Light-duty electric vehicles (EV) offer the best opportunity for near-term growth within the U.S. commercial fleet sector, according to a new study by research firm Frost & Sullivan, because of all EV models, they offer the best fit in terms of life cycle cost and operational capability.
However, Frost & Sullivan also found that the opportunity for medium-duty EVs may expand over time if life cycle costs decline, their mileage range expands, and a national recharging infrastructure begins to take shape.
“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,” Sandeep Kar, global program manager-commercial vehicle research for Frost & Sullivan, told FleetOwner.
According to the firm’s EV study, “Strategic Analysis of the North American and European Electric Truck, Van and Bus Markets,” by 2016, some 64,817 Class 2-3 light-duty EVs should be sold, in North America predominantly (3.5 tons or less GVW) configured as parcel delivery vans, small shuttle buses, etc.
By contrast, only 26,635 medium-duty EVs (between 3.5 and 16 tons GVW) and 565 heavy-duty EVs (16 ton GVW or greater) are expected to be built and sold that same year.
Kar explained that 2016 may be the “inflection point” for commercial EV sales if purchase price, range, and life cycle cost demands are met. Right now, Frost & Sullivan’s research indicates EVs cost $10,000 more than comparable gasoline- or diesel-powered light-duty trucks primarily due to the batteries.
“The incremental cost is the biggest barrier for large scale EV adoption,” Kar noted. “Also, every 4 to 5 years you need to change the batteries, adding to the life cycle cost of the equipment.”
He added that the range of light-duty EVs averages around 90 kilometers (roughly 55 miles), with EVs requiring 6 to 8 hours of battery recharge time. To be truly practical, they must yield an average range of 300 km (roughly 186 miles) and take 15 to 20 minutes to fully recharge.
That being said, Kar stressed that light-duty EVs – especially vans – are now nearing a crucial 4-year return on investment (ROI) mark, in terms of the time it takes to generate cost savings from eliminating the cost of fuel and reduced maintenance to cover the incremental up-front cost of these vehicles.
“That cost of ownership is the crucial factor,” said Kar. “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 gasoline or diesel-powered walk-in van varies between 25 and 48 cents a mile. If EVs can deliver an eight to 10 cent per mile life cycle cost, that would hit the desired ROI target, Kar said.
That dovetails with the information EV manufacturers are getting from fleets currently using EVs.
“The biggest perceived barrier is still up-front capital costs [and] there are also some lingering concerns around infrastructure and service,” Bryan Hansel, CEO of Smith Electric Vehicles, told FleetOwner. “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.” Hansel added that a year ago, Smith received plenty of interest from fleets concerning its medium-duty EV truck model – the Newton -- but not a lot of action. “A year ago it felt like we were trying to pull the market forward. Now we have our customers pushing us,” he explained.
“I think the biggest reason is because awareness is growing and our customers understand the price savings inherent in switching from diesel to electric,” Hansel said. “The lesson from these tough economic times is that businesses are looking at alternative ways of cutting costs without cutting production. The Newton allows delivery-based businesses to do just that.”