Can Tesla’s truck actually disrupt the industry?
The ability of Tesla to succeed in the truck industry may come down to one number. That number being 2. If, as Tesla states, the Semi takes less than 2kWh to travel each mile, then it should succeed. If it takes more than 2kWh per mile, than it will struggle to meet industry requirements.
I am not an engineer, but I am a numbers guy and the numbers are straightforward. Power efficiency determines battery needs and battery needs determine weight and cost. Weight and cost will determine adoption rates. Let’s explore how this works using what we know and what we can surmise about the Semi.
In the trucking industry, weight is important. There is a limit of 80,000lb on any truck plus its load driving on the federal highway system. The more the truck weighs, the less it can carry. For a battery-powered truck to succeed, it must weigh no more than a diesel-powered truck, otherwise the trucking company needs more trucks to carry the same amount of freight. There are exceptions, such as when the truck is carrying paper products and so is less weight sensitive, but few buyers will take the risk of buying a truck that is useful only some of the time.
Batteries are rated in terms of their kWh of power capacity. If we want to find the weight of batteries needed for a vehicle’s given range, then we need to know the vehicle’s power requirements expressed as kWh/mile, and the weight of the battery per kWh. Assuming a range of 300 miles and power requirements of 2 kWh/mile, the Semi will require 600 kWh of batteries. Given that Tesla’s existing 100 kWh batteries weigh approximately 1,300lb and the Semi will require the equivalent of six of these, its batteries will weigh approximately 7,800lb.
7,800lb is a lot more than the weight of a large diesel engine, but it is in the same range as the entire drivetrain for a diesel-powered truck. As well as the engine, a diesel-powered truck requires a transmission, driveshaft, differentials, half drives, cooling system, and exhaust system. It also requires a lot of fluids and a large tank full of diesel. Add it all up and the entire drivetrain can easily weigh in the range of 8 – 9,000lb. For a battery-powered truck, the weight is determined by the batteries given that Tesla’s motors weigh only 70lb each. A 300 mile Semi is therefore competitive from a weight perspective.
To achieve a range of 500 miles, which would be needed for many trucking applications, the Semi would require the equivalent of ten 100 kWh batteries, which would weigh approximately 13,000lb and make it too heavy for general use. This assumes today’s battery technology. When Elon Musk claimed a range of 500 miles for the Semi, he assumed significant improvements in battery technology, a power requirement of less than 2 kWh/mile, or a combination of the two.
If 2 kWh/mile is the magic number to make a 300 mile Semi competitive from a weight perspective, then how realistic is it? Diesel-powered highway trucks typically achieve around 6.4mpg. Diesel contains 38 kWh/gallon, so 6.4mpg equates to almost 6 kWh/mile. This means that a battery-powered truck would need to be around three times as efficient as a diesel-powered one to be competitive. This may seem high until you consider that a diesel engine is less than 50% efficient. Most of the fuel that is burned ends up as heat rather than movement. There are then power losses at the transmission and all the other moving parts between the engine and the wheels, plus the loss of energy whenever the brakes are used. An electric motor is far more efficient at transforming energy into movement.
For comparison, I looked at a diesel-powered car versus a battery-powered one of similar size. I chose the VW Passat (2015 model, since VW no longer offers diesel cars in the US) and the Tesla Model 3. The Passat achieves 35mpg, which equates to 1.08 kWh/mile. The Model 3 achieves a range of 300 miles from a 75kWh battery, which equates to 0.25 kWh/mile. The Model 3 is therefore more than four times as efficient as the Passat. If the Model 3 is more than four times as efficient as an equivalent diesel-powered car then it doesn’t seem too outlandish to believe that the Semi can be three times as efficient as its diesel equivalent.
