Tesla More Than A Tech Company That Makes Cars

Tesla is an automaker that makes electric vehicles. So how did it land the No. 7 spot on the FreightWaves' FreightTech 25 list, which highlights the most innovative and disruptive companies across the freight industry?

Sure, Tesla Inc. TSLA is developing an all-electric tractor-trailer rig that initially will be used for drayage and short-haul applications.

But Tesla's real value is how its culture of innovation and unique business model are trickling down to other sectors, including freight. The company, for example, is working to develop fully automated vehicles and current models come with autopilot driver-assistance software. Self-driving technology is expected to be a boon for the long-haul trucking industry, which faces a looming driver shortage as trucking's career appeal wanes and sees the technology as a way to significantly reduce accident risk and liability costs.

Tesla is really a technology company that makes cars. Founder Elon Musk created a business model that disrupted the slow-changing auto industry by selling appealing cars directly to consumers and creating a loyal brand following. The strategy included building a network of fast charging stations across the nation that gave potential buyers confidence they could refuel on long trips. 

"Research shows that consumers are not a big fan of dealerships overall, so if you give people a chance to bypass the dealership, they get excited. And they can control better all their costs and processes," said Augusto Amorim, senior manager for American vehicle sales forecasting at research firm LMC Automotive. "So, they know when the car is going to be built, when it will be delivered. A traditional OEM doesn't control all the steps like that."

Whether Tesla grows into a profitable company remains to be seen, but there is no doubting the impact it has had on the auto industry. Most major manufacturers are now planning to roll out dozens of EV models by early next decade in response to public pressure for reductions in harmful exhaust. But Tesla showed them that EVs could move from niche to mainstream acceptance.

Tesla was also pioneering by building its own lithium-ion battery packs, now produced at its Gigafactory in Sparks, Nevada. More traditional equipment makers, such as Daimler and Volkswagen, have recognized the importance of controlling this critical piece of the vehicle rather than leaving it to a supplier and are investing in battery facilities.

There is no shortage of Tesla naysayers, but the company has succeeded far beyond most expectations. Critics were out in force last month after Musk unveiled Tesla's new electric pickup, a futuristic, angular vehicle called the Cybertruck. Here again Tesla pushed the envelope on consumer taste and technology. It features ultra-hard, cold-rolled stainless steel body panels designed to be dent resistant and shatterproof windows, which need more work after failing during the preview demonstration.

Ralph Zammit, chair of the graduate program in transportation design at the College for Creative Studies in Detroit, said in a Bloomberg interview that Cybertruck is a form of creative genius.

The blocky lines and triangular peaked roof may be polarizing, but also mean "it may be the cheapest vehicle ever to manufacture. Stamping and tooling is expensive, bending glass is extremely expensive," but the car is so "de-contented. There's so little investment in the aesthetic side, it's almost like they could pull a profit straight off, possibly even on the lowest model."

As for the semi-truck, Tesla has postponed the start of limited production until late 2020 after prioritizing production and logistics problems associated with the mass-market Model 3. Musk has said there will be two production versions suitable for 100-mile routes and a top average speed of 60 mph. The models are expected to have a 300-mile and a 500- to 600-mile range and cost of $150,000 to $180,000, compared to about $120,000 for a comparable diesel truck.

Fleets will be able to install "mega-chargers" at their terminals capable of topping off a depleted battery pack in 30 minutes and providing up to 400 miles of range.

Tesla claims truckers will recoup the extra cost within two years from fuel savings, with another $200,000 in savings over the life of the vehicle. It has received initial orders from companies such as UPS, J.B. Hunt Transport Services, Pepsico, Ryder Systems, Sysco, Anheuser-Busch InBev NV, Walmart Canada and Deutsche Post AG's DHL. 

Amorim said truck sales will probably be handled differently than online consumer sales because companies are buying in bulk.

Tesla also plans to roll out is first robotaxis in 2020, although getting municipal regulatory clearances and other challenges could delay the timetable. Musk envisions consumers activating a self-driving computer chip installed in each vehicle and offering service themselves, with Tesla taking a cut of the profits.

The FreightTech 25 awards were presented Nov. 13 at FreightWaves LIVE Chicago.

Image by Blomst from Pixabay