Published on February 25th, 2018 | by Zachary Shahan0
Will Tesla Semi Bring In $20 Billion In Annual Revenue? $3-5 Billion In Profits?
February 25th, 2018 by Zachary Shahan
The world without Tesla would be a very different world. A much more boring world. A less inspiring world, especially if you are interested in seeing solutions to global warming and air pollution. Tesla cannot achieve everything it targets. And the dreams many observers have in response to what Tesla is doing are sometimes more fanciful than realistic. But the inspiration is off the chains, and that’s in good part due to what Tesla has actually achieved to date.
In December, I was inspired enough by Tesla’s Semi specs and the flow of orders coming in for the trucks that I decided to crunch some numbers to try to estimate various revenue and gross margin possibilities for Tesla from its semi truck offerings. I wanted to start fairly conservative but within the realm of possibility. I ran some estimates for a very modest number of orders first, and then I got more aggressive.
I thought the numbers I used in the second article were still more on the conservative side than the realistic side, and many readers agreed, so I thought I’d get even more rambunctious and come up with estimates for 70,000–100,000 Tesla Semi sales a year.
Some readers appeared to be thinking along similar lines. One commenter noted, “Freightliner is the clear leader in share (75-100K annually lately).” What would happen if Tesla took over that top spot? Can Tesla take that top spot? Will Tesla take that top spot?
Alas, other work, a requirement to sleep at least a few hours every night, and perhaps a hesitancy to appear too bullish or “fanboyish” about the Tesla Semi kept me from running with the thought + Google Sheet experiment.
Then Tesla CEO Elon Musk said on the recent quarterly conference call that he thinks Tesla could end up selling 100,000 Tesla Semis a year (which is similar to the Model S + Model X total, by the way). I thought, “Hmm, maybe I’ll finally get to that story.”
Then a DHL exec came out and basically said that the low cost on the Tesla Semi blows the competition out of the water, earning back its extra cost compared to a conventional diesel semi truck in only 1½ years. Quite humorously, this came right after a Daimler truck exec claimed the Tesla specs broke the laws of physics. It appears DHL disagrees with its German neighbor. And maybe 100,000 Tesla Semi sales a year is a genuine possibility.
With that intro out of the way, let’s jump back into the numbers.
Skipping all of the semi truck market context we got into before, the assumption below just goes with this 100,000 a year hope Elon Musk thinks is possible.
I previously went with a $200,000 estimate for the average Semi selling price, but I’m scaling that back a bit. Well, I’m including a range in the estimates. On the low end, I’ve got an average selling price of $170,000. On the high end, I’ve still got $200,000. The question is about what options truck buyers will add on, and which semi offering they will choose in the first place (the longer range one or the shorter range one). In the long term especially, a key consideration is how many buyers choose to get self-driving trucks and what the premium on those will be.
In terms of gross margin, I’m sticking with two options I was persuaded to include for the last estimates — 20% gross margin and 25% gross margin. However, for the pessimists among us, I also added a low-end option of 15%. Of course, the true pessimists will say the Tesla Semi will never come to market, Tesla will be bankrupt next year (… or even tomorrow), and the Tesla Semi specs break the laws of physics. Well, more or less, that’s what they said about the Tesla Model S, Tesla Model X, and Tesla Model 3, so why expect a change now?
With all of those assumptions put in, below is the table of potential Tesla revenue and profits from 100,000 Tesla Semi sales a year. What do you think is wrong here? What do you love? What would you change? (Fill in your own numbers here if you feel inclined.)
|Orders||Average Price||Total Revenue||Profits based on 15% Gross Margin||Profits based on 20% Gross Margin||Profits based on 25% Gross Margin|
|100,000||$170,000||$17 billion||$2.55 billion||$3.4 billion||$4.25 billion|
|100,000||$200,000||$20 billion||$3 billion||$4 billion||$5 billion|
And, by the way, it may well be a sign of overly optimistic trust in Tesla/Elon to even run an article hypothesizing about Tesla hitting its hopeful estimates for eventual annual demand, but demand for Tesla’s vehicles has historically far exceeded the company’s hopes and estimates. Whereas Tesla is typically optimistic on timelines, it is pessimistic on demand. Once upon a time, Tesla estimated 10,000–15,000 Tesla Model X sales a year and 20,000 Tesla Model S sales a year. The two models are now combining for ~100,000 annual sales.
Past is not prologue, but if Tesla still has a problem with timelines, perhaps it still has a problem with demand estimates as well.
Images above via Kyle Field except Tesla Live screenshot.