Cummins Inc. (CMI) Surprises By Unveiling Electric Truck Before Tesla Inc (TSLA)
Global diesel engines and component products giant Cummins Inc (NYSE:CMI) made a surprising move as it revealed a concept model of its electric truck with a 100 miles of battery life and capacity to carry 44k pounds of payload. Revealing the truck before a highly anticipated electric semi-truck by Tesla Inc (NASDAQ:TSLA) next month can bring CMI, a lesser known name among auto-enthusiasts, into the limelight, making it a part of the most awaited overhaul of heavy-duty transportation industries like cargo-trucks and passenger buses. CMI and Tesla are two different types of companies by their end-markets;, however, this marks CMI’s entry for bringing Powertrains, where Tesla has a significant lead, for fully-electric heavy-duty truck into production, expected by 2020. But the electric truck that Tesla is expected to launch will have a range of 200–300 miles. CMI hired engineering firm Roush to help it design the truck, which has a diesel engine to increase its range to 300 miles, bringing its experience of manufacturing efficient natural gas and diesel engines into the picture. From a scale perspective, both of these trucks won’t solve the major pollution-problem caused by highway cargo trucks running on diesel engines. The current cost and weight dynamics of battery packs don’t support commercial use. Both of these trucks, whenever they come into production, will have delivery transport in cities as their primary market. The two companies will also target city buses and transit buses with their current distance ranges. More commercial use markets will be targeted when battery range improves. For a change, Tesla has been less vocal about its electric truck vision, but speculations are on for a commercial grade 600-900 mile range while keeping the cost and the weight of the battery under acceptable levels. Tesla has its famous Gigafactory in Nevada to supply cells for its batteries. CMI needs to source them to power its battery electronics system. Although Tesla and CMI have a common agenda here, their financial profiles are poles apart. CMI is a cash rich company with cash flows to the tune of $2 billion annually, while Tesla hasn’t been profitable yet. Tesla is a story stock and CMI is a dividend-paying cash cow which has adapted to changing market conditions in the commercial transport industry for decades. Interestingly, both have high institutional ownership as quality and growth are found to attract large institutional investments from passive long-term funds and growth investors, respectively. Tesla shares are up north of 60% for the year and CMI, with a 2.8% dividend yield, is up nearly 14% during the same time.