Commercial Electric Vehicles: The Stealth Growth in EV Fleets

This article builds on my previous article that examined the contribution of fuel savings alone to make the business case for ride-sharing, and electric vehicle (EV) taxi fleets. In this article, we examine the quiet emergence, and stealth growth of EV fleets in a variety of segments. Unlike the spotlight on consumer electric vehicles, and […]

This article builds on my previous article that examined the contribution of fuel savings alone to make the business case for ride-sharing, and electric vehicle (EV) taxi fleets. In this article, we examine the quiet emergence, and stealth growth of EV fleets in a variety of segments. Unlike the spotlight on consumer electric vehicles, and the growth of Tesla, this story has been fairly quiet.

Core Economics: Fuel Savings & Contribution to Incremental Capex / ROI

Lets start with the summary of cost-per-mile economics from the end of the previous article. Note this analysis only considers fuel savings based upon ~$70/barrel Brent price, and not additional savings due to maintenance, depreciation etc. A CMU study by Sripad and Viswanathan mentions that the general operational expenses (for large Semi trucks) to be in the range of US$[0.76-0.81]/mi (estimates for smaller trucks will be updated soon in this article). In the case of Semi trucks, the differential of ~0.33c/mi we compute is consistent with Tesla’s estimates (adjusting for the fact that Brent oil prices are higher now vs their announcements) and the range of values in the CMU study. The two fundamental factors are energy efficiency (gallons/mile for fuel vehicle or kWh/mile for an EV), and energy cost ($/gallon for fuel vehicles vs cents/kWh for EVs).

A heavily used vehicle does 300 miles a day for 350 days or 100K+ miles/year. A lightly used LCV does 100 miles a day for 300-350 days or 30-35K miles/year. In special applications (eg: logistics warehouses, ports, airports, agriculture) specialized EVs may be involved in high power activities in addition to distance covered.

On a levelized basis, an average gasoline car (or light commercial vehicle, LCV) in USA would cost 12-15 cents / mile vs electric vehicle (EV) of 4.3-5.2 cents/mile in USA. This implies a cost per mile savings of 7-10 cents/mile or 58-66% in relative terms. Over 100K miles the fuel savings alone is $7000-$10000 per year (which could be realized in one year for a heavily used vehicle).

In Europe, an average gasoline car (or light commercial vehicle, LCV) in USA would cost 23-28 cents / mile vs electric vehicle (EV) of 5.8-6.9 cents/mile in Europe. This implies a cost per mile savings of 17-21 cents/mile or 75% in relative terms. Over 100K miles the fuel savings alone is $17,000-$21,000 per year (which could be realized in one year for a heavily used vehicle).

The fuel savings significantly contributes to the recovery of capex differential vs a fossil-fuel vehicle. For instance if a LCV (light commercial vehicle) costs $15,000 more compared to an equivalent diesel vehicle, this entire capex cost differential can be recovered in just one year of operation in Europe (for heavy usage). Note: this is an incremental contribution to other sources of gains (eg: subsidies, maintenance savings).

At a cost of $0.13 / kWh or $130 / MWh (average commercial electricity tariffs in USA), it implies a cost-per-mile of $0.043 – 0.052 / mile for an e-LCV or EV car. Annual charging energy demand for 100K miles/year is 25-40 MWh/year/vehicle. Annual charging cost is $3250 – 5200 / year/vehicle vs annual fuel cost is $12,000 – 15000. The economics becomes even better for a more efficient EV like the Tesla Model 3 which will deliver saving of 11-12 cents/mile or 73-80% over an ICE car in the USA. In Europe, 18.7-23.7 US cents/mile (vs a baseline of 23-28 cents/mile for ICE) or85% in percentage terms. The savings for 100K miles would be $19-24K, and five year savings of $95K-120K (in an environment of low interest rates, or time-value-of-money in Europe) and well above the full capital cost of a Tesla Model 3 (around $50-60K today in USA).

Annual charging energy demand for 100K miles/year is 25-40 MWh/year/vehicle. Annual charging cost is at €150/MWh (or 15 €-cents/kWh, based upon German rates) represents a charging cost of €3750 – 6000/year/vehicle. Compare this to annual fuel cost in Europe of €19.5K – 24.5K!

