Big news coming from tech mega power and hater of fossil fuels, Elon Musk. This evening, Tesla (ticker NASDAQ:TSLA) is set to unveil its new electric semi-truck. Not content to only disrupt the personal automobile market, Tesla is now coming after our big rigs.
There is nothing more American than starting an innovative company to completely flip a complacent industry on its head. There is also nothing more American then complaining about foreigners (and robots) taking our jobs.
Ahh yes, the double edged sword of progress.
Creative destruction, or the act of disassembling an industry to rebuild it into something new and better, is not a novel phenomenon related to the recent tech boom. The industrial revolution, the telephone, the computer, and the internet have all completely changed how we work and live. All of these major changes have left casualties in their wake before spurring major growth on the other side.
Even the transportation industry has been victim to the horrors of progress in the past. Think of all the out-of-work horses that struggled to make a living when Henry Ford’s “automobile” replaced the horse and buggy.
As much as some try to resist it, the drumbeat of progress inevitably marches us forward.
Anyway, you likely aren’t here for my musings on societal advancement or horses (unless they are the racing kind). You are here to talk MONEY.
So is the Tesla Truck good money?
To start off, Tesla is not an investment for the faint of heart, the weak of stomach, or the short of time horizon. With recent production delays and billions of CapEx on Thing-a-ma-Gigafactories, you really need to buy into the long-term vision of Tesla and Elon Musk.
Yes, Tesla is up nearly 71% in the last year, but it’s down almost 20% off its 52 week high. Volatility is inevitable as the long term strategy plays out against short term investor and analyst expectations.
And what is that strategy and vision? To de-gasify and de-driver every vehicle on the road. Tesla has already had some major successes on that front. To date, they have:
- Proven that electric cars can actually look cool and perform comparably to a gas powered vehicle
- Taken market share from a highly entrenched, brand-rich luxury car market
- Disrupted a decades old auto sales model by going direct to consumer
- Invested in the nationwide infrastructure to make mass adoption of electric vehicles possible
- Systematically pushed software updates to existing vehicles to make improving safety and performance as simple as updating a phone.
Their biggest failure? Proving they can actually execute on a mass scale to compete with the big boys when it comes to the mass market.
Here is where the Tesla truck comes into play.
Is Tesla really ready to break into the trucking industry, or is this an expensive distraction? And by distraction, I mean both for the company and its employees, when they could be focusing more on delivering the Model 3, but also for investors, to distract them with a new shiny hope of future earnings while production issues get resolved.
Long term, I think this is a very smart play. Shipping costs are expensive, human drivers are fragile (e.g. they need to sleep and take breaks), and the trucking industry is ripe for disruption. Increasingly complex global logistics and e-commerce growth make the opportunity even greater. And despite the current president’s rhetoric to the contrary, many business leaders are also concerned about that cumbersome environment and reducing their carbon footprints.
Short term, however, it seems as if things may get worse before they get better. Until Tesla can cross the finish-line and prove that it can deliver the Model 3 at scale, I don’t think the Tesla truck will provide a major lift. Besides, this prototype is 2 years in the works, and despite Musk’s claims that it will “blow your mind clear out of your skull” it will be another few years before it comes to market and hits the bottom line.
I don’t know if Tesla is poised to change the game with its new semi. I don’t know when America’s truck drivers will be replaced by sentient, Optimus Prime-like electric big rigs. But I do know that despite the odds being stacked against him, I wouldn’t bet against Elon Musk anytime soon.
The reveal begins at 8PST/11EST with Tesla’s website expected to have the livestream.
As always, this is an opinion and not a recommendation to buy or sell any mentioned stocks and what not and so forth. Disclaimer.