The overall commercial trucking market has been growing steadily for the entire 21st century with two cyclical interruptions for the 2002 and 2008 recessions, as the stacked bar chart from Statista shows in my prior
post today. Simple linear extrapolation of the growth trend for the Class 8 truck market in the US suggests that about 2.5M will be sold in the next decade. If I remember correctly, Tesla historically has taken about 40% market segment share in each respective segment for the S3XY lineup, so if they took 40% of 2.5M then they'd sell 1M which leads to $80B estimated subsidy with $80k per truck estimated earlier today. Likewise, for Classes 4-8 as a collective, there's currently sales of around 420k per year and with extrapolation of growth trends we can expect a baseline of maybe 5M sold in the next decade, so Tesla maybe could claim 2M of it with naive application of 40% market share history as representative of future market share performance.
Why has this growth happened? Demand for interstate commerce has increased, especially as online shopping has gained popularity. Also, the economy and population of the US has grown over this time. Growth of both the online shopping sector and the US macroeconomy is likely to continue into the future, so we can expect continued growth of demand for trucks. A nationwide network of Boring Company freight tunnels is not going to be completed overnight and air freight is fundamentally less efficient and has less capacity and flexibility for point-to-point deliveries, so freight trucks are going to continue to be needed more and more in the future. Functional work vehicles are also indispensable tools for a wide variety of jobs beyond just freight, of course. General growth of the economy is inextricably tied to demand for commercial motor vehicles, as is clearly shown in times when oil price spikes have caused or contributed to recessions like in the 1970s and 2007-2012.
If I'm understanding things correctly, all the qualified commercial clean vehicles over 14k lbs gross weight rating are going to be receiving federal subsidies which will be 30% of the sale price plus about $50/kWh total subsidy for their hefty professional-grade batteries. For instance, Tesla sells a tricked-out, medium-duty Class 5 work truck for $80k with a 200 kWh battery it could receive up to 30% * $80k + 200 kWh * $50/kWh = $34k of federal subsidies. This would be
in addition to any state-level subsidies, such as New York's generous NY Truck Voucher Incentive Programs (
link), largely funded by Volkswagen's diesel testing fraud settlement.
Since the effective upfront price of these vehicles is being lowered by roughly 50%, the revenue per vehicle received by the manufacturer will go up and so will the quantity demanded because the customer is still paying less. Plus BEV medium- and heavy-duty commercial vehicles will be fundamentally more utilitarian and reliable with higher uptime than internal combustion ones, same as with the Cybertruck. The law of demand says when you have a better product that costs less, quantity demanded is higher. So, the US sales trend shown in the Statista sales history may actually inflect sharply upwards in the next few years. The question is still battery supply and factory output, but these incentives will drive a lot of increased investment by giving mining and refining businesses more confidence that they can get high margins and sustained demand for the minerals, and they will probably ramp more aggressively. The deadline of 31 Dec 2032 to claim the benefits gives everyone in America a limited time to try to replace their fleet in the window of giant subsidies. Who won't want to immediately save fat stacks of money while drastically reducing maintenance and repair headaches, instead of delaying, placing orders too late, falling behind competition, and then missing the chance to get the half-off deal?
Therefore, simple linear extrapolation is probably way wrong. It's hard to guess just what the quantity sold will be in the next decade except that it's probably going way up from 2022 levels because it depends on how sensitive buyers are to price and how much they value the benefits of BEVs for their operations. So what if it's 10M trucks? Or 20M? And what if Tesla's technology and manufacturing advantage matters
even more for the work vehicles because those buyers care more about objectively measurable characteristics where Tesla wins across the board, like cost, range, charging speed, charging network, and longevity? Let's venture out a bit further and guess that Tesla sells 5M Class 4-8 vehicles in total in the American market by 2032, with an average total per-vehicle subsidy benefit accruing to Tesla of maybe $40k. Now the total IRA subsidy is 5M * $40k = $200B directly to Tesla's profits.
Work vehicles get much heavier annual usage than private passenger vehicles, and thus these vehicles can shift the schedule forward for the transition to sustainable energy consumption even more than the mere money helps with the mission. Diesel vehicles in particular also take a heavy toll on human health due to their hazardous air pollution which Tesla also wants to solve as quickly as possible. So, 5M Class 4-8 vehicles by 2032 might be too low still, especially considering Tesla's overall goal of 20M
per year in 2030, but I don't want to get carried away. That adds up to Tesla basically planning for roughly 130M total vehicles produced in the next decade, and 5M Class 3-4 would be just 4% of their total unit volume.
$200B / 3.5B shares outstanding fully diluted = estimated $57/share value opportunity from USA tax change for Class 4+ commercial vehicles.
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