For heavy commercial vehicles (HCVs), eg: class 7/8 semi-trucks, or electric buses, the cost-per-mile savings in Europe are 68 cents/mile and in USA 33 cents/mile. {Note: some of the assumptions on fuel economy of diesel trucks made above may be more conservative if the fleet or vehicles of a particular company are newer.} For a HCV that does 100K miles (or equivalent considering power usage for specialist applications), this translates to $68,000 per year (Europe) and $33,000 per year (USA) contribution towards the differential in capex. On a more conservative basis, $50K/year (Europe/100K miles) and $25K/year (US/100 miles) is a reasonable assumption. This will contribute to the differential in capital prices and determine a payback period.

For example, the Tesla Semi truck costing $200,000 (500 mile version) is likely $60-70K costlier than an equivalent diesel counterpart, which will imply ~2 year payback of capex differential from just fuel savings at current fuel prices ($70 brent oil price) in USA; and a 1 year payback in Europe. A CMU study by Sripad and Viswanathansummarized graphically below estimates a payback between two and three years using a base case with lower gas prices (and considering more factors, and emphasizing battery replacement timeframes). Battery weight and lifetime are very important factors for trucks (and aerodynamic truck design, measured by drag coefficient). This is why ultrafast charging should be also managed carefully to be “safe” ultra-fast charging (to maximize battery life while charging fast); and why chemistries with higher energy densities and number of lifetime deep discharge charge cycles matter.

Source: S. Sripad, V. Vishwanath, Quantifying the Economic Case for Electric Semi-Trucks, preprint, 2018.

Oil, Gasoline, Diesel Price Trends

Since the paybacks are sensitive to oil and diesel price trends, the graphs below (from GlobalPetrolPrices.com and FuelsEurope.eu) give a current snapshot, as of Nov 2018.

Note that countries with relatively higher diesel prices and lower electricity prices (eg: Netherlands, France, Norway, Sweden) are even more attractive for Commercial EV switching than the median country in Europe.

Brent oil prices are around $70/barrel. European diesel prices are around 1.3 euros/litre ($5.6 / litre) and may trend down slightly in 2019 if oil prices continue to trend lower between $60-70/barrel Brent crude.

A 10% move in oil prices results in a 3-4% move in end use prices due to the tax / tariff structures. In the USA, there is a greater sensitivity in pump prices to oil prices.

Commercial electricity rates in Europe range from 6 euro c/kWh to 15 euro c/kWh (see graphic below; and UK is around 12-13 euro-cents/kWh). US commercial rates are $0.13/kWh, and lower in middle western states.

Fuel, vehicle payments and labor costs are a large fraction of the total operational costs in 2017 (USA data from ATRI, see graphic), & fuel costs have been rebounding (should continue to increase strongly (15-20%) into 2018 data).

Note that the fuel share of total opex tends to go up in the years with higher oil prices (and between 25-35% of total opex). See graphic: 2016/2017 had relatively lower oil prices compared to 2014/15 and recently in 2018. Repair and maintenance is ~10% opex. Total cost per mile reported in 2017 was $1.69/mile. Revenue per mile on spot market was around $2.2 to 2.5/mile in 2018. Obviously lowering vehicle-based cost-per-mile will increase profitability. [Sidebar: Driverless/autonomous or platooning technologies will impact the large line item on driver-based costs. Increasing utilization and yield via dynamic / on-demand freight brokering (ala Uber freight) enabled by mobile / AI and matching technologies is another lever for profitability. ]

EV Initiatives by Retailers, Consumer Goods & Beverages Companies

Leadership by retail players like IKEA (zero emissions in last mile delivery by 2025 in major cities), Walmart (Walmart Canada’s 2028 pledge to go 100% alternative powered vehicles) is a big factor. Large consumer goods & beverages suppliers like PepsiCo (large Tesla Semi pre-order of 100 trucks) and Anheuser-Busch (Order of 800 Nikola Hydrogen-Electric trucks and Tesla Electric Semis ) going electric in their commercial vehicles is a huge driver in addition to 3PL logistics companies strategies. Companies like PepsiCo (Eg: for FritoLay business) have been seeking ways of reducing fuel consumption and greenhouse gas emissions as part of their sustainability initiative for years; and in fact started adopting electric trucking as early as 2013!

