Elon Musk has said the reveal of the Tesla Semi will take place in September. Well, September is here. Where is this ground breaking, game changing electric truck he promised? Morgan Stanley analysts Ravi Shanker (no relation to the Bengali musician who taught George Harrison how to play the sitar) and Adam Jonas think they know the answer. “We believe the NACV show in Atlanta on September 25 could be a catalyst for the reveal,” the duo said on last Friday.
NACV stands for the National Association of Commercial Vehicles, which will present its annual assemblage of heavy duty rolling stock at the end of this month. Shanker and Jonas believe that would make the perfect place and time for Tesla to show its Semi to the world for the first time and also to showcase its potential association with such industry partners as Schneider National, FedEx, XPO Logistics, US Xpress, and Ryder Systems. The pair says the unveiling could be “the biggest catalyst in trucking in decades.”
As exciting as the Tesla Semi might be, Shanker and Jonas are warning their clients not to get too carried away by its unveiling, even though it “could stoke investor interest/headlines in the stock again.” Ready for some stock analyst mumbo jumbo? Here ya go.
“We theoretically assume that Tesla can deliver 25k units of Class 8 electric trucks annually with battery leasing revenue from 300k trucks in operation driving 30 billion miles (300k trucks x 100k miles per truck per year). This would result in revenue of $0.25 per mile assuming a 50% gross margin on the battery business alone and a blended gross margin of 36% by 2028 (including 15% gross margin on OEM truck sales and 5% gross margin for 3PL logistics).
“We further assumed 15% SG&A/sales and 5% R&D/sales and a 25% tax rate to achieve $1.4bn of NOPAT on $11.7bn of revenues for Tesla Trucks by 2028. We value this on a DCF model assuming a 13% WACC and an exit multiple on NOPAT of 15x. We have assumed $1.7bn of up-front costs on top of Tesla’s current capex to launch the truck business of which ~$1bn is dedicated to tooling and manufacturing capacity with another $0.75bn for the battery swapping infrastructure, which consists of 1,500 locations (an average of 3 robots per location in servicing an average of 3 trucks per hour on a 24 hour/day schedule).
“We have assumed a cost per swapping station of $500k or roughly double the cost of the average Tesla supercharger station. These assumptions produce an NPV of $5.1bn or roughly 8% of Tesla’s current market cap.
There you have it folks. What it comes down to is, the analysts have peered deeply into their crystal balls and decided the Tesla Semi could add about 8% to the value of Tesla stock in the coming years. Whether their convoluted analysis will have much bearing on the fluctuations of Tesla stock in the days, weeks, and months to come is anyone’s guess. Notice that the analysts assume battery swapping is part of the plan for the Tesla Semi, something that Tesla itself has yet to confirm.
There is no question that Tesla’s involvement in the trucking industry will precisely the kind of disruptive impact Musk so dearly loves. Cummins announced its first all electric tractor last week and both Mercedes and BYD are not far behind. With luck, the era of the diesel tractor being the king of freight may soon be behind us, God willing and the creek don’t rise.
Source: Barron’s (subscription only)