December 13, 2010

Why isn't trucking moving faster to electric vehicles?

Companies with large local delivery operations, like Staples, UPS and others, are moving to electric trucks, but they're doing so very slowly, despite clear savings:

"The trucks, which have a top speed of about 50 mph and can carry 16,000 pounds, cost about $30,000 more than a diesel, but Staples expects to recover that expense in 3.3 years because of the savings inherent in the electric models, Mr. Payette said.

Staples said the annual maintenance cost of a diesel delivery truck is about $2,700 in most years, including oil, transmission fluid, filters and belts. For an electric truck—which has no transmission and needs no fluids, filters or belts—the cost is about $250."

On the other hand, the volumes are very small:

"FedEx is using 19 all-electric vehicles in London, Paris and Los Angeles made by Modec of Great Britain and Navistar International Corp. FedEx Chief Executive Officer Fred Smith has been outspoken about his desire to see electric vehicles proliferate, in part to cut the U.S. dependence on imported oil."

Why so slowly?

One problem: achieving economies of scale. The manufacturer received a grant to help get past that hurdle:

"Bryan Hansel, Smith's CEO, said his company is on track to lower its costs enough to not raise prices after its federal grant is used up. "We don't think there is a need for ongoing support," Mr. Hansel said. "

In comparable production volumes, electric vehicles are much cheaper than ICE vehicles, both to manufacture (without the battery) and to maintain. The cost of the battery will be more than paid for with fuel savings, leaving the other savings as profit.

Note the short-term orientation, which makes any kind of innovation difficult:

"One impediment to wider adoption of electric trucks: few finance companies offer leases on them. That's because finance companies are unsure about how to value the lease "residual," a truck's worth after a few years of use. "

The leasing companies are risk-averse. The larger problem: the operating companies are risk-averse, which is why they're leasing in the first place:

"Many large companies, including Staples, prefer to lease trucks to avoid the large capital requirements of an outright purchase, Mr. Payette said."


Anonymous said...

Thanks for this post.

Is there a way to subscribe to your blog?

Nick G said...

Thanks for the support!

I guess I should look into RSS - I will try to do that soon.