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.

‘First Movers’

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.

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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.

Reuters, InsideClimateNews


  • Max Reid

    I saw a Fedex EV in Chicago. The most important thing to Electrification is establishing Charging Station Network. There should be a Charging Station every 10 miles, which means
    300 stations from East to West (in distance of 3,000 miles)
    times
    100 stations from North to South (in distance of 1,000 miles)
    = 30,000 stations.

    First they should get Level-2 Charger which costs just $2,000 and
    30,000 * $2,000 = $60,000,000 (just $60 Million)
    At the next level, they should also get Level-3 Charger which costs $60,000.

    30,000 * $60,000 = $1,800,000,000 (just $1.8 Billion) and thats peanuts compare to $1 billion spent on Foreign Oil every day.

    Infact Nissan’s Level 3 Charger costs just $13,000.

    After this, many fleets, individuals, Taxis will automatically start buying Plugin.

    Toyota has priced Prius Plugin @ $32,000 and it has 15 mile range.

    For companies like Fedex and USPS, just can just buy a EV with 100 mile range and during lunch time, they should be fast charged for another 100 miles for the afternoon service.

  • John K.

    1) “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.”

    CNG hybrids are the idea “bridge technology” for urban usage until battery tech improves. Honda could easily combine their Civic Hybrid and Civic Natural Gas technologies into one car, preferably w/Li ion.

    2) Hydraulic hybrids are very efficient for delivery truck. IIRC, UPS had a trial w/a few of them. Anyone know how that turned out? Again, combining it w/CNG seems like a quick & clean fix to hold us over for the next 5 years until battery tech improves.

    Too many on our side say “BEVs or bust!” Everyone else says, “What’s in it for me? How much can I save?” That’s why we remain a fringe….

    We’ve got to “sell” everyone else something that they’ll want to buy and sell it to them in terms that motivate them, not in terms that motivate us.

  • Max Reid

    Mr John K

    When a plugin drives on motor, it will be more smoother than luxury vehicle, so you should compare Prius PHV with vehcle that costs $35K – $40 K.

    Plugins are stopgap between IC engine & BEV. If my daily commute is 20 miles and by using Prius PHV, I can drive 75% of the distance on Electric, then why should I buy a BEV with a 100 mile range.

  • MrEnergyCzar

    We need real gas taxes like Europe, that will speed adoption…

    MrEnergyCzar

  • roro

    They need to make this happen, it’s just a smart move.Some common add-ons to plug in vehicles will be electric vehicle supply equipment (EVSE), chargers, and software.

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  • Somebody buy these things!
  • Jay Telford

    We already have electrical outlets across the country. They are in welding shops, construction yards, RV parks, campgrounds, motorhome parks, my barn… The question is will an auto maker create an on board charger that will allow the user to use any 240 volt outlet and select the charge rate based on the amp rating of that outlet. The 110 volt onboard cord in my car takes too long to charge. The charging stations are not designed to remove from the wall and carry in the car.

  • arthurarnold

    Today’s vehicles are graded on stricter and more precise parameters than ever before from weight to safety to durability and anywhere and everywhere in between. New materials have brought out new techniques for construction and vehicle design. Minneapolis Moving Company