With Tesla Semi Project, Has The Company Finally Bitten Off More Than It Can Chew?

The Tesla Semi has sent shock waves through the trucking industry. In many ways, it is boldly innovative in a way that has become customary for Elon Musk. On the other, it signals even greater capital expenses ahead for the company, which will need to invest in a new manufacturing facility to build it and a new network of Megachargers to keep it charged during normal use.

tesla semi

Headwinds Ahead For Tesla?

Critics like perennial industry gadfly Bob Lutz say Tesla will be bankrupt by 2019. He whined to CNBC’s Power Lunch recently,¬† “The company, folks, is going out of business. At this rate they’ll never get to 2019. There is no secret sauce in Tesla. They use the same lithium-ion batteries as everybody else.”

Randy Carlson of Seeking Alpha is less bombastic than Lutz but still sees turbulent times ahead for Tesla. “With Tesla burning cash while struggling with Model 3 ‘production hell,’ the prospect of a new semi truck (and a new Roadster), however spectacular the range and performance, necessarily adds risk and uncertainty to the company’s future. Understand that this ‘uncertainty’ accrues both on the upside and on the downside. But it does make investing in Tesla a less stable affair with risk that one’s investment may either shrivel or blossom in coming quarters.”

Carlson tells his readers, “My greatest concern with respect to Tesla, and what I believe will most influence the stock price over the next few quarters, is the ongoing perception of immature planning and execution. Tesla continues to behave as an eager child at Thanksgiving dinner with eyes bigger than their stomach. Every new opportunity appears more luscious than the last and is to be devoured quickly lest someone else get more of it first.”

While he acknowledges that small, nimble companies like Tesla that are willing to take big risks may reap enormous rewards through bold action — especially when the rest of the industry is slow to react, as has been the case with legacy automakers — he warns “No matter how much ‘business school sense’ it makes for Tesla to continue raising more and more capital to tackle more and more disruption opportunities, there comes a point where investor enthusiasm wanes.”

“For the next couple of quarters — say until next summer — I expect Tesla will appear to many as the child gourmand suffering gastric distress. None of this will change sentiment toward the company of those making the most of a gloomy outlook. Neither will it much affect those fully in love with Tesla’s marvelous products. It will however weigh heavily on those investors who have come to Tesla in rosy prospect of participating in a company boundlessly triumphant as the old withers away and the new unfolds.”

Details About Tesla Semi Drivetrain Emerge

Tesla Semi control lines

Speaking of the new unfolding, Carlson spoke directly with KManAuto, the industrious Tesla blogger with his own YouTube channel devoted to all things Tesla. KMan was at the unveiling of the Tesla Semi and took some video of the drive train that revealed details that others may not have picked up on. For instance, he noticed that the motors for the front drive wheels feed their power through a 23:1 reduction gears while those for the rear drive wheels use a 15:1 ratio.

Carlson speculates that the the front motors are used primarily for acceleration and for driving in stop and go traffic. The rear motors are used for maintaining a constant speed on the highway. Air lines to each axle suggests that one or the other set of motors can be decoupled, allowing for higher efficiency when the tractor is operating with less of a load, such as when returning to a terminal.

The Numbers Don’t Add Up For Some

Tesla revealed this week that the base price of its new all electric tractor will be less than expected. The short range (300 miles) version will start at $150,000 and the long range version (500 miles) will sell for $180,000. That information has Carslon’s colleague at Seeking Alpha, Donn Bailey, who claims the Tesla product sells for 50% more than a comparable diesel powered truck. The numbers just don’t add up, he says.

Furthermore, Bailey warns that the massive batteries needed to power the truck will cut into the number of batteries Tesla has available for its cars, especially the Model 3 and upcoming Model Y. Bailey concludes his article by saying he has a short position on Tesla stock. Color him pessimistic compared to Carlson’s “wait and see” attitude.

Musk Sails Serenely Through Choppy Waters

Musk attracts controversy the way flowers attract bees. Financial types fret that he has bitten off more than he can chew with each announcement of a fresh quest by the serial entrepreneur. Some people who drive trucks for a living believe the Tesla Semi will make their lives more complicated, not less so.

Through it all, Elon sails unperturbed through the choppy waters surrounding him. He seems to thrive on challenges and have an insatiable appetite for risk. Doubters have good reason to be skeptical; the ultimate success of the Tesla adventure is far from assured. But Musk’s track record so far is impressive. Each time he breaks down new barriers, his legend grows. There are lots of people around the world who believe in him and his quixotic quest to stop the world from burning fossil fuels.

Does that mean you should buy Tesla stock? According to Carlson and Bailey, the answer to that question is a definite “maybe.” Our crack legal team says we have to warn readers that we are not stock analysts nor do we play one on television. Nothing we say here should be construed as financial advice. Consult a qualified investment professional and chart your own course. Good luck!

Steve Hanley

Closely following the transition from internal combustion to electricity. Whether it's cars, trucks, ships, or airplanes, sustainability is the key. Please follow me on Google + and Twitter.