Plug-in vehicle industry needs fleet sales
What will it take to speed the process of plug-in vehicle proliferation?
Aside from consumer acceptance in the long run, it will require adoption by fleets in the near term, say electric vehicle industry stakeholders.
This was the gist of a recent Reuters report by Maria Gallucci of InsideClimateNews, in which a number of reasons were given for why fleets are diving into electrification while many consumers sit on the sidelines.
One major one is fleet operators will pay the extra upfront money required for plug-in vehicles because they focus on a vehicle’s overall operating costs and have the budget to do so.
“They’re interested in the total cost of ownership. That’s their number one priority,” said Sam Ori, policy director for the Electrification Coalition in Washington, D.C. “If you can show there is a value over six to seven years, you’ve got a foot in the door.”
In the course of a truck or car’s lifetime, savings on fuel and maintenance will be substantial, the report said.
The belief is that as plug-in vehicles are adopted, a cascade of benefits will follow.
“By fleets being first movers, they can help scale up the battery industry in a significant way in the early years of the electric vehicle industry,” Ori said.
Hopes are also riding on fleets “working out the kinks,” Reuters said, of yet-scarce recharging infrastructure, thus alleviating concerns held by all over range anxiety.
A synonym for the fleet counterpart to consumer “early adopters” is “first movers.”
One advantage first movers in charge of fleets have is the numbers to make a difference.
The Electrification Coalition said about 16 million government and corporate cars, trucks and vans in America are controlled by fleets. This is 6 percent of the nation’s 255 million light duty vehicles.
Fleet operators in charge of this sizable chunk are expected to buy more than 200,000 all-electric and plug-in hybrid vehicles between 2011 and 2015.
Many of these, further, will be trucks that cost much more per unit than a Fisker Karma.
Bottom-line thinking by fleet operators will justify their purchases, as their fuel savings alone is especially great, said Brian Wynne, president of the Electric Drive Transportation Association (EDTA).
On a cost-per-mile basis, “electricity is about a quarter of the cost of gas on today’s prices, and electricity prices can be pretty stable going forward,” Wynne said.
The EDTA estimates a plug-in car costs 2-3 cents per mile, versus five times this for a petrol vehicle.
What is more, industrial and commercial firms typically pay less for their electricity than do consumers in their homes, so their savings are further amplified.
Another perk fleet buyers can demand that individual consumers cannot is vehicles custom tailored for their requirements.
For example, if a truck has a given route to drive, its battery pack can be specified to be just enough and thus less expensive – not overkill and thus more expensive.
In contrast, someone contemplating a $32,000 Nissan Leaf and only needing to drive 12 miles per day could not very well expect Nissan to deliver a one-off version with a quarter-sized battery – and demand a hefty discount besides.
But such advantages are possible for larger clients placing bulk orders, with promise of more purchases to follow.
And if this were not enough, an additional value EVs and hybrids present fleets is reduced maintenance. Electric drivetrains particularly cost much less to upkeep, having no engines or conventional transmissions.
This advantage is further multiplied by the number of vehicles a fleet owns and the fact that these vehicles normally undergo heavy wear and tear in their lifetime.
“Past 60 to 70,000 miles, maintenance costs go through the roof,” said Ori. “For companies like FedEx,” he added, “that’s a huge expenditure over a 10-year lifespan.”
Some first movers
There are hundreds if not thousands of potential fleet customers poised to take advantage of hybrid and electric vehicles, from utilities, to delivery services to U.S., state and local government agencies.
Reuters observes that General Electric leads the list, as it has committed to buy 25,000 electric vehicles by 2015 for its global fleet management businesses comprised of around 65,000 customers.
By 2015, GE has said it will convert half of its 30,000-vehicle fleet to electric, and this year alone it will buy 12,000 GM electric vehicles, including the Chevrolet Volt.
Other lesser examples, among others, include FedEx and UPS.
As of August FedEx had 43 electric vans in four U.S. cities, plus London and Paris. Similarly UPS said last month it bought 100 all-electric vans to replace older diesels in California.
More examples could be given, but we will assume you get the point …
Consumer concerns persist
Lack of infrastructure is being overcome best in California, and here and there in the rest of the country thanks to public and private funding sources, but overall, range anxiety remains a worry.
Where possible, advocates have tried to minimize some of these concerns, stating they are essentially overblown.
“The average American drives 40 miles a day, therefore an electric vehicle that gets 100 miles of range should provide more than enough range,” Ori said. “Of course, consumers don’t buy vehicles that way. You want the vehicle to be able to meet your needs for all kinds of different things.”
The very fact that plug-in cars are a minority, and expected to remain so for years is proof that – right or wrong – many U.S. consumers remain unconvinced.
A common consumer objection is that plug-in vehicles are a step backwards compared to internally combusted vehicles. They cost more, and have limited range and slow recharging in a country where 170,000 gas stations and five-minute fill-ups are taken for granted.
Further, city dwellers, multi-unit apartment dwellers and people who otherwise do not have a garage to charge a plug-in vehicle naturally view their situation as a major impediment.
In contrast, fleets can get around these problems with ease, Reuters said. They typically have depots or parking areas where they install chargers and plug-in as long as it requires.
And since delivery trucks, for example, often traverse the same areas or routes daily, charging can be set up to accommodate them.
Jump starting the age of battery-powered vehicles
Fleets are being seen as the hopeful contender to augment creation of economies of scale.
Adding to the Reuters report, as was recently reported, battery companies are already poised to have excess production capacity.
But more will be needed, Reuters said.
Federal and state tax benefits for advanced manufacturing “will be critical to helping drive down the costs of technology,” said Simon Mui, a scientist with the National Resources Defense Council’s Air & Energy Program.
He also said federal incentives like tax credits or rebates must be included to sweeten the deal.
The Obama Administration has doled out $2.4 billion to 30 automakers, advanced battery manufacturers, as well as battery materials suppliers, and this is seen as at least helping.
Getting the nascent industry up to speed however will take more time, money, energy, and innovation.
Ori and the Electrification Coalition plus other advocates are in favor of more strategic government spending, including revisiting a set of bills tabled by Congress intended to further subsidize EVs in key markets. These are expected to be considered next session.
On toward progress
In sum, more private and government spending, new thinking, strategic alliances and innovation will be necessary if plug-in vehicles are to succeed, say some observers.
Individual consumers do represent the lion’s share of purchasing power, and they to will need to be catered to by automakers and stakeholders.
In the short term however, fleets are seen as lower hanging fruit, and better positioned to embrace the unique value proposition represented by plug-in vehicles.
Their money is expected to help enable growth by the electric vehicle industry in coming years as manufacturers clamor to make the deal clearly better for everyone else.