I started this reply over in the Investor forum - decided to post it here and link to it over there.
I disagree that the switch will be instantaneous.
First, there will be trial fleets of large companies. Then a transition of the first movers, then trial fleets for the second wave and so on.
Last will be individual owner operators.
Daimlers offering will not "compete" with Tesla because they will not take any sales from Tesla. On that we agree. The first choice will be the lowest cost per mile.And that will be Tesla.
(Moving response over to the Semi forum - I'll add a link back to Invest forum as well)
I think we've got approximately the same point of view, with different language to articulate it.
Even on "compete". Compete, where the meaning is that Teslas offering appears to be better than DTNA's - completely agree. Compete, where the meaning is that one can sell trucks and the other can't (an admittedly extreme overstatement), no. You've also made that clarification.
Totally agree with the start being trial fleets at large companies, and then working their way down. My own thinking is that these trials will be with as few as 1 truck, but the size of the trial fleets isn't really an issue. The purpose of these initial trials is to establish that these new things "work". They might be cheaper, they might be more expensive - we don't know that yet (where "we" are buyers of commercial trucks). We think they might be the future, and the first thing we need to know is that they "work".
"work", as best I can articulate, is a mixture of:
- They can be used once to haul the load.
- They can be refueled (recharged) in a sufficiently moderate time that they can be used again to haul a load.
- Maintenance can be performed to keep them on the road, hauling loads.
At their core, the difference in the Semi market from the light duty vehicle market (S/X/3/Y/...) is that ~100% of Semi's are income producing assets for their buyers. They have a financial model that makes sense, or they don't. And when that financial model becomes compelling enough, the business case will switch to being skeptical of any diesel truck purchases.
The ideal outcome for evaluators of the trucks will be that there's some modest and scalable infrastructure that needs to be installed, and after that, the trucks can just drop into some existing regular route and they "work". Repetitively. At least as easily as diesels, and hopefully more easily.
Once they "work", and that'll need to be established over some period of time (month, quarter, year, ..), then they'll also acquire information about the cost to operate. My own simplistic estimate of what fleets will discover is that an electric class 8 semi will save them $0.30/mile in fuel costs. If we assume all other costs are the same, then that's $30k/year for a truck driven the industry average of 100k miles/year.
This cost savings is why I see a pretty fast industry switch from diesel to electric. As long as the electric variants are close enough to the diesel variant on price. Previous reading says diesel class 8's can be had for $120k - if an otherwise equivalent electric comes in at $180k, then that means that the first 200k miles pay off the electric premium, and after that is gravy for the buyers of the electric trucks.
The cost savings will be so compelling, it will create strong customer pull.
I see 3 phases to the adoption.
1) trial fleets. Do these "work"?
2) Each buyer will figure out their own financial model, and savings from electrification. And discover they gotta have it now
3) Manufacturers of electric trucks establish "scale". Buyers realize that even if they can't get the truck(s) they want TODAY, they can get them soon enough that they're better off postponing their purchase. Keep the current truck in service with more maintenance, buy used, etc.. Note here - from my reading, some of these trucks are purchased with a 5-8 year sort of timeline, so a 1 or 2 year delay getting the trucks could easily cause new purchases to be postponed for that year or 2. A new purchase of a more expensive to operate truck, that you're locking in for 5-8 or more years, sounds like a recipe for creating a stranded asset.
I think (and am honestly guessing here) that "scale" will be established in the minds of truck buyers at between 10 and 20% market share. To put a fine "I'm really guessing now" point on it, I think it happens at 1/6th. Partly because the math is easy.
The North American Class 8 truck market is around 300k trucks / year. 10-20% is 30-60k trucks per year, with 16% being 50k trucks per year.
My prediction is that however long it takes electric truck manufactures, all combined, to reach that 30-60k level, at that level you'll see the diesel truck market Osbourne. By which I mean - a sharp drop in orders from current levels to something that is too low for all of the truck makers to stay in business - say 10-20% of current levels. There will be a few very hard, very lean years in there where diesel trucks aren't selling, and electrics (and their supply chain haven't ramped enough) to supply all of the demand.
I also think that the new electric truck market will surge past the current 300k level - my guess is to 2x (600k / year), but I also wouldn't be surprised at anything up to 10x current level (1.5 - 3M per year). The higher levels are a mixture of aggressive retirement of trucks in the current fleet, plus the incremental demand that is created when something comes along that makes the prior thing much cheaper to do.
To put some numbers on the installed base - I found a source (previously) saying 16M trucks in North America. If those are replaced on a 10 year schedule, that is 1.6M trucks / year. That's clearly not happening with the diesel trucks, but with lower cost of operation, that might happen with electrics while they are replacing the installed base of diesel trucks.
There will be corner use cases where the class 8 semi is used infrequently over the year. Those trucks won't be changed out in the beginning. They will have to be changed out later in the change over, due to diesel becoming harder and harder to source (we're all happy with how much closer to a solution to climate change we have by this time
)
The big limitations in each phase:
1) Buyable trucks, in single digit units. Buyers need to get their hands on trucks, and start using them on real routes to do real work (after some initial testing on fake routes with fake work / loads).
2) Happens fast, and probably in parallel with 1 - buyers do their financial models. Some or many of these will make it into the press.
3) Everybody watches the ramp of trucks with baited breath, buying every truck they can to fill routes / use cases that the truck can solve, pushing diesel trucks out of anything an electric can do.
So far, the primary limitation is the question nobody (I claim) can answer authoritatively at an industry level - electric trucks "work". Every appearance is that they will, but the testing to prove the hypothesis is barely started, much less repeated with high quality results for an industry-wide consensus to emerge that "electric trucks work".
The next limitation, simplistically, is battery supply (cells and packs). 300k trucks / year, at 1/2 MWh per truck, is 150 GWh/year. Tesla, if they took their current output and went all in on Semi can maybe supply 1/3rd of that today. And to do so, they'd shut down Model production completely.
Tesla looks like the best opportunity for that cell supply to be created to me, but there's a LOT of growth needed. I'm ready to hear that the remaining build out of GF1 is underway, and that site selection for the next North American GF is started. We need ANOTHER GF1 in North America, and maybe 2 or 3 more.