If the Semi was to achieve a similar level of efficiency gain over its diesel rivals to that which the Model 3 enjoys, then it would use less than 1.5 kWh/mile. 1.5 kWh/mile equates to a battery weight of only 5,850lb for a 300 mile range and 9,750lb for a 500 mile range. While at the high end of the weight range for a diesel drivetrain, the number for a 500 mile range doesn’t represent an enormous weight penalty. Savings through the use of lightweight materials in place of steel may get the weight down to the equivalent of today’s trucks.
The business case
Now let’s consider the aspect of cost. Tesla has given a cost of $150,000 for a Semi with a 300 mile range and $180,000 for one with a 500 mile range. A bare bones day cab (i.e. a highway truck without a sleeper) costs around $110,000 – 130,000 depending mainly on the purchasing power of the buyer. Take the low end of this and Tesla is asking for a premium of $40,000 for a short range truck and $70,000 for a long range one.
A truck running 62,500 miles per year (250 miles per day, five days a week, 50 week a year) and achieving 6.4mpg burns through 9,770 gallons of fuel. At $2.60 per gallon, that’s $25,400 in annual fuel costs. As of January 2018, the average cost in the USA for electricity was 10.46 cents per kWh. For a truck traveling 62,500 miles per year and achieving 2 kWh/mile, that’s an annual cost of $13,100, for a saving of $12,300. Without considering savings in maintenance (no oil to change, CELs to diagnose, or engine parts to replace), it would take just over three years to pay back the premium for a short range electric truck versus a diesel one. This seems reasonable.
For a truck traveling 100,000 miles a year, which would require the longer range batteries, the annual fuel cost would be $40,600 for diesel versus $20,900 for electricity, for a saving of $19,700 and a payback period of three and a half years.
Okay, so it’s clear that at these prices, the Semi makes financial sense. Are these prices realistic? Car companies, including Tesla, don’t discuss their battery costs but it is reckoned to be around $200/kWh for most companies and possibly lower for Tesla. For a truck with a 300 mile range, that amounts to $120,000 for batteries at 2 kWh/mile. A truck with a 500 mile range would require $200,000 of batteries. Even if the power efficiency increased to 1.5 kWh and the battery cost fell to $150,000 for the 500 mile version, the truck would still be loss-making for Tesla. Clearly, Tesla is able to obtain batteries for significantly less than $200 per kWh, or assumes that it will by the time that these trucks come online.
The $30,000 difference between the 300 and 500 mile versions of the truck indicates a battery cost of approximately $100 per kWh at 1.5 kWh/mile. $100 per kWh has been the holy grail of electric motoring for the last decade and wasn’t expected for several more years. It may be that Tesla is willing to take a loss on the Semi until battery costs catch up with its business model.
Acceptance within the industry
For a truck to add value, it must be on the road, pulling freight. Any time spent at the side of the road or in a service bay waiting to be diagnosed, represents lost revenue. As they have become cleaner burning over the last 20 years, truck engines have become incredibly complex. With every added layer of complexity has come another series of items that can fail. To go from a vehicle with hundreds of moving parts and dozens of sensors to one whose only moving part is a motor, is a godsend for the industry and one that will be welcomed with open arms. Savings in fuel costs may justify the purchase but the elimination of downtime will be the emotional driver for this change.
The point of this paper isn’t to beat the drums in favor of battery-powered trucks but to look at some of the key numbers that will determine the success or failure of the technology in the near-term. It appears likely that the technology already exists to construct a regional haul truck with a range of 300 miles that would meet weight and cost requirements. It is less clear that these requirements can currently be met for a truck with a range of 500 miles, but the technology is close enough that it doesn’t seem unreasonable for Tesla to assume it will be there by the time they are ready to produce the vehicles. The question of charging infrastructure is less important for the likely first wave of adopters, as they will consist of large fleets experimenting with the technology, followed by in-house fleets such as those owned by grocery store chains, where charging can take place at the same location each night. In both cases, the users will have enough of an incentive to put the infrastructure in place. The charging infrastructure will be important for the long-haul business and is worth going into in detail, which we will discuss in a separate paper.