Commentary – SeekingAlpha.com - Anton Wahlman
With 471,000 trucks sold in 2017 and 22% revenue growth, Daimler is now bringing four all-electric vans and trucks to market, with two more coming soon.
Two of these Daimler electric truck and van models are now going into customer hands, with two more coming within the next year.
Daimler emphasizes durability testing and utilizing existing truck factories in order to hopefully keep the lifecycle economics in the positive column.
Tesla has yet to announce a truck factory, customer trials, or provide evidence of durability testing in the harshest outdoor conditions.
Daimler has clearly came to market first, with multiple electric trucks and vans, but the final verdict is unlikely going to be rendered until 2021-2022.
This idea was discussed in more depth with members of my private investing community, Auto Insight For Wall St.
Geely and its CEO Li Shufu, who already owns Volvo Cars and has a minority investment in Volvo AB, the independent commercial vehicle company, made a $9.2 billion investment in Daimler last week: Why did Geely and Li Shufu think that not only Volvo Cars and Volvo AB but also Daimler (which owns Mercedes, Freightliner and Fuso truck brands) are so far ahead of Tesla in their plan for automobile and truck vehicle electrification alike?
For all the talk about Tesla's electric semitruck, the world's largest truck maker - Daimler - will be entering the larger electric truck market in March 2018 with the eActros. It's important to understand that Daimler already is going to market with four different sizes of all-electric vans and trucks - not just the eActros - and with two more to come later in 2018 and 2019:
- Mercedes Metris: This is the smallest van, in the size of a regular minivan - think Dodge Caravan - so it fits in a regular residential home garage. It is used by everyone from electricians to plumbers and the like. Commercial deliveries of the electric version of this truck start in Europe in the second half of 2018, the price is 39,990 Euros.
- Mercedes Sprinter: This is the iconic "Euro" large panel van, popular with construction workers and those who build motorhomes. The size makes it too large to park in a regular residential home garage. Commercial deliveries of the electric version of this truck start in Europe in 2019.
- FUSO Canter: This is a much larger truck, which Daimler (via its FUSO brand) builds in Japan and Portugal. It's used as a very large inner-city delivery truck and in the broader metropolitan areas. Commercial deliveries of the electric version of this truck were announced in the second half of 2017, and double-digit number of eFuso trucks already are in customer hands. The eCanter began testing in 2014, and the deliveries that are taking place right now are versions of the eCanter with a payload of 9,000 lbs. This payload will be increased later in 2018, and yet again in 2019. The range is only 60-80 miles, but this fits a large delivery truck for an inner city such as Manhattan or Tokyo. Expect this range to increase in the next year or so, and again in 2020 and 2021, with improved versions. The first eCanter customers include UPS and Seven-Eleven, and FUSO envisions delivering up to 500 units in 2018 and 2019.
- Mercedes Actros: The eActros is an even larger electric truck, with a European-defined capacity of 18-25 tons, in part depending on whether it's a 2-axle version or 3-axle (11.5 tons per axle in Europe). It has a 240 kWh battery which yields an average range of 124 miles with a full load, according to Mercedes.
Expanding on the eActros, it is going into testing with 10 customers in Germany and Switzerland in March 2018 - next month! This test will be underway for a year, at which point Mercedes will switch some of its external testing to 10 other customers for another year. Then, there may be some further customer testing, but the final production version of the eActros will enter mass production in 2021.
You might ask: Why is the eActros range only 124 miles? The answer is that's the realistic range of a 240 kWh battery moving around up to 25 tons of weight. Today's battery technology means that 240 kWh is the realistic size of the battery pack that can fit in one of these trucks and not impact the total weight too much.
However, battery technology is improving, and Daimler expects to be able to fit a higher capacity - and therefore a longer range - by the time mass production of the eActros starts in 2021.
Why mass production in 2021 instead of 2020 or even 2019? Daimler cannot afford to enter the large electric truck market with anything but a bullet-proof product. In 2017, Daimler sold 471,000 trucks - up 13% from the 416,000 it delivered in 2016 - yielding it a 39.8% market share. Revenue growth was even stronger, at 22%. And yes, the profit margin was indeed positive - 6.7%.
With this size of the business, Daimler just can't afford to deliver a truck that has not been fully tested, including by demanding customers. Customer testing alone will likely take closer to 36 months than the 24 months it described in detail in last week's press conference. Large truck customers expect these kinds of trucks to last one million miles, so in order to not be stuck with warranty expense, Daimler must test its new electric trucks for a lot longer, under the harshest field conditions.
