Commercial Fleets and EVs: Key Factors for Making a Sound Economic Decision
Last week Duane Reade, perhaps the most recognized drugstore chain in New York, announced that it would add 10 all-electric delivery trucks from Smith Electric Vehicles to its fleet. In doing so, Duane Reade joins the growing list of companies that are taking a leadership position in fleet electrification—FedEx continues to build on its commitment to electrifying its fleet, and Frito-Lay, Staples, Coca-Cola and others continue to deploy cleaner, more fuel-efficient vehicles.
While deploying EVs can satisfy an organization’s sense of environmental responsibility and enhance its brand image among eco-conscious consumers, advances in battery technology and truck design have significantly improved the economics of fleet electrification….if fleet operators properly consider all of the factors associated with adding EVs to their armadas.
For instance, the most important factor is range. If the fleet vehicles travel approximately the same routes/distances each day, the operator can more easily determine the range required for each EV. This enables the organization to purchase EVs with an optimal battery pack size, effectively balancing per-mile savings and up-front cost. Our analysis shows that when an all-electric truck uses 75 percent of its available range five days per week, the breakeven point is now approaching five years.
Conversely, without this understanding, a fleet operator may end up purchasing EVs with larger battery systems offering unnecessary range capabilities, which translates into a higher initial cost. To that end, some electric truck manufacturers now offer different battery sizes in the same truck chassis, enabling commercial fleet operators to purchase EVs that meets their specific range requirements.
Another factor that organizations should take into account when considering EVs is charging infrastructure. The consistent operational patterns of most commercial fleets enable the straightforward deployment of charging infrastructure—vehicles typically park in the same location every night, which minimizes the costs and logistical details associated with implementing charging stations.
A third factor is the durability and longevity of the vehicles, which is determined in large part by the batteries that power them. Commercial fleet operators want their vehicles to last for ten or more years, so when considering EVs, some are budgeting for potential battery replacement costs. How long an EV battery lasts and how consistently it will perform over the course of its lifetime vary depending on the chemistry, in which case the battery warranty becomes important. For example, A123 typically develops and designs its EV batteries with the goal of achieving a 10 year life in the initial installation. It is prudent for fleet operators to evaluate the battery chemistry, supplier, warranty information and projected cost reductions over time to better predict longer-term maintenance cost of the vehicle.
While these factors help fleet managers determine the operating costs of EVs, there are also innovative business models being implemented by truck makers and battery suppliers (i.e., battery leasing) to reduce additional up-front cost of EVs and further enhance the economic benefits. For example, VIA Motors offers a leasing program for its lineup for extended-range electric vehicle to minimize the acquisition cost premium for an EV. In fact, VIA has a Life Cycle Savings Calculator that can help fleet operators determine their expected savings over the life of the vehicle lease by inputting the specifics of their requirements.
By taking these innovative economic models into consideration and developing a strong understanding of a fleet’s operational requirements, organizations can easily determine that investing in EVs today makes long-term fiscal sense. And as EVs rapidly advance towards business case parity with internal combustion vehicles, we expect to see plenty more companies follow Duane Reade’s example and start to electrify their fleets.