Delivery Companies and Electric CV start-ups: A combination accelerating commercial EV adoption

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This guest article by Jaymeen Raj talks about the recent trend in the logistics space where delivery companies are tying up with electric vehicle (EV) start-ups to aid product development and accelerate inclusion of e-mobility in commercial vehicle domain.

Introduction

Across the globe, there has been one area where collective efforts have been initiated with utmost importance and that is climate change. Businesses have started looking for sustainable solutions, communities have become more responsible towards the impact of their actions on the climate, and governments have taken measures to slow climate change as a priority deliverable.

Amidst collective measures towards making the planet more clean and green, one sector that has been under the scanner is transportation sector, that contributes up to 24% of Global CO2 emissions as reported by IEA. Governments have announced stringent emission targets and this has forced automakers in major economies to reconsider their growth strategy and bring in more focus on cleaner vehicles with battery and fuel cell technologies.

Along with governments’ push for electric vehicles, fleet operators, delivery and logistic companies have brought in a unique demand for electric vehicles. While these companies have added advantage of reducing their operating expenses, businesses are pushing for electrified fleet in order to meet their climate commitments.

Related: Overview of electric cargo 3Ws in India’s last mile delivery space

However, fleet operators and business along with the automakers face a challenge in designing a one-fits-all solution. Each application has a unique requirement in terms of range, payload capacity, usage dynamics and economics of the vehicle. Thus each solution requires a unique design and engineering solution to meet the client-checklist.

Conventional OEMs have been reluctant in introducing electric commercial vehicles.

The reasons many fleet operators have faced challenges in finding a suitable electric vehicles from traditional automakers are:

1. Emission targets are mainly focused on passenger vehicles and thus most of the OEMs have placed passenger cars and LCVs under electrification program and kept plans for commercial electric vehicles for the later years.

2. Volumes for a particular application based truck model or platform would not justify the developments and other associated fixed costs. This was highlighted when DHL mentioned that no conventional van makers it approached were interested in making a suitable, bespoke vehicle in relatively low quantities.

3. It is more difficult to achieve Price parity with ICE counterparts for medium and heavy duty electric vehicles as compared to mass market electric passenger vehicles.

Electric Vehicle start-ups come to the aid of fleet operators and logistic companies.

Since traditional business models don’t allow major automakers to design a customised solution for particular fleet operators, electric vehicle start-ups are rising to the occasion. There are few benefits that start-ups have which attracts the attention of fleet operators and logistics companies looking for cleaner alternatives to run their business.

1. Early stage companies start with a specific model. Customization of the components and systems according to the end application is easy and cost effective as start-ups are leaner and more agile.

2. Immediate requirement of vehicles and availability of financial resources at logistics companies’ end enables them to invest in the start-ups and direct product development according to their requirements.

The combination is gaining traction.

Commitments for sustainable business has made delivery and logistic companies aggressively look for electric alternatives, and many companies have already joined hands with start-ups. Below are some of the examples:

1. Amazon invested in Rivian and placed pre-orders for 100,000 delivery vehicles.

2. UPS placed pre-orders for 10,000 Arrival EVs.

3. Deutsche Post acquired StreetScooter and deployed electric vehicle fleet across cities.

Amazon & Rivian

Rivian – a relatively new but popular name in automotive industry made headlines when it showcased its pick-up truck back in 2018. The company started its operations in 2009 and got major back-up from Amazon and Ford. Ford was more interested in the pickup truck technology while Amazon had other plans when it led a $700 million funding round. 

With the platform based on a pick-up truck model, Rivian had two models in its initial design R1T pickup and the R1S SUV. But soon after Amazon added money in Rivian’s pocket, Jeff Bezoz revealed that Rivian will also have a third model in its portfolio – a commercial delivery van. And this was followed by the single largest Amazon order for 100,000 electric delivery vans. The first prototype is expected to hit the road later this year.

UPS & Arrival

Founded in 2015, Arrival has built its vehicle on a modular platform which helps produce custom solutions from its micro-factories. With most of the capabilities in-house, Arrival has been able to complete trials for many fleet operators to suit their unique requirements.