Unilever is another consumer goods giant making a commitment for 100% electric vehicles by 2030, and was a founding member of EV100. If large shippers and retailers nudge their supply chains to go electric and green logistics, combined with compelling economics, it will accelerate the transition. The EV100 is a group of companies pledging to accelerate the transition to electric vehicles.

Last mile logistics is an especially attractive target for electrification – since the economics works today (contribution to capex recovery, ROI is fast), and it is a large fraction in absolute numbers of the total logistics fleets (see DHL numbers in the graphic: >47,000 vehicles (>90% of its total fleet) are last mile logistics vehicles!).

Last mile delivery logistics can be quite innovative: IKEA opened its India stores with solar on top of IKEA store roofs charging electric tuk-tuks (called “auto-rikshaws” in India) to have a zero-carbon delivery logistics solution! (not to mention a huge customer convenience and brand booster).

Electric Light Commercial Vehicle (LCV) Drivers and Adoption:

We saw that last mile logistics can be attractive target for electrification – these vehicles are also called “light commercial vehicles” (LCVs). Light commercial vehicles (LCVs) and HCVs that are intensively used will be the first sectors to electrify. LCVs come in different sizes and shapes: N1 (< 3500 kg or 3.5 ton), N2 (upto 12 ton), and N3 (> 12 ton). They are ubiquitous in last mile logistics and a fast growth segment in logistics; and account for 10-13% of new vehicle registrations (and not an insignificant sector). If you combine with the fact that these vehicles are intensively driven in city conditions, and growing due to e-commerce, the emissions impact and health impact on citizens is an important consideration.

There are over 25-30 million vans on the road in Europe alone, and about 60 vans per thousand inhabitants. Compared to this total potential, the early sales numbers of electric vans are still in a few thousands (~8000 in Europe per one report). The growth of last mile delivery in e-commerce, and combined brick/mortar + eCommerce (1 hour delivery), and omni-channel delivery will drive demand in this segment. Emissions regulations in city centres (low emission zones) and fleet level emission limits will be auxiliary contributors. As the figure above (for Netherlands) shows, the relative share of NOx and other emissions is due to a larger number of km driven by commercial vehicles, and lower emissions standards for these vehicles vs passenger cars.

The price of diesel and taxes on such vehicles will be the primary short term drivers to enable EV-switching; and on the technology side the cost reduction in batteries due to consumer EVs will bleed over to commercial EVs. The weight of payload is an important consideration, and therefore energy density improvements, and availability of fast DC top-up charging in many locations are as almost as important as price of the battery.

On the OEM side, though volumes are lower, it is starting to get interesting for auto makers. Nissan has been shipping the e-NV200 with a 40 kWh battery and 124 miles of range, 705 kg payload, two Euro pallet space, with bi-directional charging/discharging capability to participate in V2G markets. According to Nissan, multi-drop drivers currently using diesel vans meanwhile, will also benefit from savings on heavy wear items like starter motors and clutches (the e-NV200 has neither) and by not using fuel while ticking over. The price starts from £18,599 CVOTR (commercial vehicle on-the-road price, including government grant). As discussed earlier, the differential between this CVOTR CAPEX cost and the regular LCV cost can be covered within a year with fuel savings alone. Reviews are reasonably positive for the vehicle (except that driving range is a function of how your drive), and lease rates in UK are attractive as well. The van with 4.2 cu-m can be used for pure commercial load transport or people transport (eg: shuttle vehicle). Nissan also has launched a camper version of the van in Spain (graphic below).

Several cities including Hamburg, London, Paris are starting to impose restrictions and additional charges on non-Euro-6 compliant vans will soon face a daily £24 charge to operate in some parts of London. In response logistics companies like DPD are starting to create all-electric depots in central London.

