Key Tesla (TSLA.O) customer PepsiCo (PEP.O) made initial payments for 100 Tesla Semis in 2017, intending to use the electric-truck fleet to haul its Cheetos, Lays potato chips and Pepsi soda pop to retailers.
But according to the food-and-drinks maker and one of its executives with knowledge of the deal, PepsiCo was using only 36 of Teslas promised 100 electric trucks as of this month.
The shortfall, which hasn't been previously disclosed, lays bare the challenges for Tesla as it seeks to become a high-volume player in the truck-manufacturing business. Other would-be Tesla customers including food distributor Sysco (SYY.N), UPS (UPS.N) and Walmart (WMT.N) Canada continue to wait for Tesla Semi trucks and are turning to rival electric-truck makers.
The struggles of shipping enough Semis come at a bad time for Tesla, which has seen growth for its consumer electric vehicles slow, forcing it to cut prices and hurt margins. In addition, Reuters reported this month that Tesla had decided to cancel its long-promised inexpensive car that investors had hoped would drive further growth.
Diesel-powered 18-wheelers are a major source of pollution. As companies pledge to slash their greenhouse gas emissions, the proposition for Tesla is clear.
"People might wonder why build a semi truck?" Musk said at the carmaker's gigafactory in Sparks, Nevada, in late 2022, when Tesla delivered the Semis to PepsiCo. "It's 20% of U.S. vehicle emissions."
Under the Biden administration, companies using electric trucks qualify for large subsidies to offset their purchases. PepsiCo secured over $20 million in government grants to cover the cost of 32 of the 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 can shift when technology and the need to establish infrastructure is involved.
The soda and snack producer was the first of Corporate America to take delivery of any of Tesla's highly-anticipated Semi trucks. "The 100 (Tesla Semis) we have a deposit on, we’ll get those out in ‘23 for sure," Mike O’Connell, PepsiCo’s vice president of supply chain, told Reuters at the time.
But, as of this month, PepsiCo was "focused on best leveraging the 36 (Tesla Semi) vehicles that are currently in our fleet," a spokesperson told Reuters in early April. That’s the same number PepsiCo first started with when it began using the trucks to transport goods from its Modesto food manufacturing plant and Sacramento bottling site, PepsiCo executives said.
Tesla has been looking to build a truck-making business for years.
Tesla had said it would have the Semi in production by 2019. In October 2022, Musk told investors that his goal was to make 50,000 Semis in 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 "as the battery problem gets solved."
Svein Sollie, the transportation director at ASKO Norway, the logistical arm of Norway's largest food retailer NorgesGruppen, used his personal credit card to put down an initial deposit on 10 of the Tesla Semis in 2017 but has not received any.
"We are not happy with the situation at Tesla," Sollie said. "(It's) almost seven years now, it's a long time to wait.”
Meanwhile, UPS, Walmart Canada, Sysco and Schneider National (SNDR.N), a transportation company that works for PepsiCo's Frito-Lay, said they are turning to Daimler Truck, maker of the Freightliner eCascadia. All four companies said they had begun to put dozens of eCascadia electric big rigs on the road.
The eCascadia's range is around 230 miles, while the Tesla Semi can go about 500 miles. Schneider said it uses nearly 100 eCascadia trucks to haul goods including PepsiCo's Frito-Lay products.
Daimler Truck North America said the eCascadia is used in more than 55 separate companies' fleets.
To be sure, Tesla has its own fleet of close to 100 Semi trucks that are traveling between its factories in Fremont, California and Sparks, Tesla executive Lars Moravy said on reality show Jay Leno's Garage in December.
In addition, logistics provider Martin Brower has said on its website that it used two Tesla Semis to make deliveries to its restaurant customers earlier this year, as part of a pilot. It did not respond to additional requests for comment.
In Tesla's quarterly earnings call on Jan. 24 Andrew Baglino, an executive who has since left the company, said Tesla recently began expanding its plant in Nevada to manufacture the Semi. Musk said in March that it would "make sense to also build the Semi in Europe" at the company's factory outside of Berlin, according to local news reports.
Pepsi Chief Sustainability Officer Jim Andrew said in a recent interview with Reuters that PepsiCo was working on building out the infrastructure to support an electric fleet, including employees who can service the vehicles and power grids strong enough to charge them.
"You're talking about a system," Andrew said. "All of those things have to happen before we can electrify the fleet."
A PepsiCo spokesperson said the company would be deploying more electric vehicles from a range of manufactures as they are available.
PepsiCo investor Green Century Capital Management has reservations about the company's time table for rolling out the Semis.
"The fact they're running behind schedule is concerning," said Andrea Ranger, a shareholder advocate at Green Century. The investment firm has followed PepsiCo's use of electric vehicles and is pushing the company to consider its impacts on biodiversity at its annual meeting in May.
In Europe, ASKO Norway is using electric semis from Scania and Volvo while it waits for Tesla, according to Sollie. He said Tesla told him that Tesla is prioritizing Semi deliveries to Pepsi and other U.S. customers.
