Nikola Motors calls Elon Musk "full of it". Report suggests Tesla pre-orders are anemic

Nikola's H2 fuel-cell truck

Nikola's H2 fuel-cell truck

Truckers are naturally born cynics. For anyone that has spent sometime in the industry can attest to, truckers are not easily convinced and it takes a lot to win them over- especially when you start talking economics. For decades, snake oil salesmen have come up with all sorts of contraptions to “help truckers save on fuel.” Unfortunately, most of these ideas were bunk and amounted to little more than a charismatic sales person with a bold pitch.

For someone like Elon Musk- this is new ground. He has been given a pass among investors for the past decade and that have bought much of what he has said based on pure faith in him and his team. His charisma and ability to sell a bold vision has enabled him to build a car manufacturer that is valued more like a software company and nothing like the way car manufacturers have been valued on cash flow and earnings.

So it should come as no surprise that truckers are not buying the Tesla claims. After the unveiling of the Tesla Semi happened on November 16th, the other OEMs’ stocks sold off. Most were surprised by the incredible claims of range and operating costs for the truck. They have since recovered as investors and truckers came out and questioned the viability of such bold promises.

According to a Seeking Alpha article, even Nikola Motors, which has been promising its own revolutionary truck got in the question game. In a series of tweets that have since been deleted, Nikola Motors called Elon Musk out, calling him “full of it.” The tweets question the claims about the power consumption, range, acceleration, and the fact that everything that Tesla states has to be perfect in order to work- weather, terrain, and traffic.

According to Nikola, the specs that Tesla promised were only feasible in absolute perfect conditions, i.e. "a vacuum." They point out that the batteries take up too much weight; they can not maintain acceleration or range when you factor in things like hills and normal temps; and economics of the batteries they are promising costs more than the truck itself at $144,500, based on current lithium prices. The batteries alone are expected to weigh 15,000 lbs. 

Nikola Motors started out in the early days as strictly a company focused on delivering a battery operated vehicle, but has since converted to a hydrogen fuel-cell after realizing that a battery operated truck would be limiting in range, economics, and feasibility for the class 8 commercial vehicle market. The firm also did something that Musk did not- it answered the maintenance and service question on the mind of fleet owners through a series of partnerships with Ryder and Fitzgerald. 

The other thing that Nikola could be credited for is in lining up commercial commitments at the time of the unveiling. According to the company, they had lined up over $2B in pre-order commitments from fleets. Another thing that Nikola did to ensure commercial credibility is to partner with fleets in the space with a reputation for being an influential technology trend setter. Anyone that has been reading about the Nikola has likely come across the picture with the giant US Xpress logo on the front of the truck. By doing this, Nikola didn’t have to talk a lot about its commercial orders because anytime someone saw the photo, they were immediately reminded that one of the largest fleets in North America had a standing order. Back in March FreightWaves did a story on why US Xpress was backing the Nikola. 

Walmart, Meijer, and JB Hunt all announced their preorder commitments on the night of the unveiling and while those names are sexy, the amount of trucks they ordered are quite small compared to the total amount of trucks they buy each year. JB Hunt and Walmart independently order around 4000 vehicles each per year, making the orders of 25 and 15 respectively a rounding error for each.

Seeking Alpha suggests that pre-orders for the truck have been much slower than Tesla initially expected. This contrasts with our theory that their raising of the deposit was a sign of high demand. Could it be the opposite? Did Tesla over-estimate the commercial demand for the product and raised the deposit to $20,000 to cover any gap in their proformas?

As of November 22, Electric vehicle site Electrek published a damning report on Tesla preorders showing that only 55 trucks have been announced. This could be caused by how fleets buy trucks. They are more methodical in their buying decisions than consumers. The process for buying and evaluating commercial orders requires committees and a “wait-and-see” approach. They will want to test the claims made by Tesla and ensure that the truck lives up to the promises.

It is also possible that fleets are struggling to reconcile the claims made with their own technical expertise on trucks; the commercial practicality of the truck in their network; and the ability to maintain the trucks and keep them running. Many large fleets have their own maintenance staff that are unfamiliar with operating on a new platform and since Tesla did not answer how they plan on addressing this, it was an open question that left fleets uncomfortable with jumping in.

It will be interesting to see how all of this plays out over the next few years. Tesla is reportedly burning through $8000 a minute meaning that they will be focused on wowing investors as much as any group to ensure they can raise the billions they need to survive.

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