Friday, 17 November 2017

Tesla disruptive Semi Truck 5 Real-world business implications

How Tesla's new Semi Truck will disrupt the Cargo & Freight Logistics Industries

17 November 2017

Introduction


On 16 November 2017 Tesla, and its founder Elon Musk, may just have pulled the carpet out under other truck and Semi manufacturers around the world. Competing manufacturers and fleet owners might have sleepless nights over the Tesla Semi Truck

Elon Musk launches the new Tesla Semi Truck
Elon Musk launches the new Tesla Semi Truck. Photo Credit: Elon Musk / Twitter

In a highly anticipated press release, choreographed more like a pop concert, the founder of Tesla threw down the gauntlet at other manufacturers as he arrived at the event in a new futuristic proto-type Semi Truck. The very imposing Semi Truck drove in and parked in a huge hangar where the launch event took place. 

A visibly excited and wise-cracking Musk jumped out and immediately starting sharing key performance stats with the audience:

Tesla Semi Truck Factsheet 


The vehicle is in every way as innovative and disruptive as it looks. Data below as presented at the launch:

  • Claimed Speed

o   0-60 mph (96.6km/h) in 5 secs unloaded
o   0-60 mph (96.6km/h) in 20 secs loaded at 80  000 pounds (36.2 ton)  gross max vehicle weight
o   Tesla can reach 65 mph (104.6 km/h) up a 5% incline compared to traditional diesel 45mph (at max gross weight)
  • Claimed Range

o   500 mile (804.6 km) range on a full charge at full weight at highway speed
o   Vehicle can charge sufficiently for 400-mile range in 30 min
o   Recharging through a planned solar-powered Tesla mega-charger network which could mean lower electrical costs compared to current Utility rates

Elon Musk at the launch of the Tesla Semi Truck
Elon Musk at the launch of the Tesla Semi Truck 
  •  Claimed technical specs

o   4 independent computer-controlled electrical motors
o   Effectively 1 continuous gear
o   Built-in computer system that can potentially integrate with 3rd party fleet IT systems
o   Drivetrain guarantee 1 million miles
o   Quasi-infinite brake life
o   No transmission, emission scrubbers or differentials
o   Thermo-nuclear explosion proof windscreen glass
o   Remote diagnostics – connected to Tesla Mobile Service
o   Predictive maintenance
o   Location tracking built-in
o   Built-in communication with Dispatch
  • Claimed Aerodynamics

o   Drag coefficient  0.36 vs traditional trucks 0.60-0.70
  • Safety

o   Enhanced auto-pilot
o   Automatic Emergency braking
o   Automatic lane Keeping
o   Forward collision warning
o   Built-in protection against jack-knifing via independently controlled electrical motors on wheels
o   IT communications connected to Emergency services

You can watch the launch here (redirect to Tesla's site) or below

Video material courtesy Market Reaction's Youtube Channel & Tesla

Overview 


The Tesla Semi Truck leapfrogs the traditional heavy vehicle / semi-truck segment, and not only in the way it looks. It threatens to make many other traditional competitors’ vehicles redundant.  

This Semi truck rewrites many of the rules associated with large vehicles. It has 4 independent computer-controlled motors. Tesla claims it is guaranteed that it will not break down next to the side of the road. So convinced are they that they offer a 1 million mile (1 609 km) drive train breakdown guarantee. This claim is based on the fact that the vehicle can continue to be driven even if 2 of the electrical motors fail simultaneously.


Tesla Semi Truck Interior - Driver's view
Tesla Interior - Driver's view - Pic Credit: Tesla / Business Insider

The cabin has been redesigned with the driver seated in the middle, surrounded by screens and huge windows. The screens update the driver continuously with relevant information, and presumably also display rear-facing cameras. 

The windows specifically are made of thermonuclear explosion-proof glass. This means the windscreen is less likely to crack from typical industrial or on-the-road type accidents or require replacement. Fewer replacements and maintenance requirements mean more time on the road generating revenue.


Tesla Semi Truck Interior - Cabin view
Tesla Semi Truck Interior - Cabin view. Pic Credit Tesla / Business Insider 

The brakes are regenerative, meaning every time you step on the brake that energy goes back to recharging the batteries. According to Mr Musk, theoretically, the brakes can last forever without needing replacement. At projected fuel rates of $2.5 / US gallon for diesel (1 US gallon = 3.78 liters metric), it is anticipated that a fully-loaded diesel fuelled truck will be at least 20% more expensive per mile than a new Tesla Semi.

