In late July, Tesla (NASDAQ: TSLA) CEO Elon Musk tweeted that the automaker was only two or three months away from unveiling its next big thing: an electric pickup truck. Now it's early September, and MarketFoolery host Mac Greer is looking ahead with anticipation to seeing the prototype. But during the long lead-up to the big reveal, some fairly muscular promises have been made about the vehicle.
In this segment of the podcast, Greer and senior analysts Emily Flippen and Jim Mueller discuss the Tesla pickup's potential range, cost, profitability, and proposed features, as well as how long it might be before it reaches the market. In addition, they reflect on how Ford, which already has the best-selling truck line in the country, is working to preempt this challenge by putting out an electric F-150.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.
10 stocks we like better than Tesla
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Tesla wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of June 1, 2019
This video was recorded on Sept. 4, 2019.
Mac Greer: Let's move on to Tesla. Let's talk Tesla trucks. Now, a tweet this summer from Tesla founder Elon Musk said that a Tesla pickup truck could be two to three months away. Kind of cryptic. We don't know exactly when, but the anticipation is building, and Musk has already mentioned some details. He said the starting price for a Tesla pickup will be below $50,000, which is actually very affordable for a pickup; and, the truck will have a range of at least 400 to 500 miles. OK, Jim. We should also add that Ford also working on an electric version of the F-150, which happens to be the most popular vehicle sold in the U.S. last year. It is game on. What do you make of a Tesla pickup truck?
Jim Mueller: I think there are three concerns. Before I get to those, I want to add a couple of more interesting stats here. You mentioned the 400 to 500 mile range. That is with six people, presumably six adults, in the cab, including Andre the Giant.
Greer: Who was 7'4 or 7'5.
Mueller: Depending on who you ask. I believe Musk was the one who said that Andre the Giant could fit in the driver's seat, which implies a very large cab. I'm 6'3 and I have a hard time fitting into some drivers' seats. Not pickups, but other cars.
Greer: OK, so, roomy interior.
Mueller: Very roomy interior, enough for six people. This is the one that surprises me -- 300,000 pound towing capacity. For comparison, this year's model of the F-150, the 2019, has a towing capacity with a special configuration of the truck of only 13,200 pounds. To put that into context, as if everyone knows the size of a dinosaur, the T-Rex, the Ford can haul about one T-Rex down the road.
Greer: Which is a lot.
Mueller: Which is a lot. Tesla is saying that they're going to be able to put 20 T-Rexes on your trailer and the truck can haul it down the road.
Greer: Hold on there. You're saying, if I need to haul multiple T-Rexes, an F-150 can't get it done?
Mueller: No. Not at all.
Greer: Oh, my gosh!
Emily Flippen: What are we going to do?! We have to buy a Tesla now!
Mueller: [laughs] To put it in a more familiar context, 300,000 pounds is about the weight of four fully loaded semi-trucks with trailers, with a gross vehicle made of 80,000 pounds apiece.
Greer: But here's the thing. I hear all of that. But the F-150 is so iconic. Ford is so iconic that I am incredibly skeptical -- what's the word beyond "incredibly skeptical"? -- that the Tesla pickup truck will make it, especially in rural America. The moment they announce, the moment they bust out this truck, if I'm Ford, I'm like, "Keep your powder dry, our truck is coming out in a year/ four months/ two years, and I'm getting very specific."
Mueller: I don't know what the word beyond "totally skeptical" is. Maybe somebody out there with a thesaurus can tell us. My issue with this is, when? The Model Y is not even in production yet. That's not expected until next year. When might the truck actually be delivered? Musk isn't saying that it's going to start production. It's going to be unveiled, which means on a stage, in a prototype, and all that, and, "Look how pretty it is, start placing your orders today, folks." So, when? Two, three years from now, maybe. That gives a lot of time for companies like GM, Ford and Chevy to put out their own trucks. The price. $50,000. That's about mid-range for a pickup truck.
Greer: That's amazing!
Mueller: Ranges run about $30,000 to $70,000. But, can Tesla actually get the same levels of profits that the trucks deliver for Ford? A third of their sales revenue is from these pickup trucks, among the three big Detroit automakers. I'm sure a large amount of their profit is also coming from those trucks. Can Tesla match that profitability? I don't know.
Flippen: Yeah. And, here's the thing. 20 T-Rexes, I'll give it to them. The guy sent a car to space, OK, you can have your 20 T-Rexes. Here's what I don't believe: the $50,000 price point. I feel like we've been there. We've done that. We've heard it. It's probably not happening, at least not at that price.
Greer: You're skeptical?
Flippen: I will give him the 20 T-Rexes. That's being very, very generous. I'm skeptical of the price.
Greer: What do you think, Emily, of my strategy? Let's say, the moment they unveil this Tesla pickup truck and they start accepting orders, if you're Ford, wouldn't you also announce your version of an electric pickup truck and also start accepting orders? What you want to do is, you want to freeze the gameboard. You don't want to lose anyone who would be tempted to buy that Tesla truck. You don't have to make the sale right away, but if you say, "Hey, two years from now, we're going to have our own F-150 electric truck. You've heard of the F-150. We'll start accepting orders today."
Mueller: Maybe. Maybe not. A big driver of the sales of those F-150 pickup trucks is to farmers and small business owners who need the hauling capacity, who need the payload capacity, and is forth. They also need the utility, ability to switch between hauling or payload or driving around town or what have you, as well as being easily repaired -- for farmers, easily repaired on-site. So, with Tesla and their repair issues going on today, will they actually appeal to the farmers and small business owners? Or will Ford come out and say, "Yeah, Tesla announced that big pickup truck, but they're not targeting you, our core buyers of our trucks. We're coming out with something. If you want electric, we can give you electric. If you want diesel, we can give you a diesel," and so on.
Greer: If you're Tesla, and you're hauling 20 T-Rexes, you may need some repairs.
Mueller: [laughs] Right.
Greer: One more bank shot for the Tesla story, quickly. Emily, Tesla owners in China asking for refunds after Tesla got a 10% tax break. What do you make of that?
Flippen: I would do the same thing, wouldn't you? Pass that savings on to me. But there's no way Tesla's actually going to be doing that. They worked hard for that tax break. I think it'd put them at a 25% tax bracket if they didn't get a cut there, so, all their auto parts. But, no surprise there. I think that consumers want a little bit of that refund.
Greer: Never hurts to ask.
Mueller: That was actually a sales tax break that Tesla doesn't have to charge anymore and pay to the Chinese government. They are going to be still subject to December's proposed 25% tariff of importing cars, which is a big reason why Tesla is building that factory in Shanghai.
Emily Flippen has no position in any of the stocks mentioned. Jim Mueller, CFA has the following options: short January 2021 $200 calls on Tesla, long January 2021 $200 puts on Tesla, short January 2021 $230 calls on Tesla, long January 2021 $230 puts on Tesla, short January 2021 $240 puts on Tesla, and long January 2021 $270 puts on Tesla. Mac Greer has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.