From Diesel to Electric Trucks: Making the Switch – Part 1

10.04.2018

 

Tesla’s Electric Trucks vs Physics

It’s not every day that Daimler’s head of trucks describes a competitor’s product as “defying the laws of physics.” Yet such word choice somehow comes as less of a shock when referencing a Tesla product. In fact, the California-based company’s latest disruption to the automotive industry takes the form of an electric truck, the Tesla Semi, allegedly capable of travelling up to 500 consecutive miles with a full load and expected to hit the market as soon as next year.

The eTrucks are expected to be available in two versions, each able to travel 300-mile and 500-mile ranges per battery charge. The trucks will cost $150,000 and $180,000 USD, depending on the battery size and thus the charge-less range. Such transport capabilities at such costs should strike fear into the hearts of any diesel truck manufacturers, as companies such as PepsiCo, Sysco, UPS, DHL, and Anheuser-Busch have already announced combined reservations of about 500 trucks – causing speculation as to which additional companies have quietly concluded preemptive orders with Tesla thus far. Yet considering Tesla’s founder and CEO, Elon Musk, has recently announced that he plans to manufacture as many as 100,000 trucks per year by 2023, the likelihood of unannounced orders looms high.

Considering about 75% of EU freight and 70% of US freight is transported by road, a slow but steady switch from diesel to electric trucks will have monumental impacts not only on the environment (trucks contribute about 25% of the EU’s road transport carbon emissions), but on the logistics industry altogether. This article will thus, in part 1, explore the first of 3 main factors that ultimately decide the speed at which the inevitable shift to electric trucks will take place, namely, cost, legal necessity, and infrastructural feasibility.

Part 1: The Bottom Line of eTrucks

Electric Truck Costs: Fuel, Maintenance, and Battery

Even when considering brand new, industry-altering technologies, the age-old bottom line wields the power of decision making. Thus, the speed at which transport companies will dump diesel trucks and onboard shiny new electric carriers will be decided by the cost efficiency of doing so. This cost efficiency is tied not only to the upfront vehicle price tag, but is also influenced by regional fuel prices, maintenance costs, and the delivery distance (or battery) required.

For example, while Tesla Semi may cost only between $20,000 and $50,000 USD more than an average class 8 diesel truck, the total cost of ownership (TCO) is highly dependent on fuel prices. This is exemplified best when comparing EU and US projected purchasing patterns of electronic trucks. With EU fuel prices being comparatively higher than US fuel prices, the potential savings of ditching diesel and committing to electric are noticeably higher for European-operating companies than US-operating companies. As such, while the EU is expected to have the largest share of sales of electronic trucks by 2030 at 29%, the US is expected to reach only 15% of the share by the same year.

Nonetheless, fuel savings are still expected to significantly impact US-operating companies overall. According to Tesla’s estimates, Anheuser-Busch’s integration of 40 Tesla tractors in its 750-strong fleet is expected save the company $8 million USD on fuel each year.

Maintenance costs, which account for a $61.5 billion aftermarket industry, are also no small factor when considering the transition to eTrucks. In fact, with truck maintenance costing about $20,000 USD per truck per year – the largest chunk going to part replacement – the “simpler number of parts” and fewer “complexities of the parts” of eTrucks argue in favor of the switch.

That’s why, DHL, one of the world’s largest logistic firms and a member of the Tesla Semi pre-order club, expects to save “tens of thousands a year” with its new purchase, estimating a pay back within a year-and-a-half based not only on fuel savings, but the lower maintenance costs of electric trucks.  The bottom line is pointing more and more towards eTrucks.

Still, it’s important to remember that eTrucks, like regular trucks, come in all shapes and sizes. Some of those sizes, more importantly, are far more affordable than others. For example, potential Tesla competitors, Ohio-based Workhorse and California-based Thor Trucks, are each working on implementing light and medium duty electronic trucks, which can travel between 100 and 300 miles per charge, into their products. Each require smaller and thus less expensive batteries than Tesla Semis or any take on an electric heavy-duty truck. These smaller trucks, also offered by Tesla, are the types that aforementioned Anheuser-Busch plans to utilize in delivering its beer on a short-haul basis from breweries to wholesalers. While this means that the transition to eTrucks is more likely to first take place with regards to less expensive light and medium duty trucks, it’s worth remembering that, for example, 80% of the EU’s freight is transported in heavy duty trucks.

Taking fuel, maintenance, and battery life into consideration, cost efficiency is slowly but surely to favor a transition to electric trucks in due time, if not already.