Tesla Motors (NASDAQ: TSLA) investors are asking are trucks making money because Elon Musk is betting his company’s future on semi-tractors.
In fact, Eletrek claims witnesses spotted a driverless prototype of a Tesla Semi on California’s 101 or Pacific Coast, highway. Some observers even posted pictures of the driverless semi on social media.
Such experiments will have Tesla shareholders wondering why Musk is so intent on developing electric trucks. The answer is simple commercial truck makers like PACCAR Inc. (NASDAQ: PCAR) can make a lot of money.
PACCAR is Making Money
In fact, PACCAR, the parent of Kenworth, DAF, Leyland, and Peterbilt, reported a gross profit of $5.217 billion and a revenue growth rate of 14.74% on 31 March 2019. In addition, PACCAR reports an operating income of $843 million and a net income of $629 million for the quarter ending on 31 March 2019.
Meanwhile Tesla reports an operating loss of -$167.46 million and a net loss of -$408.33 million for the quarter ending on 30 June 2019. However, Tesla did achieve a revenue growth rate of 58.65% and a gross profit of $921.05 million on the same day.
Musk understands that to survive, Tesla will need moneymaking products and trucks are profitable. PACCAR reported quarterly revenues of $6.488 billion on March 31, 2019. That figure was up from $5.654 billion on 31 March 2018.
How Much Cash Does PACCAR Have?
Moreover, PACCAR reported an operating cash flow of $363 million the same day. However, PACCAR did report a negative free cash flow of -$27.2 million for the quarter ending on 31 March 2019.
In fact, PACCAR made enough money to report $2.842 billion in cash and equivalents and $1.081 billion in short-term investments on 31 March 2019. Thus, PACCAR was able to accumulate $3.924 billion in cash and short-term investments without burning through large amounts of cash like Tesla.
Tesla had $5.083 billion in cash and equivalents on 30 June 2019. However, the electric carmaker reported a positive free cash flow of $595.73 million, a financing cash flow of $2.143 billion, and an operating cash flow of $863.61 million on 30 June 2019.
Tesla is finally generating some cash but it is still running at a loss. Hence, Musk needs to expand to additional; and more lucrative, lines of vehicles fast if he wants his auto brand to survive. Obviously, trucks are one of those lucrative lines, Tesla can enter.
Can Tesla Make Money with Trucks?
Musk wants Tesla in the truck business because the demand for commercial trucks is huge.
In fact, there were 3.63 million Class Six trucks and 3.68 million Class Eight (heavy commercial vehicles and semi-tractors) trucks on US roads in 2015, the American Trucking Associations (ATA) estimates. Notably, those trucks generated $700.1 billion in revenues hauling 71.5% of America’s freight in 2017.
Consequently, there’s a vast demand for commercial trucks of all shapes and sizes. Additionally, there were 772,840 trucking businesses constantly seeking better technology and more efficiency in America in June 2017, the Federal Motor Carrier Safety Administration estimates. Notably, electric trucks could be cheaper to operate and maintain.
In addition, there could be a huge demand for autonomous or semiautonomous trucks like Tesla proposes. Dramatically, there are claims of a shortage of truckers. For instance, the American Trucking Associations estimates the industry is already short 60,000 drivers, NPR claims. Thus, there will be a market for any technology that could reduce the demand for drivers.
Can Tesla Compete with PACCAR?
The demand for electric trucks is there but so is the competition. For instance, PACCAR’s Peterbilt subsidiary plans over 30 electric trucks, Transport Topics claims.
Current Peterbilt plans include the 520EV, an electric garbage truck and the 579EV a small electric semi-tractor for use around rail yards, ports, and warehouses. Both the 520EV and the 579EV were on display at the Consumer Electronics Show in Las Vegas on 8 January 2019. Moreover, field trials of both the 579EV and the 520EV are underway, Transport Topics claims.
PACCAR is developing its own Level Four autonomous truck at its Innovation Center in Sunnyvale, California in the Silicon Valley, Trucking Info reports. To clarify, Level Four means a vehicle is fully autonomous and can drive itself under most circumstances.
PACCAR is Developing an Autonomous Peterbilt Truck
Thus, PACCAR is developing a self-driving truck. However, there is still room for a driver in a Level Four semi.
Instead of driving all the time, the driver can relax and take control of the rig in an emergency. Moreover, PACCAR is beefing up its technology by meeting with over 125 startups between November 2018 and June 2019, Peterbilt General Manager Jason Skoog tells Trucking Info.
Consequently, PACCAR is doing everything Tesla is doing without Elon Musk’s fanfare. In fact, PACCAR is ahead of Telsa in trucks because it has two models of electric trucks on the road.
Tesla has just truck, the Semi on the road, and a cyberpunk pickup truck on the drawing board. However, there are rumors Musk could unveil a Tesla Pickup at the Los Angeles Auto Show in November 2019, The International Business Times notes.
Is PACCAR a Value Investment?
At a $65.12 a share on 6 August 2019 PACCAR (NASDAQ: PCAR) is a value investment when compared to Tesla. In fact Tesla shares were trading at $228.29 on the same day.
Plus, PACCAR has scheduled a 32₵ dividend for 4 September 2019, while Tesla pays no dividend. Additionally, the PACCAR dividend is up from 28₵ on 4 December 2019. There was also a bonus PACCAR dividend of $2 on 4 January 2019.
Consequently, PACCAR shares offered a dividend yield of 1.97%, an annualized payout of $1.28, and a payout ratio of 21.2% combined with nine years of dividend growth on 6 August 2019. Thus, if you are looking for a dividend and stock in electric autonomous vehicles, PACCAR is it.
People that like to take risks; lose money, and watch Elon Musk’s circus, can stick with Tesla Motors (NASDAQ: TSLA). Those who want to make money from electric and autonomous vehicles need to investigate PACCAR.