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Peter Tertzakian

Peter Tertzakian

Peter is an economist, investment strategist, author and public speaker on issues vital to the future of energy. He has clocked over 30 years of…

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The Electric Truck Revolution Is About To Accelerate

Trucks

Not long ago, the idea of 18-wheelers pulling cargo with a battery seemed somewhat ludicrous to me. But I’ve changed my mind.

In fact, I would argue that electrically-powered wheels may come to the trucking market faster than the world of passenger cars.

The reason is simple. Trucking companies—like any capitalist, profit-maximizing institution—make rational purchase decisions based on careful assessments of economic viability. Any capable Chief Financial Officer is algorithmically brain-wired to ask, “Is this thing going to make our company any more money?” If the answer is “yes,” the switch is often fast.

Individuals on the other hand are often motivated by soft sell factors like vanity, size and flexibility, not to mention instant convenience. A good set of cup holders often trumps fuel economy. The option to haul a sheet of plywood on a moment’s notice, if only twice a year, is perceived as worth the cost of supersizing a vehicle purchase.

Personal transport choices have long been incompatible with making good financial decisions (I can validate that fact personally). Yes, I know that new money saving modalities like ride-sharing are redefining the way some people move around, but there is more of the vehicle world to take on than just Manhattan and Berlin.

But let’s get back to thinking about changing the face of the trucking business. Can we think of a historical analogy that helps us consider whether an electric truck will gain favor over a tried-and-true diesel? The criteria for comparison are: (1) both old and new systems must be on wheels; (2) the energy source is changing; (3) the propulsion method that drives the wheels is changing; and, (4) the procurement is being driven by business decisions. Related: Saudi Oil Minister Hints At Post OPEC Deal Strategy

The closest example I can think of is railroad locomotives; the transition from coal-fired steam boilers to petroleum-powered diesel engines. Because of superior performance, the substitution away from big iron horses was fast, meaningfully starting in the 1940s and ending with complete obsolescence by the early 1970s. “Fast,” however, still translated into three decades.

Our chart this week shows the rate of diesel locomotive adoption over time, which followed a typical S-shaped pattern. Looking at the data, the 30-year transition happened at a much faster pace than any current analyst projection for personal electric vehicles. In fact, it happened faster than the extreme hypothetical scenario under which the sale of all internal combustion engines is globally banned by 2040 (see my column from October 16th).

(Click to enlarge)

A diesel locomotive had compellingly better utility over its steamy predecessor. The engineer didn’t have to waste time stopping at water towers to fill up the boiler. Nor was there a need for a tender car and a guy in black overalls to shovel coal into a fire-box. Everything was superior: range, power and control. All put together it meant greater productivity, lower operating cost and an ear-to-ear grin on the CFO’s face.

In fact, if you were a railroad operator still running steam engines in the mid-20th century, you were probably headed toward bankruptcy. Your competitors with shiny new diesel equipment would have been stealing customers with better service and lower prices for hauling goods.

And that’s the thing in the business world that drives faster transitions to newer products and processes: the threat of being uncompetitive, or outright bankruptcy. It’s a powerful force for change. Related: Venezuela To Launch ‘Petro’ Cryptocurrency

As a side note, households don’t often feel that force. Do you feel competitive pressure to buy an electric vehicle over gasoline? For most individuals, competition means keeping up with the Jones’, which often leads to irrational financial decisions.

Within the trucking business, Tesla, Cummins and several other manufacturers are in the fray to build the next generation. But it’s still too early to tell how the pros, cons and dollars stack up. Over the next couple of years, CFOs will be grinding spreadsheets to see if electrified trucks make financial sense. Lower energy and maintenance costs, as well as the promise of efficiency gains by virtue of autonomous driving technologies, tells me there is significant potential for electric propulsion in trucking. I think some niches are likely to haul change in the near future. Within the heavy-duty vehicle (HDV) market I’ll put my money on step vans first – the type that blocks a city road when delivering my Amazon order.

Several companies with trucking fleets have pre-ordered the Tesla Semi in small quantities, already signaling an interest. However, an important cue will be when the first big trucking company starts making the switch. That will mean there is money to be made. And when this happens the train will have left the station.

By Peter Tertzakian

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  • AD on December 04 2017 said:
    You wrote, "Several companies with trucking fleets have pre-ordered the Tesla Semi in small quantities."

    It's good PR for these companies to show interest for Tesla semi. Until Tesla delivers, it's little obligation for these companies anyway. Though publicly $5K deposit is required to reserve, I doubt Tesla could enforce it with these lead customers. Even if indeed Tesla collected $5K/truck from Walmart, it is too little money to show Walmart's commitment.

    Tesla is not disclosing the spec for the battery, the most critical part of an EV. Many reporters misinterpret Musk's word of carrying 80K lb as payload. 80K lb is the MAXIMUM LEGAL gross weight of a semi-truck. Some analysts have calculated Tesla semi truck's battery to weigh at least 20+K lb for a 1MWH capacity since Musk claims 2KWH/ mile and 500 miles per charge. On top of the battery, you have to add the weight of the rest of truck itself. I wonder if these trucking companies would still be interested if the payload turns out to be substantially less than a diesel truck.
  • Me on December 05 2017 said:
    If I were CFO of a trucking company, l'd prefer a "Sky truck" (you know, ala the Jetsons) to a plain old electric truck any day. Current availability (and likely price) is the same.
  • Tom on December 05 2017 said:
    Peter I very much enjoyed your dollars and cents article on the possible transition to electric trucks. It's interesting to note that the early diesel locomotives were mere wimps compared to the massive steam locomotives they were replacing. 1/5 to 1/4 the power of the steam giants they were challenging. Yet you could string four or five of the new Diesel engines together to equal one large steam locomotive. It wasn't until the recent development of the AC Diesel Locomotive that the Diesel Locomotive finally matched the 5,000 and 6,000 horsepower range of the steam engines their wimp brothers replaced 65 years ago! Truly a facinating analogy!
  • Petergrt on December 05 2017 said:
    I've long wondered why some company didn't come up with a truck that would employs a similar system to that of GM's Volt, which is fairly similar to the modern locomotives . . . . .

    Use diesel to produce electricity and and use electric motors for locomotion as well as braking . . . while using batteries to to smooth the process . . . .

    Anyway, I agree with the article's findings and believe that the electrical locomotion will bring about the 'peak-oil' a lot sooner than most experts envisioned.
  • Emmanuel Moyana on December 06 2017 said:
    This is always good news. More and more players means more research and consequently more progress
  • snoopyloopy on December 06 2017 said:
    @Petergrt: That's part of what the concept Cummins showed a couple months ago would allow. There's also Wrightspeed which has been using turbine generators instead of traditional reciprocating engines like GM does in the Volt. But both are just barely coming to market, so it remains to be seen how quickly the market takes it up.
  • Null on December 07 2017 said:
    AD:
    There's an amazing amount of weight in the current diesels that would no longer be necessary.

    From mechanicals: giant diesel engine, transmission, drive shaft, differentials
    to fluids: Diesel, oil, transmission, coolant, after treatment
    to support equipment: exhaust, radiators, after treatment, coolant loops
    to frame and body structure to support the massive twisting forces of motor, transmission, differentials.
    to vibration damping and noise abatements
    to body work like hood and cab...

    Much weight to be saved with battery vehicles, Battery pack becomes a stressed member part of the frame.

    Heard a truck driver and diesel mechanic do the math in various podcasts, youtube and even rough order estimates it's in the ball park.

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