Nikola (NASDAQ:NKLA) founder and CEO Trevor Milton seems to have borrowed a few pages from Elon Musk’s playbook. That’s, make daring claims about your electrical car firm’s potential, even when that endzone is years down the street and fraught with challenges. In simply the few days since his firm started publicly buying and selling, Milton has in contrast his Nikola to e-commerce monolith Amazon, warned Ford he is seeking to outsell its widespread F-150 pickups, after which did not balk when requested about an analyst’s suggestion that the maker of hybrid semi-trucks might be worth greater than $100 billion.
Musk, chief of budding huge rig rival Tesla (NASDAQ:TSLA), responded as a result of … effectively, that is what he does. Now realizing that Nikola might beat the world’s largest EV maker to the semitrailer mass market, he despatched an inner memo to workers telling them: “It is time to go all out and produce the Tesla Semi to quantity manufacturing.” That truck was first unveiled in 2017.
Buyers love the drama, in fact, together with those that neither personal Tesla nor newly minted shares of Nikola. Electrical vehicles are cool, and electrical vehicles resolve a serious downside. It is also enjoyable to observe two bigger-than-life CEOs spar whereas sporting their egos on their sleeves.
Picture supply: Getty Photos.
There’s an extremely vital query not sufficient persons are asking concerning the matter but, nonetheless, whereas they’re distracted by the juicy headlines. That’s: How a lot cash is there to be made by manufacturing the tractors that pull trailers the world over’s roads?
Reply: Greater than you may suppose.
A surprisingly huge market
It is a cyclical (and considerably psychological) enterprise. S&P World estimates worldwide gross sales of semitrailers reached 2.three million final 12 months, falling only a bit from 2018’s record-breaking determine of nearer to 2.four million. On the time, trucking firms had been anticipating a swell of sustained demand into 2020.
That demand wasn’t sustained, in fact. Even with out the impact of the COVID-19 contagion, fleet homeowners started to really feel they overbought. To right their course, S&P World reckons the trade will solely buy round 1.7 million new rigs this 12 months, adopted by a 10% uptick in 2021.
Given the numbers for all 4 years, we will roughly say heavy-duty haulers promote at a clip of about 2 million per 12 months.
As for his or her retail value, the sticker price can range extensively for a brand new truck. Frost & Sullivan pegs the determine between $110,000 and $125,000. A have a look at sellers’ heaps suggests many drivers and fleet homeowners pays in extra of $150,000 for a brand new semitrailer, jibing with the numbers Tesla was utilizing to make its cost-comparison with its rig that was first revealed in 2017. Tesla’s truck will value extra, beginning at $150,000 with some models anticipated to sport a sticker price of $200,000 every, though they’re cheaper to function in the long term when factoring in gasoline financial savings.
However, let’s conservatively say the standard value of a brand new diesel rig is $125,000. At that price, multiplied by subsequent 12 months’s estimated unit gross sales of round 1.9 million, the so-called “huge rig” market is worth about $240 billion per 12 months. That is huge.
More and more aggressive, and sophisticated
Nikola and Tesla will not be capable to seize all of that market, in fact. Not solely will the 2 electrical semitrailer makers — Tesla’s is 100% battery-powered, whereas Nikola’s is a hybrid engine typically powered by hydrogen — be competing with each other, they’re competing with different firms additionally venturing into the battery-powered heavy-hauling enviornment. Truck identify Freightliner is engaged on an all-electric hauler that is anticipated to enter manufacturing subsequent 12 months. Kenworth, owned by PACCAR (NASDAQ:PCAR), in addition to Geely-owned Volvo are additionally getting the electrical truck sport, and whereas each are behind Nikola and Tesla on this entrance, they don’t seem to be miles behind the leaders of the comparatively new class.
Then there’s the matter of logistics. Though the world will want round its typical 2 million new semitrailers subsequent 12 months, S&P World predicts the North American market will solely want round 200,000 new ones subsequent 12 months, up from this 12 months’s anticipated 150,000. Europe often buys about 100,000 greater than the North American market does in any given 12 months. Electrical rigs can definitely be shipped abroad, nevertheless it’s not simple or significantly low-cost to ship an 80,000-pound steel monster throughout an ocean.
Ergo, the straightforward market will likely be considerably restricted to close the place Nikola and Tesla are making their battery-powered vehicles. That is Fremont, California, for Tesla, although it additionally wants parts from its Sparks, Nevada, facility. Nikola operates manufacturing amenities in Arizona and Germany. However it may in the end be simpler to arrange a number of manufacturing amenities everywhere in the world than to attempt to serve the entire market from just one or two places.
Definitely worth the effort
Nonetheless, even a fraction of a $240 billion sliver of the transportation trade is a pleasant chunk of change. Even a 10% share of the market interprets into greater than $20 billion worth of annual income for a reputation in a position to garner that a lot share from the principally diesel market.
On that observe, Tesla indicated way back to 2018 that it was sitting on orders for greater than 2,000 of its electrical rigs, whereas Nikola reviews it needed to cease taking orders after preorders reached a retail value of round $14 billion. The backlog was merely getting too huge. There may be sufficient room for each firms to thrive with their alternate options to diesel-burning semitrailers.