UPS had initially deployed Daimlers FUSO vehicles to electrify its fleet. Later it placed orders with Workhorse and Tesla but didn’t make a significant purchase. Arrival had already made trial vehicles for British Mail but it got a major push in Jan 2020 when UPS along with other investors pumped in money in the EV start-up.

Deutsche Post (DHL) & StreetScooter

StreetScooter, originated at Aachen University in 2010. The vehicles have been designed on a modular battery system that can hold modules between 30 and 90 kWh of energy, manifesting as vehicles with diverse range between 80 km and 200 km.

DHL had also committed to sustainable business practices and was looking for electric CV options. As established carmakers declined to make an electric vehicle to Deutsche Post’s specifications, the logistics giant decided to take matters in own hands and acquired StreetScooter in 2014. In late 2019, Deutsche Post DHL expanded its fleet of StreetScooters to 11,000 and sold a four-digit number to other fleets. However, this does not have a happy ending.

But are these arrangements sustainable?

One thing that such partnerships have done is – they helped uptake of electric commercial vehicles by fleet operators when major automakers are still thinking on their commercial EV strategy. But how long these partnership can reap benefit for both the stakeholders will be interesting to follow.

How will start-ups navigate the scope of scaling up beyond one customer and what happens when fleet operators are faced with more electric vehicle options once the competition picks up? Will the partnership still strive or it will lead to the same fate as Street-scooter?

StreetScooter was a market leader in the e-LCV segment and with the segment itself set to grow in Europe, the future looked promising. Deutsche Post acquired the start-up in 2014 and also set up two manufacturing facilities. But with increasing competition in the segment and StreetScooter unable to optimize operations, the losses were mounting up. Deutsche Post started exploring selling StreetScooter second half of 2020. In February 2020, the company announced that it would stop operations of StreetScooter.

Can India see a similar partnership?

India has seen the rise of start-ups that are offering electric vehicle solutions particularly for urban delivery. And many companies in India have also started deploying electric vehicles into their delivery fleet. With governments direction of making cities cleaner and giving mandate for fleet operators to turn part of their fleet into electric the adoption rate of electric vehicles is set to increase in the coming years. 

But the global trend of logistic and delivery companies investing in early stage start-ups to have a solution for specific application is missing in Indian scenario. So far India has not seen an investment by a commercial fleet operator in an electric vehicle start-up. However, India is witnessing the rise of logistics and delivery start-ups set to leverage technology and improve logistics efficiency.

Logistics players in the organized sector are adopting EVs because of multiple drivers such as lower operating costs, better fleet control and government policy support. But this adoption is limited to sub 1-ton category. If India wants to make its transportation sector more sustainable, the companies need have to look for electric vehicle options in the medium duty and heavy duty categories and this will call for strategic alliances and significant investments. 

Also Read: India’s first electric truck | Rhino 5536

Will the Indian OEMs learn from the global trend?

When DHL increased its production capacity to 5000 units per year and decided to replace its entire fleet of around 30,000 vans with Streetscooter, Volkswagen CEO Matthias Muller said. “I am annoyed beyond measure. I of course ask myself why Post did not talk to our VW commercial vehicles division about doing something similar. Let’s see if we can still get a foot in the door there”.

While investments in multiple EV platforms including commercial vehicles will still be a challenge for many Indian OEMs, it will be interesting to see how they support fleet electrification programs of delivery and logistics companies. 

Automotive market is evolving at an unprecedented rate and globally, this has led to many companies relying on JVs and consolidation. Fleet electrification is anticipated to be the next big change that can certainly see partnerships and close collaborations between logistic companies, EV start-ups and major automakers. 

About the Author

Jaymeen Raj works as Assistant Manager in Strategic Business Group at Bharat Forge Ltd. He has been tracking developments in EV industry both on the technology and market side. After completing Mechanical Engineering from Dharmsinh Desai University, he has completed Masters in Business Administration from IIM Indore. He is a committed to play his part in driving clean revolution in the auto industry. Views are personal.