Major automakers as well as nascent startups are showing an increased focus on electrified commercial delivery vehicles, hoping to gain market share as corporate demand increases.
Last month, Reuters reported that General Motors is planning an electric van geared toward businesses, with production to start late next year at the company’s Detroit-Hamtramck plant. Meanwhile, startups Arrival and Rivian have contracts with United Parcel Service Inc. and Amazon.com, respectively, totaling more than $4 billion.
Analysts say the automakers are rushing into a space with notable differences from electrified passenger vehicles. Commercial vehicles provide an opportunity for higher margins and are driven less by customer preference in vehicle type. Companies, meanwhile, can realize cost savings of electric vehicles through less maintenance and fuel costs.
“Commercial vehicles are excellent opportunities in many ways for electrification,” said Jukka Kukkonen, chief EV educator with Shift2Electric, a Minnesota-based consulting and training firm. “You’d have to fund the transition to move to new technology, but then you could save a lot by not having to do ongoing maintenance for those and pay for gas. There’s a lot of opportunities in there.”
Delivery organizations like Amazon and UPS are suited for electric vehicles, Kukkonen added, with set routes and frequent usage.
As well, commercial vehicle manufacturers are taking notice and incorporating electric chassis into their future product plans. That includes The Shyft Group, formerly known as Spartan Motors Inc. with operations in Charlotte, Mich., which last year debuted a pair of electric commercial fleet vehicle concepts: a walk-in van developed with Motiv Power Systems and an electrified last-mile delivery vehicle aimed at the parcel-delivery market.
Charles Griffith, director of the Ann Arbor-based Ecology Center’s climate and energy program, said vehicle technology has advanced to the point where automakers are now close to rolling out commercial EV models. Ford Motor Co. plans to introduce an electric Transit van for the 2022 model year, while Rivian plans to start building 100,000 electric vans for Amazon next year.
GM spokesperson Katlynn Downey responded to questions about GM’s reported interest in electrified commercial vehicles with the following statement: “General Motors is committed to an all-electric future and is implementing a multi-segment, scalable EV strategy to get there. At this time, we do not have any announcements to make regarding electric commercial vehicles.”
Griffith agrees with the “reasons why this commercial vehicle space makes a lot of sense for electrification,” including fuel savings and maintenance.
“Electricity is cheaper than gasoline or diesel on an equivalency basis over a particular number of miles,” he said. “In the commercial vehicle space, it’s all about being able to deliver your products more cheaply.”
By comparison, the consumer vehicle market focuses on style, convenience and other vehicle attributes to cater to buyers’ preferences, Griffith added. Also, larger and more expensive vehicles have a higher profit margin for manufacturers.
Clean energy advocates also say the commercial vehicle space could be an avenue for more widespread adoption and reducing emissions from the transportation sector as passenger EV sales still represent a tiny fraction of overall vehicle sales.
“Commercial vehicles are responsible for a significant share of air pollution, especially for more traditional air pollutants because of the heavy reliance on diesel,” Griffith said. “When you start thinking of areas where trucks travel the most — more industrial areas of urban cities — you realize those trucks are the primary source of pollution in those neighborhoods. It’s very important from both an environmental and equity standpoint to focus on how we can improve the profile to clean up the emissions from this segment.”
Kukkonen said the U.S. overall remains a laggard in EV sales compared to China and Europe, where he said automakers are focusing their attention.
“They’re considering the U.S. as a sideshow right now,” he said. “Production numbers are still small, and there are a lot of moving parts.”
Charging infrastructure, corporate demand
Should commercial EVs take off, they likely will rely most often on company-owned charging stations as opposed to publicly available chargers. The vehicles are more likely to travel a planned route and return to a central depot.
“I think it’s easier for fleets to be able to provide the necessary charging infrastructure of those vehicles,” Griffith said, compared to passenger light-duty vehicles.
Additionally, charging the vehicles is more likely to take place overnight, which offers overall electric grid benefits for ratepayers by dispatching power during otherwise low-demand periods.
“I don’t really see charging infrastructure being any kind of a problem for (companies),” Kukkonen said. “They just have to do the installation at their facilities and figure out how they’re used.”
Large companies’ consideration of electrified fleets comes after corporate demand for clean energy has advanced the development of renewable energy. Kukkonen said the two issues go “hand in hand,” and if a company has publicly stated climate change goals, transportation is the logical next step after renewable energy.
Ceres, a Boston nonprofit focused on corporate sustainability, formed the Corporate Electric Vehicle Alliance earlier this year to help companies with fleet electrification. Members include Consumers Energy, AT&T, DHL and Amazon.
As part of its plan to spend Volkswagen settlement funds, the state Department of Environment, Great Lakes and Energy is planning phases that include funding for local freight vehicles and related charging infrastructure.
“There’s an opportunity for fleet managers, both public and private, to take advantage,” Griffith said. “This is a good opportunity to help jumpstart this market. It could help motivate some entity to explore the options they might not have otherwise.”