By Jessica DiNapoli
NEW YORK (Reuters) – Major Tesla (NASDAQ:) customer PepsiCo (NASDAQ:) made first payments for 100 Tesla Semis in 2017, planning to use its fleet of electric trucks to deliver its Cheetos, Lays chips and Pepsi transport soft drinks to retailers.
But as of this month, PepsiCo was using just 36 of Tesla’s promised 100 electric trucks, according to the food and beverage maker and one of its executives with knowledge of the deal.
The shortage, which has not previously been disclosed, highlights challenges for Tesla, which aims to become a major player in truck manufacturing. Other potential Tesla customers, including food distributor Sysco (NYSE:), UPS and Walmart (NYSE:) Canada continue to wait for Tesla Semi trucks and are turning to rival electric truck makers.
The struggle to ship enough semis comes at a bad time for Tesla, which has seen growth in its consumer electric vehicles slow, forcing the country to cut prices and hurt margins. In addition, Reuters reported this month that Tesla had decided to discontinue its long-promised low-cost car, which investors had hoped would spur further growth.
Diesel-powered 18-wheelers are a major source of pollution. With companies promising to reduce their greenhouse gas emissions, the proposition for Tesla is clear.
“People may wonder why a semi truck is built?” Musk said this at the end of 2022 at the automaker’s gigafactory in Sparks, Nevada, when Tesla delivered the Semis to PepsiCo. “It’s 20% of U.S. vehicle emissions.”
Under the Biden administration, companies that use electric trucks are eligible for large subsidies to offset their purchases. PepsiCo has secured more than $20 million in government grants to cover the cost of 32 Semis, plus federal subsidies of $40,000 per vehicle.
Tesla, which will report quarterly results on Tuesday, did not return a request for comment.
A PepsiCo spokesperson said in a statement that the company’s plans for the Semis could change based on technology and the need to build infrastructure.
The soft drink and snack maker was the first from Corporate America to take delivery of one of Tesla’s highly anticipated Semi trucks. “The 100 (Tesla Semis) that we put a deposit on, we will definitely be releasing in ’23,” Mike O’Connell, PepsiCo’s vice president of supply chain, told Reuters at the time.
But as of this month, PepsiCo was “focused on getting the most out of the 36 (Tesla Semi) vehicles currently in our fleet,” a spokesperson told Reuters in early April. That’s the same number that PepsiCo first started with when it began using the trucks to transport goods from its food plant in Modesto and its bottling plant in Sacramento, PepsiCo executives said.
Tesla has been looking for a truck factory for years.
Tesla had said the Semi would be in production in 2019. In October 2022, Musk told investors that his goal was to make 50,000 Semis by 2024. Tesla finally unveiled the Tesla Semi truck in late 2022.
But in June 2023, Musk said at an energy conference that “there just weren’t enough batteries” for Tesla to reach “volume production” of the truck, without quantifying how many Semis that would be. He said Tesla would reach volume production in 2024 “when the battery problem is solved.”
Svein Sollie, transportation director at ASKO Norway, the logistics arm of Norway’s largest food retailer NorgesGruppen, used his personal credit card to make an initial deposit on 10 of the Tesla Semis in 2017 but received nothing.
“We are not happy with the situation at Tesla,” Sollie said. “(It’s) almost seven years now, it’s a long time to wait.”
UPS reserved 125 Tesla Semi-tucks in 2017, one of Tesla’s largest orders at the time. A spokesperson for the package delivery company told Reuters on April 16 that it is “working closely with Tesla to determine a date when we can take delivery of the trucks,” but declined to provide additional details.
Meanwhile, UPS, Walmart Canada, Sysco and Schneider National (NYSE:), a trucking company that works for PepsiCo’s Frito-Lay, said they are turning to Daimler (OTC:) Truck, maker of the Freightliner eCascadia. All four companies said they had started putting dozens of eCascadia electric big rigs on the road.
The eCascadia’s range is about 230 miles, while the Tesla Semi can travel about 500 miles. Schneider said it uses nearly 100 eCascadia trucks to transport goods, including PepsiCo’s Frito-Lay products.
Daimler Truck North America said the eCascadia is used in the fleets of more than 55 individual companies.
Certainly, Tesla has its own fleet of nearly 100 semi-trucks that travel between its factories in Fremont, California, and Sparks, Tesla CEO Lars Moravy said in December on the reality show Jay Leno’s Garage.
In addition, logistics provider Martin Brower said on its website that it deployed two Tesla Semis to deliver to its restaurant customers earlier this year as part of a pilot. Additional requests for comment were not responded to.
In Tesla’s quarterly earnings call on January 24, Andrew Baglino, an executive who has since left the company, said Tesla recently began expanding its Nevada factory to produce the Semi. According to local news reports, Musk said in March that it “would make sense to also build the Semi in Europe” at the company’s factory outside Berlin.
Pepsi Chief Sustainability Officer Jim Andrew said in a recent interview with Reuters that PepsiCo was building out the infrastructure to support an electric fleet, including workers who can maintain the vehicles and electrical grids strong enough to charge them.
“You’re talking about a system,” Andrew said. “All these things have to happen before we can electrify the fleet.”
A PepsiCo spokesperson said the company would deploy more electric vehicles from a range of manufacturers as they become available.
PepsiCo investor Green Century Capital Management has reservations about the company’s timeline for the Semis rollout.
“The fact that they are behind schedule is concerning,” said Andrea Ranger, a shareholder advocate at Green Century. The investment firm has been monitoring PepsiCo’s use of electric vehicles and is urging the company to consider their impact on biodiversity at its annual meeting in May.
In Europe, ASKO Norway is using electric semis from Scania and Volvo (OTC 🙂 while it waits for Tesla, Sollie said. He said Tesla told him Tesla is prioritizing semi deliveries to Pepsi and other U.S. customers.