German pioneer StreetScooter, associated with the RWTH Aachen (university) and logistics giant DHL has recently partnered with Ford to produce 3500 electric vans (larger size than the Nissan e-NV200) as shown in the adjacent graphic.

In USA, the company Workhorse has been partnering with UPS in adopting electric vehicle delivery trucks. UPS has placed an order of 1000 electric delivery trucks from Workhorse. UPS has also placed a smaller pilot order w/ UK pioneer Arrival in Paris and London. UPS currently has over 300 electric vehicles and nearly 700 hybrid electric vehicles on the road in Europe and the US.

As discussed earlier, though the pure fuel savings are lower and the business case takes longer for ROI compared to Europe, heavy usage fleets such as logistics players are seriously considering this option. The lower cost of capital in Europe and US also enables capex especially with the recent tax reform in the US that incents companies to bring back excess cash from around the world. The electricity prices are lower in the US compared to Europe, especially in the middle part of the country.

Fedex recently placed a 1000 van order with Chanje EV startup of delivery vans (in part through a leasing arrangement with Ryder). Ryder also recently placed an order of 500 vans with Chanje. The Chanje V8100 is designed to has an estimated range of 150 miles with 2,000 lbs of payload on a single charge; and their brochure mentions that the average trip size of a medium duty truck is 65 miles.

Logistics company Hermes is working with Daimler on an order for 1500 electric vans. Amazon logistics has placed (what would be an initial) order of 100 electric delivery truckseVitos from Mercedes Benz for its Bochum and Dusseldorf facilities. This is a small fraction, considering its recent order of 20K Sprinter vans from Mercedes for last mile logistics. UPS has a fleet of 119K vehicles, Fedex has over 60K vehicles, DHL over 50K vehicles in Europe alone. Note that with e-Commerce and omni-channel, and trends such as Uber-Eats, Amazon Prime Now/2 hour delivery, the consumer’s trip to the department store or restaurant is being substituted by a door-delivery to one’s home from a nearby store, — and this trend will mean the growth of last mile commercial delivery vehicles.

Penske truck leasing is preparing to go deeper into battery-electric trucks: its just a matter of time and economics according to the company. Penske and NFI Industries, a leading Port Dryage services provider, have announced acquisition of electric trucks from Daimler North America. NFI (National Freight) has also partnered w/ Volvo in their Volvo LIGHTS (Low Impact Green Heavy Transport Solutions) program. XPO Logistics, the #1 logistics company in the world, has also indicated its backing of electric trucks for its fleet from suppliers such as Tesla and Renault.

Electrified school buses are another emerging category. Efficient Drivetrains, Inc. (EDI), which recently announced a plan to be acquired by Cummins, has introduced its EDI PowerDrive 4000ev, suited for Type-A school buses. The Class 4 offering rounds out the company’s electric school bus solution portfolio for the North American market, which now includes Types C, D, and A. With a captive ridership of 26 million students, the number of vehicles in the nation’s school bus fleet includes almost half a million buses waiting to be transitioned to electric drivetrains. The graphic above shows eLion school buses made by Quebec based Lion bus, which is planning a manufacturing facility in California. The eLion is a Type C electric school bus manufactured in Quebec, uses a technology developed and funded in part by proceeds from the Quebec cap-and-trade program, which is linked with California’s cap-and-trade program.

Proterra and Thomas Built (a subsidiary of Daimler) have recently announced a new school bus for north america. The school bus sector is quietly heating up indeed!

A study by CE Delft says small vans are at parity right away (as of 2018). It does project a longer breakeven for bigger vans, due to larger battery capacity and costs and tax policies. The breakeven is a function of intensity of use relative to cost of battery; fuel savings can also be bigger on those vehicles as discussed earlier. The diesel tax exemptions for larger vans make the breakeven longer (this could change as EU regulators reexamine policies). With a well-sized battery pack (depending upon costs of battery vs payload size & range desired), affordable fast charging to boost productivity, reduce downtimes, and supportive policies, delivery vans of all sizes should be attractive for electrification in 2019-2020 time frame in Europe.

