This is a follow-up to our prior November Supply Chain Matters blog commentary: Tesla’s Electric Truck- Brilliance or More Challenge and Distraction, the unveiling of Tesla’s long-rumored Class 8 semitrailer truck. In our commentary, we raised a few questions regarding Tesla’s manufacturing and supply chain challenges given the announcement.
This week provides added good and not-so-good news related to this new electrically-powered Class 8 truck.
Consumer packaged goods, beverages, and snacks producer PepsiCo announced that the company’s distribution operations placed reservations for 100 of the semi-trucks, the largest reservation order to-date. According to Reuters, the PepsiCo reservation, combined with reservations from a dozen companies including fleet operator J.B. Hunt, food service distribution firm Sysco and global retailer Walmart, point to total reservations amounting to 285 trucks in-hand, a mere month after the public announcement.
What’s interesting is that most of these announcements indicate use of point-to-point distribution legs, well within the operating range of this new truck. For PepsiCo, the electric truck will likely serve as a supplement to an existing fleet reported to be more than 10,000 semi-trailer trucks. Wal-Mart has a similar strategy. Filling in point-to-point routing is an attractive option, especially considering the likely option of autonomous driving capabilities in the same time-period. First mover in the market does have its advantages especially with the engineering and brand reputation of Tesla.
The apparent good news is that the Tesla truck, despite its limited range compared to diesel-powered Class 8 trucks, seems to have attracted the attention of fleet operators that need to deliver on corporate sustainability goals. While the price of this new electrically-powered truck has not been publicly disclosed, it is very likely that operators placing these reservations had a good sense of what the price will be, adding to the initial market interest.
In the not so good news category, our prior commentary raised the question that a move into the engineer-to-customer dominated heavy truck sector adds yet another set of manufacturing and distribution challenges to a company and supply chain ecosystem that does not need more on its current plate. It is obvious that Tesla has not as-yet mastered the challenge of ramping Model 3 production as originally planned. The auto producer further remains cash-constrained to fund capital for a product that has far different production requirements. With nearly 300 reservations and likely more to come, fleet operators are going to be expecting deliveries to begin according to Tesla’s stated goal of 2019. Given that timetable, additional truck, and lithium-ion production capacity needs to be secured and production lines engineered. Tesla has no upside capacity right now, and truck production requires a far different footprint.
Readers should not be surprised if Tesla seeks out a new manufacturing partner in 2018, one that has proven experience in truck manufacturing and supply chain planning. Then again, there are Class 8 manufacturers that has plans for their electric or hybrid-powered vehicles. Look to a creative approach to a thought-provoking challenge.
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