As gasoline and diesel prices surpassed $4/gal. across the U.S. this spring, the natural assumption would be that sales of alternative-powered vehicles, especially those utilizing electricity for some or all of their power, would have risen as quickly as the fuel prices. Instead, more hurdles than ever before seem to be arising for all-electric, hybrid diesel- and gasoline-electric powered trucks, largely due to the still-high upfront costs for such vehicles.
Without the investment of deep-pocketed fleets like those operated by FedEx Corp., United Parcel Service, Coca-Cola, Frito-Lay, and many others, electrically powered trucks of either genre might find themselves struggling even more mightily for survival.
“Guys like FedEx and UPS can afford to be in that [electric] transportation arena,” says Darry Stuart, president of consulting firm DWS Fleet Management. “For fleets working on marginal budgets, all-electrics and hybrids are very difficult to pay for.” For example, Via Motor’s new extended range electric vehicle, or eREV, technology package is now being tested by telecommunications giant Verizon on gasoline-powered GMC Savana cargo vans. Via Motors CEO Kraig Higginson said during a recent press conference that this particular hybrid package provides up to 40 mi. of electric-only range power via the electricity stored in its lithium ion batteries. At the same time, it boosts fuel economy from an average 8 to 12 mpg in typical gasoline-only operation to nearly 100 mpg in combined gasoline/electric mode. Yet the sticker price is daunting to say the least, with Via’s gasoline-electric hybrid van costing $79,000 compared to $25,900 for a gasoline-only version of the GMC Savana it’s based upon.
“That’s why a lot of fleets are still watching and waiting,” Stuart says. “The feeling is, let the big guys do the investing and testing; they can afford the money to do it. It’s not to say that allelectric and hybrid trucks don’t have their place. They certainly do. It’s that alternative [vehicle] technology costs a lot of money, and money is still tight for a lot of fleets.”
The impact of high diesel prices on a company’s bottom line continues to drive fleet interest in all-electric and hybrid truck technology. “It all comes down to fuel prices,” explains Sandeep Kar, global program manager-commercial vehicle research for global consulting firm Frost & Sullivan. “That’s the reason we believe North America will be the largest market for all-electric and hybrid trucks by 2020, because a 20% fluctuation in diesel fuel prices significantly messes up their daily operational ROI calculations.”
Frost & Sullivan believes that by 2020, 307,000 all-electric and hybrid trucks will be in operation around the world, with 132,000 in North America.
Light-duty all-electric vehicles (EV) offer the best opportunity for near-term growth within the U.S. commercial fleet sector, according to Frost & Sullivan research, since they offer the best fit in terms of lifecycle cost and operational capability. “In North America, trucks drive longer distances and there are far more rural areas, so this is why the light-duty EVs serving inner-urban delivery needs will really experience the most demand,” Kar says.
Inflection point In the firm’s most recent in-depth study on all-electric trucks, entitled “Strategic Analysis of the North American and European Electric Truck, Van and Bus Markets—by 2016,” Frost & Sullivan predicts some 64,817 Class 2-3 light-duty EVs will be sold in North America, predominantly 3.5 tons or less GVW models configured as parcel delivery vans, small shuttle buses, etc. By contrast, only 26,635 medium-duty EVs, trucks ranging from 3.5 to 16 tons GVW, and 565 heavy-duty EVs with GVWs exceeding 16 tons are expected to be built and sold that same year.
Kar explains that 2016 may be the “inflection point” for commercial EV sales if purchase price, range, and lifecycle cost demands are met, especially where batteries are concerned as the battery packs for EVs alone typically cost $10,000.
“The incremental cost is the biggest barrier for largescale EV adoption,” he says. “Also, every four to five years you need to change the batteries, adding significantly to the lifecycle cost of the equipment.”
He adds that the range of light-duty EVs averages 55 mi., with EVs requiring six to eight hours of battery recharge time. To be truly practical, they must yield an average range of 186 mi. and take 15 to 20 minutes to fully recharge, Kar notes. That being said, light-duty EVs, especially vans, are nearing a crucial four-year return-on-investment (ROI) mark due to savings generated through the elimination of both fuel and maintenance costs.
“That cost of ownership is the crucial factor,” Kar adds. “Our polling of fleet managers indicates 63% are focused on the total ownership cost, not the initial purchase price. So if the ROI can be fully realized, fleets would adopt these vehicles.”
For example, the average ownership cost for a gasolineor diesel-powered walk-in van varies between 25¢ and 48¢ a mile. If EVs can deliver an 8¢ to 10¢ per mile lifecycle cost, that would hit the desired ROI target, Kar points out. That dovetails with the information manufacturers are getting from fleets currently using EVs.
“The biggest perceived barrier is still upfront capital costs [and] there are also some lingering concerns around infrastructure and service,” explains Bryan Hansel, CEO of Smith Electric Vehicles, which builds the Smith Newton allelectric truck chassis. “That’s why we’re working every day…to dramatically shorten the time period it takes customers to receive a return on their initial investments.”
Frederick Smith, chairman, president & CEO of FedEx Corp. and co-chairman of the Energy Security Leadership Council, noted in a speech two years ago that transportation electrification is not an easy process, with challenges not limited to just lowering the cost and boosting the range of EVs.
“We cannot encourage the purchase of electric cars and then not have the generation capacity to power them, the transmission capacity to deliver that power to the consumers who need it, or the smart grid technology that will be required to handle those vehicles as we plug them in and out of the grid,” he said. “These are all crucial issues, and we need to work on all of them in sync. Without one, the others are useless. And without all three, this entire venture [transportation electrification] could put us at greater risk.”