Special purpose electric trucks for municipal operations (eg: road cleaning) are also starting to appear on the road as shown in the graphic for cleaning autumn leaves in Berlin, Germany.

New vans registered in the EU cannot emit more than an average of 175 grams of CO2 per kilometre by 2017 (EC, DG Transport, 2017). For 2020, the target is 147 grams of CO2 per kilometre – 19% less than the 2012 average of 180.2 g CO2/km.

Tesla does not have a commercial van in its roadmap, but recently hinted it may like to collaborate with Daimler on their eSprinter van. Some of the other OEM’s offerings are covered in the next section.

Heavy Commercial Vehicles: Municipal Vehicles, Semi-Trucks et al

A wide variety of heavy commercial vehicles ply the roads today especially on long distance routes. We will look at municipal heavy vehicles (esp garbage trucks) and semi-trucks / class 7/8 trucks, and dryage trucks. We will take an updated look at buses in a future article.

US DOT puts trucks into classes by “Gross Vehicle Weight Rating” (GVWR) ranked from 1 to 8 (smallest to largest). GVWR refers to the maximum operating weight a truck can possibly carry while driving including the truck itself. If a truck’s GVWR is 10,000 pounds, that’s the most the manufacturer and government have certified the truck to possibly weigh with fuel, passengers, and cargo. every vehicle that has a GVWR over 10,001 pounds has to be identified with the name of the company and the US DOT Number. A quick view of truck classes is shown below (credit: Jalopnik), and another overview is here:

The heavy duty trucks comprise of commercial truck classes 7 and 8. The class is determined by the GVWR of the vehicle. Class 7 and 8 vehicles require that the driver has a Class B CDL (commercial driver’s license) to operate the vehicle.

Class 7 – This class of truck has a GVWR of 26,001 to 33,000 pounds (11,794 to 14,969 kg). Class 8 – This class of truck has a GVWR of greater than 33,001 pounds (14,969 kg), and includes all tractor trailers.

As cities are exercising leadership in electric vehicles to combat climate change, the cities with OEM manufacturing operations are adopting electric HCVs rapidly. For example, Gothenburg city has partnered with Volvo to adopt electric garbage trucks: beyond the direct fuel savings and maintenance, and emissions benefits in human habitats, the quiet running of these electric trucks in early morning / late night times of operations is important to avoid disturbing sleeping residents. A more pleasant driving experience helps attract drivers who are in short supply in the logistics industry.

A Volvo FL Electric class 7 truck is approximately 248 hp (2-6 50 kWh battery packs); and FE class 8 is 496 hp (4-6 batteries). With the full complement of six batteries, the FL Electric will offer a maximum range of up to 186 miles in ideal conditions, while the FE will offer a range of up to 125 miles. Each lithium-ion battery provides 50 kilowatt hours of energy and weighs 1,146 pounds (or 0.52 ton); 6 packs would weigh 3.12 ton, a non-trivial fraction of total vehicle weight, and affects payload weight. Another reason why battery energy density improvements will matter, in addition to affordable fast-charging infrastructure to manage the commercial tradeoffs. The first Volvo FL Electric trucks will enter regular operation with customers in Gothenburg, home to Volvo Trucks’ headquarters. The first Volvo FE Electric is a refuse truck that will begin operating in early 2019 in Hamburg, Germany

Daimler (Mercedes Benz), the leader in trucking in Europe, has announced multiple trucking products. In the smaller truck categories, Daimler offers the FUSO eCanter, a small electric truck meant for urban routes with a range of 100 kilometers (62 miles) and a load capacity up to three and a half tons, and a bigger all-electric eTruck, which has a 26 ton capacity, a 212 kWh battery pack, and ~125 miles of range. The company is launching a new unit called E-Mobility Group to consolidates its electric truck efforts. Freightliner, Daimler’s main truck company, is unveiling the eCascadia, a class 8 truck with a range of up to 250 miles. It also unveiled a smaller electric truck for “local distribution”, which consists of an electric version of the M2 106 (eM2 106) with 325 kWh for 480 hp, and 230 miles (370 km) range with fast charging options.

