Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Market Insanity

Food Service Giant Sysco Orders 50 Tesla Semis

In a couple of years, the ingredients for your restaurant or cafeteria meal might be delivered by an electric truck. The biggest order yet for Tesla Motors’ (NASDAQ: TSLA) electric semi-tractor has been placed by food-service goliath Sysco (NYSE: SYY).

Sysco has placed a reservation for 50 Tesla Semis, the company’s president and chief operating officer Tom Bené announced in an 8 December 2017 press release. That does not mean you will see a Tesla Semi outside your favorite eatery anytime soon. It simply means that Sysco will be first in line if the Semi goes into production.

Elon Musk has not said where the Semi will be produced but he has promised that production will begin in 2019. Skeptics have noted that there is not enough room to build large trucks at Tesla’s car factory in Oakland, California. That means Musk will have to build a production line for them elsewhere possibly at the Gigafactory in Storey County, Nevada.

Largest order for Tesla Semis Yet

The announcement is good news for Tesla because Sysco owns the food service business in the U.S. It delivers to almost every restaurant and cafeteria in the United States.

Sysco is the largest buyer of the Tesla Semi yet; the second largest buyer is brewer Anheuser-Busch (NYSE: BUD), which has pledged to buy 40 semis. Walmart (NYSE: WMT) has plans to buy 15, the J.B. Hunt trucking company will buy several, and Canadian grocer Loblaw’s has placed an order for 25.

The Semis might be a source of much-needed cash for Tesla because each one is projected to cost $150,000, The Verge reported. There’s also a $20,000 deposit on each one.

That means the Sysco deal might be worth $7.5 million to Tesla in the long run and $1 million upfront. The extra cash might save Tesla because the company reported a $1.407 billion loss on 30 September 2017. That means it would have to sell several hundred or several thousand trucks to become solvent.

Despite that, the Sysco, Anheuser-Busch and Anheuser Busch deals show there is a market for electric semis. If Tesla does not fill it somebody else will. Such orders would also make it easier for Musk to sell Tesla or its truck subsidiary to another automaker or a truck manufacturer.