The global trucking industry is currently facing two great challenges for sustainability: to transport a significantly higher volume of goods, and to further develop new means of delivery concepts.
A Nikola Motors model, designed to compete with Tesla's Semi.
Tesla, one of the most successful players in the recent history of the automobile industry, aims to address these issues to improve the logistics industry. CEO Elon Musk, whose original “Master Plan” was unveiled ten years ago in 2006, initially mapped out blueprints for autonomous electric cars and energy storage. On July 20th, Musk unveiled his “Master Plan Deux”, which included the “Tesla Semi” to revolutionize and shake up the trucking industry. The Semi, set to be unveiled in 2017, is a large electric-powered, long-haul trucking vehicle that Musk says will “deliver a substantial reduction in the cost of cargo transport, while increasing safety and making it really fun to operate.”
The question now is: What impact can this major move have on the company and in the trucking industry?
Overview of Trucking in the U.S.
Trucking is the main means for freight transportation in the United States. Around 14,547M tons worth of cargo was in transit in 2013, accounting for 73% of cargo delivered that year. According to data from the 2014 truck study conducted by Deloitte, sales in the global truck market for medium and heavy commercial vehicles grew at an average annual rate of 2.7% from 2004 to 2014, with HCVs comprising 67% of market share. Additionally, the truck market is expected to grow at a CAGR of 3.1% in 2024.
However, trucking businesses in the US have been anything but lucrative in recent months. Swift Transportation, the largest truckload shipping carrier in the country, reportedly saw losses of nearly 16% in the second quarter of 2015. The company states that “The truckload freight environment thus far in 2016 has been challenging (due to) excess industry capacity, excess customer inventories, and sluggish demand.” Similarly, Werner Enterprises, another major freight carrier, also experienced drops in net income of up to 30% as compared to 2015. It states that weak demand, high capacity, and customers’ demands for lower rates led to the decline in revenues.
Tesla’s Role in Trucking
Tesla, with its tested EV expertise, will address the above-mentioned issues. The following are potential reasons as to why Musk’s grand plan may work:
Autonomous Driving: With autonomous features, the Semi will only need to stop for battery recharging and maintenance, as compared to regular trucks wherein drivers need time to rest. Autonomous driving means that companies will save time and money.
Battery-Powered Features: Tesla also makes batteries, so it will be a win-win situation if they install their current battery offerings in the Semi trucks. EV also holds the promise of reduced energy costs.
Untapped Markets. The shift to the manufacturing of electric trucks is recent, as the only “real” rival Tesla has is the recently-launched Nikola Motor Company, which already garnered a US $3B investment and promises emission-free trucks. The market for electric trucks is relatively new and Tesla may just become a leader in this untapped market.
President Obama’s “Electric Vehicle Adoption” Plan: On July 21, 2016, a day after Musk unveiled Part Deux, President Obama laid plans for EVs. The White House released a statement that the Federal government will be “geared towards accelerating the deployment of electric vehicle charging infrastructure and putting more electric vehicles on the road.” This timely plan is inclusive of loans, funding, financing, assistance, and commitments to EV deployment and research for companies. Tesla is already a signatory for this new development in the country and will prove to be indispensable for the company’s planned Semi to thrive.
Tesla is optimistic about entering the trucking business. The company’s decision is timely given the dire situation of today’s trucking industry. However, other questions will remain—such as the reliability of autonomous driving. With enough research, experimentation and investment, Tesla may very well be the game-changer and eventual leader in the trucking industry.