Scania is doing a pilot with Siemens in Germany with an overhead electric charging system (similar to electric rail, and smaller on-board batteries (eg: 15 kWh compared to 300+ kWh in comparable electric trucks from Tesla etc). The overhead electrical infrastructure accessible via pantographs which would make sense (even if economics worked out) for long freeway stretches only and not inner city roads. The tradeoffs of capital cost of electrical infrastructure in the entire freeway, hybrid drives vs larger batteries in trucks and few ultra fast charging stations would be interesting.

BMW has been testing electric trucks in its own logistics and manufacturing plants in the Munich region. The truck maker MAN has announced an eTruck program, but refers to it as a “concept” vehicle, expected to ramp up in 2020.

And of course, there is Tesla Semi, which comes in a 300 mile ($150K) or 500 mile ($180K) version, with a $20K reservation fee. Tesla announced security of power pricing at 7 c / kWh at its mega-charger stations, presumably enabled w/ solar + storage (which is substantially lower than that average 13 c/kWh in US or 15 c/kWh in Europe). A key open question is what will be the weight available for the payload vs the batteries (which in turn is a function of the battery energy density available and costs by the time of production in late 2019/2020). Based upon our earlier fuel and efficiency calculations (which are consistent with the 2 kWh/mile assumptions of Tesla), if the range and payload assumptions bear out, the 2 year payback of the incremental 50-80K capex over regular diesel trucks should be easily achievable, and even faster in Europe.

Cummins recently unveiled the PowerDrive, a suite of plug-in hybrid powertrain solutions spanning light, medium and heavy-duty applications. PowerDrive offers both parallel and series capabilities, replacing conventional transmission and switches in real time between two hybrid and two pure electric modes, optimizing the powertrain for the best fuel economy in any driving situation. It offers a 50-mile electric range, and will be offered via OEM partners’ PHEVs. Dryage trucks in ports and local delivery (class 7) are another segment addressed by Cummins.

In the long run, the combination of autonomous EV trucking (eg: the Volvo concept truck shown), and platooning will revolutionize logistics. But even the first step of electrification of fleets will bring huge benefits.

Summary:

Electrification is starting to emerge in commercial vehicles (LCVs and HCVs) and will rapidly proliferate over the coming years. The savings vs diesel is significant enabling 1-3 year paybacks depending upon local policies and costs. The challenges include the weight of the batteries vs the weight of payload, availability at scale and marketing.

Ultrafast (100s of kW to MW-scale), flexible & affordable charging infrastructure is increasingly available from companies like GE Power Conversion to enable an immediate tradeoff between range/battery weight and payload weight. Initially it can be used to “top up” a good fraction quickly during short breaks (or charge a large fleet at lower costs); and later with larger battery sizes & better energy density, ultrafast charging will enable rapid re-charge and re-use of the mobile asset 24 x 7 x 365.

The transition to electrification in cars will drive the customer awareness and battery economics that trigger manufacturer’s willingness to shift over production lines to electrified lines. But a critical mass of OEMs, and client segments are emerging and 2019-2020 will be a key transition period for the adoption of electrification. When logistics companies see the significant value reflect in bottom lines, they will push for rapid transition. A review of why electric trucks now (and a summary of the case is in the graphic above) was published by Trucking Info. As this article has overviewed, many of the concerns are being taken care of; so it is no longer a question of “IF” but only “WHEN” and “how quickly” to transition commercial fleets.

In addition to these more visible commercial vehicle segments, there are other specialist niche segments where electrification of transport is starting to emerge: Airport vehicles (towing planes, baggage carts, buses to transport people to planes etc), Ports (cranes, dryage trucks …), Logistics vehicles (forklifts, indoor mobile robotics), Mining and Agriculture. We will examine these niche segments, and an update on electric buses in a future article.

LinkedIn: Shivkumar Kalyanaraman (The author leads growth offerings in GE Power Conversion, including a new offering on Ultra Fast (100s KW to multi MW scale), Affordable, Scalable, Flexible Charging Infrastructure)

Receive our articles directly in your inbox.

Contribute? Write for EVTrader.