Tesla Semi could be a hard sell for most customers, say analysts

Key Points
  • Electric trucks have a hard time competing with diesel.
  • Some markets might work for Tesla's truck.
Bernstein Sr. Analyst on Tesla: Semi truck market will be limited

Tesla plans to reveal an electric commercial truck on Thursday night, which CEO Elon Musk said will "blow your mind out of your skull and into an alternate dimension."

That dimension would best be one where electric trucks can compete with diesel, say a number of analysts. 

The three main boxes the truck will have to check are range, payload, and price, said Seaport Global analyst Kevin Sterling. How the Tesla semi compares with diesel on each of these metrics won't be known at least until Tesla unveils its truck at 11 p.m. Eastern Time.

But other electric trucks and buses brought to market so far tend to have lower range and higher prices, Stifel analyst Michael Baudendistel told CNBC in an interview. The demand for electric trucks among long haul carriers just isn't there, he said. 

"It is hard to make a business case for electric trucks," Baudendistel said. 

The price is a particular sticking point, said Sterling, since these vehicles tend to be more expensive than diesel, sometimes significantly so.

Companies might want to pay a bit more if they aren't going to be paying for diesel fuel," Sterling said. "But they aren't going to pay $100,000 more."

Where electric vehicles tend to succeed is in markets where trucks only have to drive short distances, and in areas where stringent air quality or pollution regulations make electric either favorable or a necessity.

Interested customers are often non-profits or public sector groups, such as municipalities, Baudendistel said. These customers might be a bit more free to spend the extra money on greener technologies. 

Some for-profit firms have invested in alternative fuels. UPS, for example, has a fleet of electric trucks, which work well for some of its shorter routes, he said. 

But UPS is also drawing on government assistance along the way.  UPS said in early November the New York State Energy Research and Development Authority will provide $500,000 to develop a system for converting UPS's New York fleet from diesel to electric. If the program is successful it could lead to the conversion of about 1,500 trucks, about 66 percent of UPS New York City fleet. 

Regulations may also drive purchases. 

For example, the Port of Los Angeles and Port of Long Beach in southern California in July approved a plan to replace their current fleets of mostly diesel trucks with zero- or near zero-emissions vehicles by 2030.

It might be, at least in the short term, that Tesla's target market would be strictly Southern California, and other places like it, Baudendistel said.

Bernstein analyst Toni Sacconaghi said in a recent note he expects the company to reveal a truck with 300-450 miles of range. 

That is less than the 500-600 mile ranges trucking analysts say customers would want from a Class 8 long-haul truck. 

Sacconaghi said the addition of the semi tractor-trailer doesn't change his investment thesis, primarily because the total market Tesla can address is small.

Whereas the automotive market is about 100 million units, Sacconaghi said on CNBC's Squawk Alley on Thursday. Sacconaghi estimates the total addressable market for trucks is about 1 million units a year, including those long range trucks that Tesla might not be able to compete with.

"So you are looking at a 100 million cars vs maybe a few hundred thousand trucks in terms of an addressable market. Even if Tesla does well, it's really not going to change the story. It is all about cars."