For example, this is the way it has been winter-testing the much smaller eVito electric commercial van, ahead of its first customer deliveries in the Fall of 2018.
Daimler allowed the press to examine this eActros truck in detail, looking "under the cover" where each battery pack/module can be seen, including all the orange high-voltage connectors. It also provided test rides for the press. From inside the truck, it looks just like the regular diesel version of the Actros, except for some new/additional display readouts. Any truck driver who has been driving the diesel Actros will feel 100% familiar. Nothing weird or kooky in sight, such as sitting in the middle of the cabin.
Basically, Daimler introduced the eActros with relatively open cards. There's no doubt about what kind of battery it has, or the placement of the battery modules. As a result, the claimed range of 124 miles when fully loaded was credible. Daimler even posted all the supporting documents on its web site.
And then there are the factories. Daimler and its various brands -from Mercedes to FUSO to Freightliner - have truck factories on the major continents - Japan, China, US, Germany, Portugal and so forth. It can produce all of these electric versions of the trucks on its existing assembly lines, gracefully interjected between its diesel trucks. This means overhead and production cost can be held relatively low. Not knowing what the demand will be for the electric trucks, it also means flexibility and lower risk than a dedicated factory.
Tesla? It has yet to communicate where it will build its semi-truck. The major choices are (1) Outfit the Reno, NV, factory for truck production, or (2) Build a new factory somewhere. If Tesla wants to produce semi-trucks in any meaningful volume on an assembly line much before 2022, it will probably start small-scale production (50-100 trucks per year) in Reno, NV, first.
We are told that Tesla has received many hundreds of "reservations" for semi-trucks, from all sorts of large companies primarily in the trucking logistics business. Once they have received their first samples, they will likely take at least a year or two testing them, while trying to figure out the lifetime total cost of ownership (TCO).
By that time we will be in 2021. That's when Daimler/Mercedes will start to deliver its eActros, which admittedly is a slightly smaller truck than the largest version of Tesla's proposed semi-truck. So you can see that Tesla could end up being at least a year behind Daimler, in terms of any meaningful large-scale production on an assembly line.
But wait, there's more!
Daimler-controlled FUSO has already shown its larger truck - the Vision One - in concept form last October. Chances are that soon enough, we will see this truck - which is optimized for Asian markets, but otherwise closely related to the Mercedes eActros, in final form within months from now. It would then enter customer trials and perhaps be ready for mass production as early as 2021.
In addition, we will soon see the Freightliner eCascadia, which the Daimler head of R&D recently announced is on its way. The Freightliner eCascadia could be the very largest class of semi-truck, optimized for North America.
In other words, before long - perhaps before 2018 is over - we will see two more large Daimler all-electric trucks being announced, thereby kicking off a multi-year testing period with proper volume manufacturing starting as early as 2021. Add those two upcoming product lines to those that have already been announced in detail, as described near the beginning of this article, and you have six all-electric trucks from the Daimler Group of brands.
Whether these six electric trucks - from the very smallest to almost the largest - will find any meaningful amount of buyers in this-or-that timeframe, of course remains to be seen. Everyone is "interested" in all-electric trucks, and everyone wants to test them - but how many will actually buy and deploy them in volume, and when?
It's not enough to conclude that the electric trucks are pleasant to drive and that most trucks operating in the inner city cores are driven fewer than 50 or so miles per day. Market participants must also be able to get the economics to work in an unsubsidized scenario. Daimler isn't going to voluntarily subsidize selling electric trucks at a loss.
In the battle to explore the frontiers of all-electric trucks, Daimler and its portfolio of brands is clearly in the lead with four models and likely two more announced within months from now. Tesla has shown two concepts, where it has made claims about range, cost and recharging time.
Now, these electric trucks have to prove themselves in the field, undergo many millions of miles of heavy-duty testing, and in the case of Tesla also see factory capacity be built. While Daimler already has numerous truck factories in place and is set to produce the eActros on an assembly line starting in 2021, I don't see many thousands of all-electric large trucks being deployed until 2022 at best.
The electric truck battle between Daimler and Tesla has just begun. We'll see by 2021 or 2022 who is able to produce any meaningful volumes at a profit. If Tesla will ever be able to fund the construction of a truck factory, when do you think they will be able to produce such trucks at a profit?
Disclosure: I am/we are short TSLA.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.