000-pound truck down a flat road at 65 MPH. If you add a modest 2% grade, the energy requirement doubles to 6 kWh per mile. While most roads seem flat from the cabin of a passenger car, very few are flat when viewed from the cab of an 80,000-pound truck.
In long-haul trucking, daily hauling distances of 400-600 miles are commonplace. So, an electric semi would need 1.1-1.7 MWh of useful battery capacity to haul normal distances on flat roads. By the time you factor in:
- a 20% margin (10% top and bottom) to protect the batteries;
- a 25% margin for unavoidable grades; and
- a 30% margin for expected cell degradation during the battery pack's useful life;
The initial battery pack specifications would include 2.2-3.3 MWh of total capacity, 26,000-39,000 pounds of additional weight and 400-600 cubic feet of battery pack volume.
From the perspective of a semi-tractor that typically weighs less than 20,000 pounds, 26,000-39,000 pounds of extra battery weight and 400-600 cubic feet of battery pack volume are huge issues.
From the perspective of an 80,000-pound combination truck that can haul 40,000 pounds of cargo, reducing cargo hauling capacity by 65-98% has an immense impact on freight economics. After all, "cheaper trips" offer no advantage to shippers when three electric trips are needed to do the same work as one diesel trip
Simply stated, a general duty Tesla semi can't happen with current battery technology, so it won't happen. Instead what we're likely to see is gussied up semi-autonomous version of the battery-powered short-haul tractors that companies like TransPower have been testing in California port facilities for the last couple of years. It's a high-value, regulation-heavy niche market, but it's no threat to Paccar, Cummins or anyone else in the trucking industry.
In 1883, Thomas Edison said, "The storage battery is one of those peculiar things which appeal to the imagination, and no more perfect thing could be desired by stock swindlers than that very self-same thing."
The targets of his anger were unscrupulous promoters who promised to increase the productivity of their generating equipment by storing electricity in batteries during the day so that customers could use the stored electricity after sundown. In the immortal words of Yogi Berra, "It's Deja-vu all over again." If you're interested, you can read a complete copy of The Electrician's 1883 interview with Thomas Edison on energy storage on my blog.
While I don't disagree with Mr. Edison's rant, the reality is batteries are beyond boring in their own right. In my experience, imagination is never fired by chemistry in a can, but it's easily inflamed by snake oil salesmen who claim they can use batteries to perform magic like getting rid of the stinky, smoky, dirty diesel engines we all learned to hate as children. What the hucksters don't mention is that the stinky, smoky, dirty diesels we remember no longer exist in America.
Between 1996 and 2015, advances in petroleum refining and diesel engine emission controls slashed:
- sulfur emissions and unpleasant smells by 97%;
- unburned hydrocarbon emissions by 89%;
- NOx emissions by 96%; and
- particulates by 80% in buses and 90% in trucks.
Most of that progress was made during the last 10 years.
I've had business conversations in a closed shop while standing next to an idling diesel engine. I was amazed that the only thing we could smell was the shop dog. Frankly, if diesel emissions critics didn't have CO2 to whine about, they'd have to take a victory lap, donate their budgets to a worthwhile cause and find private sector jobs.
Don't take my word for it. Go to the nearest bus stop. Sit for a few minutes and pay attention to the smell of traffic. Then compare the smoky, stinky diesel exhaust you remember from childhood with the diesel exhaust you can actually see and smell today.
I can't speak for anyone else, but I find it highly offensive when demagogues "tell it like it used to be" and rant about what was without acknowledging progress or discussing current realities.
While I hope everyone had a happy Earth Day, I think Tesla's plans to unveil a semi this fall add absolutely nothing to the company's intrinsic or speculative value.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: Author is an officer and director of ePower Engine Systems, a private company that's road testing a series hybrid drivetrain for long-haul heavy duty trucks in cooperation with Purdue University and a major national carrier.