This will likely be the month we finally see the Tesla electric truck for the first time, although it could be years before the company delivers it. Wall Street is finally starting to embrace the story of electric vehicles, and at least three firms have published lengthy reports on EVs this week alone. One of the firms significantly raised its price target for Tesla Inc (NASDAQ:TSLA) stock following its analysis of the potential offered by the Tesla electric truck and even sees additional upside to $400, but only if one condition is met.
Tesla electric truck slated for reveal this month
Tesla CEO Elon Musk has said he will show off the Tesla electric truck this month, so that may be reason enough for analysts to sink their teeth into the EV industry. Tesla has dealt with naysayers in the past, but it may have even more of an uphill battle with the electric truck, simply because of how much power is needed to haul big loads and how short the range is on current electric cars.
Despite that, Deutsche Bank analyst Rod Lache feels that electric trucks will one day be able to handle big loads, even for long haul jobs. He believes that they will be more competitive than most currently expects and pegs the payback period at about three years in the early years but falling to less than 2 years by the “very early” 2020s. He explained in his Sept. 4 report that truck fleet owners prefer to see payback periods of 18 to 24 months.
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Although Lache admits that the short driving range of 200 to 300 miles will probably be a constraint for electric trucks, he sees plenty of potential because 20% of Class 8 trucks in the U.S. right now drive less than 200 miles in a single day. Further, he sees a lot of use cases that would work well with charging or even battery swapping, something Tesla revealed a few years ago for its cars, although we haven’t heard about it for quite some time.
Tesla electric truck might not arrive until 2020
Lache believes that by the mid-2020s, about 10% of the Class 8 trucks and 15% of Class 5-7 trucks in the U.S. will be all-electric. Morgan Stanley analyst Ravi Shanker doesn’t expect the Tesla electric truck to arrive until 2020, although Lache predicts that it will come much sooner, “with SOP in late 2018 based on plans to utilize slightly less vertical integration.” He noted that Tesla “does not see any reason to make their own Cabs or Gliders.”
Shanker expects the Tesla electric truck to also be autonomous and set an expected price tag of $100,000 in his recent note. Like Lache, he mentioned battery swapping as a way to combat the issue of range. He predicts that Tesla will build out a full network of battery swapping stations. The Morgan Stanley analyst also believes that the Tesla electric truck will undergo testing with a few partners before being opened up for preorders.
The EV maker has a years-long wait list for its cars currently, and although it aims to ramp production fast, fleet owners could find themselves waiting years for their Tesla electric truck if they don’t get at the front of the preorder line.
Shanker pegs demand for the Tesla electric truck at over 25,000 units.
Tesla stock seen at $400 if margins hit their target
Lache believes Tesla will leverage the technology it has already built when designing its semi. For example, he said the Tesla electric truck could “use several stock electric motors from Model 3, and several stock battery packs.” Interestingly, he pegs the price tag for the Class 8 Tesla truck at $200,000 to $240,000, which is far lower than what Shanker is expecting. Despite this, Lache said most will be expecting a higher price, so he believes that at this price point alone, it could be disruptive.
His new price target for Tesla is $320, up from $240, although he continues to rate the stock a Hold based on valuation. He assumes that the Tesla electric truck takes 6% of the Class 8 market in the U.S. but adds that all of his assumptions for the EV maker could end up being too low. He sees margins as “the biggest needle mover.” He added that if Tesla manages to reach its 25% gross margin target on the Model 3, rather than the 20% he’s estimating by 2020, his target price would move to $400.
Tesla stock closed down 1.45% at $344.53 on Wednesday.