Will a $3.6 Billion investment on Semi ever make the company money?
In 2014, Tesla made a commitment to invest $3.5 billion in Nevada with their first Gigafactory and a goal to producing 35 GWh of battery cells annually or enough to manufacture about 500,000 vehicles per year.
This was achieved with just half their factory site and has announced on January 24th, that they will expand this site to include high-volume production of the Tesla Semi.
The Tesla Semi is a day-cab unit that will focus on local and regional routes, not long-haul, with a range of 500 miles fully loaded with a Gross Vehicle Weight of 82,000 lbs (regulations allow 2,000 pounds extra for electric trucks).
New charging technology allows the truck to gain 70 percent state of charge in just 30 minutes.
On top of this, Tesla is working with Semi customers to utilize solar power, megapack storage, and charging stations.
So, what does this expansion mean for the trucking industry?
Giga Nevada is expanding
After a three-year production delay, Tesla semi production began in October 2022 and just held a delivery event for PepsiCo on Dec 1st.
In 2023, Tesla will see limited production of the Tesla Semi at a production site near Giga Nevada that can produce around 5 Tesla Semis per week (260 per year).
However, Tesla has extraordinary demand for the Tesla Semi and has the battery backlogs it needs to make use of this new factory.
Elon said they hope to achieve volume production sometime in 2024, which is expected to be 50,000 Semis per year in North America.
The company would like to offer a Tesla Semi in other markets as well but would be locally produced in the Asia or Europe with a slightly modified version to meet local requirements.
So, what will the factory expansion look like?
Currently, Giga Nevada produces 7.3 billion Panasonic battery cells or equivalent to 37 GWH+ annually. The site has also produced 1.5 million battery packs, 3.6 million drive units, and 1 million energy modules.
But now, Tesla plans to fill out the other half of their Giga Nevada site.
Conservatively, Tesla plans to invest an additional $3.6 billion into a 4 million square foot manufacturing space.
This is on top of their current 5.4 million square feet currently and will add an additional 3,000 jobs beyond their 11,000 employees currently.
The new manufacturing space will include two new factories:
- 100 GWh 4680 cell factory (with hopes to reach 500 GWHs long term), and
- Tesla’s first high-volume Semi factory
At 50,000 units per year, Tesla would become the second largest manufacturer of Class 8 trucks in the US, after Freightliner (Daimler), which produced about 100,000 in 2022. Kenworth is smaller with roughly 42,000 units.
U.S. and Canada Class 8 truck industry retail sales for 2023 are estimated to increase to a range of 260,000-300,000 vehicles.
The Impossible Semi Truck
Many thought this truck was impossible to make and still argue that it will not impact the trucking industry much.
But, it is now on the road. So, the question comes down to: Is this $3.6 billion investment for Semi production too expensive when they only plan to build 50,000 units per year?
Well, let us break this down.
First, some assumed calculations:
- Elon said they hope to reach production of 50,000 Semis each year in 2024.
- Let’s assume they only achieve 40,000 Semis (or 20% less than their goal)
- 40,000 semis * assumed $225k/semi cost = $9 billion revenue per year
- $9 billion * assumed 20% margin = $1.8 billion in profit/year
- Tesla will recoup the $3.6 billion investment in just 3 years, depending on margin.
So, what about production supply, such as the lithium needed for the truck?
Well, around Tesla Battery Day in 2020, Elon mentioned the company purchased the rights to 10,000 acres of lithium clay deposits in Nevada where they hope would help eventually reduce costs by 33% in battery production.
These lithium fields will take several years to get up and running.
At the same event, Drew Baglino, Tesla’s senior vice president of engineering, shared that the carmaker will be building its own cathode plant and lithium conversion facility that will cut both production costs and the resources needed to bring materials together.
This permit process may take years to complete, but this would reduce the costs, vertically integrate supply, for a massive need in the Tesla Semi production.
In the end, these trucks will be on the road and the technology will only improve over time.
Now the question is, how many will your fleet try to get?
[Related: Pennsylvania DEP initiative Pushes EV Semi-Trucks With $12.7 Million Grant Program]
All fleets need to conduct proper and thorough pre and post trip inspections, which consists of implementing quality:
- driver training that is ongoing and consistent
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All of this will help prevent being a target for the DOT at roadside inspections and is a valuable resource to ensure a healthy fleet, and compliant safety practices.
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