Credit: Shutterstock photoA week after its unveiling, Tesla (TSLA) finally revealed the price of its all-electric driverless semi trucks, effectively signaling what some believe is the beginning of the end for trucks operating on gas and diesel.
The company announced that the 500-mile range electric semi will start at $180,000, while the 300-mile range version will be set for $150,000. There’s also a premium Founders series which the company has priced at $200,000. Production is expected to begin in 2019, for which the company is charging a base reservation price of $20,000, broken down as a $5,000 deposit and $15,000 wire transfer upon order.
But as an unabashed cheerleader of Tesla’s breakthrough battery technology and a shareholder, I question how effective this pricing strategy will be, especially given the struggles the company has already experienced with producing the Model 3? I believe Tesla is undercutting its own battery technology breakthrough.
As it stands, six major transportation companies have announced plans to be among the first try out the new big rig, according to Transport Topics News. Among those, retail giant Wal-Mart (WMT) and transportation company J.B. Hunt (JBHT) have already committed to a specific number of trucks. Wal-Mart, which said that it wants to learn how the trucks will fit into its supply chain, told CNBC that fifteen trucks were being ordered, five for its U.S.-based operation and ten for Canada.
The company also said that it wants to lean how the trucks “could help us meet some of our long-term sustainability goals, such as lowering emissions.” Meanwhile, J.B. Hunt CEO John Roberts, who plans to purchase several trucks, said that “Tesla trucks marks an important step in our efforts to implement industry-changing technology.” Loblaw, Canada's food and pharmacy leader, plans to order 25 trucks for its Canada operations. Meijer, a family-owned grocery chain, said it plans to tests the trucks before making a decision to purchase.
The demand is apparent. And while the all-electric semi might seem pricey when compared to the a typical diesel truck that starts around $120,000, I believe Tesla can and should charge more for the trucks, given their exceptional cost-saving features when compared to their gas and diesel competitors. Tesla said the new trucks will operate at a savings of 25 cents per mile over a comparable diesel truck.
While calling it “economic suicide” to continue using diesel trucks, CEO Elon Musk last week pointed out that the trucks will cost companies 20% less per mile to operate. “You’re earning 50% more per mile than in a diesel truck,” he said.
This means assuming companies opt for the $150K 300-mile range model, companies can easily recoup the extra $30K in up-front costs of the 500-mile range electric semi within the first couple of years, assuming 25-cents per mile savings is accurate. As such, Tesla, which has been criticized for its high rate of cash burn, might be leaving some money on the table — money that it can use to benefit production of the Model 3 car, which is ultimately the key to its success.
At the time of publication, Saintvilus held shares in Tesla.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
