Tesla's stock falls as launch of Semi truck fails to excite investors

By William Gavin

Autonomous trucking represents a compelling opportunity for Tesla, but it's unclear what the company's initial Semi targets look like

Volume production of the Tesla Semi officially started on Thursday.

Tesla will finally begin deliveries of its all-electric Semi truck to customers this week, after years of delays.

The heavy-duty Semi was announced by Tesla (TSLA) CEO Elon Musk in November 2017. At the time, the company had plans to kick off production a few years later. However, the company repeatedly pushed back the launch, preventing it from being able to serve the long-haul freight market on its original timeline.

But at an event on Thursday, Tesla executives confirmed that the company's Nevada factory will be capable of producing up to 50,000 Semi trucks each year. The first truck rolled off the high-volume production line in April and volume production officially began Thursday, according to the company.

While it's unclear how many Semi trucks Tesla aims to make or sell this year, the company has attracted orders from customers including PepsiCo (PEP) and DHL (XE:DHL), which tested the Semi in pilot programs. An alliance of shipping companies this week also announced an order for 2,500 of the trucks.

The Semi comes in two versions, Standard Range and Long Range, with the latter able to travel about 500 miles before needing to recharge its battery. The standard version has 325 miles of range. The company has told customers the Long Range version will cost $290,000, according to Electrek.

"This is really going to be a revolutionary truck," Musk said in a prerecorded video on Thursday. He said the waiting list for the Semi "is already pretty significant."

Musk added that Tesla will "in the very near future" make its Full Self-Driving advanced driver-assistance software available for use with the Semi. In July, he said Tesla would focus on developing the driverless software first for the Cybercab robotaxi and its other vehicles, telling investors that he didn't want the Semi to "be a distraction."

Autonomous trucking could be a big opportunity for Tesla, according to Morgan Stanley analyst Andrew Percoco. He thinks the company could generate about $15,000 in recurring software revenue each month for every truck equipped with autonomous-vehicle technology. By 2040, Percoco estimates Tesla could generate $17 billion in software revenue a year from the Semi, assuming it sells well.

The launch of the Semi comes as diesel prices surge. Tesla emphasized that the Semi's cost per mile is much lower than that of traditional heavy-duty trucks.

Don't miss: Record-breaking diesel prices are poised to hit grocery bills - and your Thanksgiving turkey

"We see Semi as an underappreciated avenue for Tesla to expand its autonomy capabilities, with impressive unit economics that support a strong demand outlook," Percoco said in a note to clients on Friday. He has the equivalent of a neutral rating on the stock and called Thursday's event "another step toward commercial rollout."

Tesla shares declined 1.5% on Friday.

With the Semi event behind it, Tesla has already turned to promoting a planned showcase of the Roadster, an electric sports car that is the result of a collaboration with SpaceX (SPCX), another company run by Musk. That event is scheduled for Oct. 1.

The Roadster was announced alongside the Semi in 2019 and has faced similar delays. Despite enthusiasm among some Tesla fans, the vehicle isn't expected to be a major financial contributor for the company.

Goldman Sachs analyst Mark Delaney recently noted that "absolute demand" will also be limited by the high cost of the Roadster, which has been estimated to be around $250,000. Just a few thousand are expected to be sold per year, experts say.

The "Roadster's near-term significance is principally as a technology and brand showcase," StoneX analyst Mickey Legg said in a note on Friday. The Semi, he added, is the "more consequential revenue opportunity."

-William Gavin

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

09-25-26 1634ET