Market Thinking

making sense of the narrative

Tesla… S,3,X,Y Models and now a pickup and a semi

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Forgive the rather obvious innuendo, but it was in fact intentional by Elon musk to label his cars this way. The point of the post is that as Tesla completes its line up, the cars are losing their competitive advantage, but the pick-up truck and the Semi (actually a truck that pulls a semi trailer) look important, both for Tesla and the US energy industry. After all, according to my good friends at Redburn, while big trucks are just 4% of the US vehicle fleet, they account for 26% of the energy consumption. Given that the US accounts for 25% of global transportation energy consumption, that is a lot. For context, on-road freight in the US uses more energy than all transportation in Australia/New Zealand and Africa combined.

The story is that Elon musk wanted to call his mass market car the Model E, to go with his existing models S and X (go figure, as the Americans say) but Ford still owned the brand, forcing him to use Model 3 instead. Strange then that the same problem didn’t occur with the Model Y, for Ford certainly had one of those and also interesting that most people I talk to don’t seem to even be aware that there is actually a Model Y coming, even though it was announced back in March. The Model Y is a crossover SUV that is supposed to share many of its components with the Model 3 and its entry level model is pitched at just under $40,000 when it comes out next spring.

To my mind, this is the model that should have come after the Model S, instead of the Model X, for while the latter was supposed to share around 60% of components with the Model S, in the end it was less than 30% and by spending so much time on the Model X, with its gimmicky Falcon Wing doors, Tesla lost a critical competitive window. Ironically, when Henry Ford stopped producing the Model T for over a year while he produced his Model Y, that was when the competition like General Motors got their break and he never really got back in front. The mainstream auto makers, especially the Germans, now have their own fully electric vehicles , including SUVs, which look like their regular models but now with equivalent benefits of electric drive trains. Meanwhile, Porsche has just introduced the Taycan, a real competitor to the Model S. At the end of the day it’s the speed, efficiency, driving experience and low running costs that will drive (sic) people towards electric vehicles, not wacky or futuristic styling. It will also now be interesting to see how the big auto PR departments, who sit in front of a global add spend of over $35.5bn according to Zenith and thus have quite a lot of shall we say ‘influence’ with the motoring press, will now reverse their relentless spin on range anxiety, which they employed as a spoiling tactic to deter mass adoption until their own models were ready.

Meanwhile, Tesla has a rather more interesting model due for launch next month, which is a pickup truck to compete with Ford (them again) in the P150 space. Aside from the usual hype from Elon – a pickup truck as fast as a Porsche 911 etc – it marks a move into the utility and commercial space where low maintenance and fuel efficiency start to really count. It also has announced a truck, or Semi, to start at the end of next year which it claims will pay for itself over two years in combined savings on fuel and maintenance.

To my mind, this is where it starts to get interesting, for hard nosed commercials work much better for corporate adoption than emotional appeals about Climate Emergencies and if it is a ‘no brainer’ to power your truck fleet with low maintenance trucks with low running costs then it will happen. And faster than you think, in the same way that most Uber’s in London are now Priuses. Moreover, currently half of all the transportation fuel consumption in China comes from road freight. Imagine if that went electric. Already places like Shenzhen have fully electric buses, significantly reducing roadside pollution, but that only works because it is flat. Hong Kong hasn’t got them yet as it is too hilly, but if Tesla can develop a semi capable of pulling loads up steep hills then suddenly bus and freight can become diesel (and fumes) free. It looks like diesel is going the way of coal.

One final stat, although the marine energy consumption in the chart above shows about 12% of total energy use is in shipping and according to the industry produce only 3% of greenhouse gas emissions, because they run on heavy fuel oil, just 15 of the world’s biggest ships emit more of the noxious nitrogen and sulphur than all the cars in the world.


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