The Tesla range also comes with convoy technology, allowing vehicles to operate as a road train in convoy (safely following one another). In the convoy scenario, a group of Diesel trucks is claimed to be 2x as expensive per mile to operate than a group of Tesla Semi trucks. This means the Tesla Semi even becomes serious competition for Rail freight in certain markets.

5 Real-world business implications of the Tesla Semi Truck


While the information available is limited and in some cases projected at this stage, sufficient information is available to conclude that this vehicle will be a game changer. Some of the real-world business implications might include:

  • Speed of business



The speed at which business can be conducted has just increased significantly. Leaving the impact of conventional traffic flow out of the argument, for now, trucks can arguably reach their destinations faster and more reliably (less roadside breakdowns). This means current capacity constraints are shifting, theoretically resulting in higher freight load capacity throughput. Whether or not this will be limited to marginal capacity increases, or not, remains to be seen.


The knock-on effect of higher capacity is that warehouses, docking areas, and loading bays will be under more pressure to turn-around vehicles. This, in turn, may necessitate the handling, racking/packing or dispatching of more SKUs per operating hour. Scheduled delivery windows will be impacted. Various aspects of business efficiency will be affected, also in downstream logistic clients such as the retail industry.

  • Income and Operating Costs including maintenance



Final market retail pricing is yet to be announced and the vehicles have to be tested and driven under less than ideal fleet and operational conditions. If however the trucks are priced not too disparate from traditional diesel trucks, this could translate to higher tonnage turned around per vehicle per day, and theoretically higher ROI.  

If the claimed costs materialize as low as promised, this means a huge shift in operating costs. Electrical engines have completely different maintenance profiles compared to fossil fuel combustion engines. Whether Tesla will allow owners to service their own vehicles in the same manner that some current truck manufacturers do, is unknown at this stage. This has a huge potential impact on current in-house workshops, stock keeping of spare parts, and stock levels, staffing and tooling requirements at in-house workshops. Also very significant implications for the spare parts and aftermarket value chain.

Driver training and the required skill set to qualify as a driver will be impacted as drivers may have to be more technically savvy than the traditional driver.


The whole efficient frontier shifts. Lower operating costs translates to either higher operating profits and or potentially putting old-school competitors out of business.

  • Fuelling and operating range


The vehicles are designed to have operating ranges sufficient to address typical US standards - 500 miles (804.6 km) range on a full charge at full weight at highway speed. How this pans out in e.g. places like Australia or North Africa where huge distances between towns are an issue, remains to be seen. 

The impact on the fossil fuel industry will be substantial. Truck stops may have to either join the Tesla network (if that is even possible) or convert infrastructure to switch over to electrical charging. The demand for solar technology and solar parks will increase substantially. 


At this stage it is not known if there will be alternatives to stopping at a designated recharging station - a workaround may be required either in the way of extra batteries to extend the range for remote regions, or local charging ability e.g. via solar panels.

  • Environmental considerations


City ordinances and environmental approval requirements that apply to approved locations for the traditional type filling stations or truck stops, may have to be changed. The current risk associated with fuel/gas storage or spillage or toxic contamination of water resources by oil, is either eliminated or materially reduced when using electrical vehicles.


In the long-run, emissions will be substantially reduced, so it is more environmentally friendly.

  • Big Data and Data Analytics


The vehicles are effectively permanently online and generating data – both technical data (e.g. typical operation data such as vehicle speed, battery charge level, and range) but also logistical information (GPS tracking location, distance remaining, time to destination remaining) – all real-time data feeding into logistical systems. 

The volume of data in real-time will increase exponentially. This means in some locations technical IT and telecoms infrastructure may need to be increased to provide the necessary capacity. More data storage will be required. Analytics capacity will have to be able to cope effectively with real-time data and a huge increase in data volume.


Overall the quality of Management Information Systems (MIS) may have to improve. This means Business Intelligence will improve, allowing management to make faster decisions on the fly.  This means reskilling and training in the back office at the head office too, and also at clients.


Conclusion


If Tesla’s final product holds up to the promises made, it will disrupt the heavy vehicle industry as well as the logistics industry. The knock-on effect of potential efficiency gains will be felt in all industries dependent on semi trucks. 

Tesla may very well have a product here that makes many competing products redundant … that is if competitors do not innovate and play catch-up FAST. In a speculative future scenario, fuel-driven vehicles may be banished to 3rd world countries, or only retained for very specific applications or deliveries to areas without the electrical and technical infrastructure required to support the Tesla Semi.

Production is targeted to commence in 2019, with delivery from 2021 onwards. Pre-orders are already open with a pre-payment of $ 5 000 per #Tesla Semi.  

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Tesla disruptive Semi Truck 5 Real-world business implications

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