Electric Vehicles are Set to Shake Up the Medium Duty Market

This week I was honored to participate in the Commercial Vehicle Business Summit. A wide range of topics were discussed over the two days, but what was clear to me is the medium duty industry is serious about electrification, particularly on the lighter-GVW end of the spectrum. Consider these facts:

• The cost new of a battery electric (BEV) cargo van or stepvan is already comparable to its gas or diesel counterpart.
• A number of BEV stepvan manufacturers (including major OEM’s) are building trucks that are either already in service or will be in the next two years, with commitments from the nation’s largest fleets.
• In the last 10 years, the number of fully-electric passenger vehicles on the road has increased from roughly 17,000 to well over 300,000. This expansion has encouraged the buildout of charging infrastructure, which benefits the commercial side of the industry.
• Tax incentives are making it feasible for fleets to add charging units to their physical operations.
• With most light-GVW delivery vehicles traveling less than 100 miles per day, range is not a major concern.

As with most clean energy initiatives, the government plays a big role in facilitating buildout. The Biden Administration plans to convert the nation’s fleet of 645,000 government vehicles to zero emissions (ZEV) over the next 10 years, many of which will be BEV’s. Part of this initiative is already underway with the US Postal Service, with its new contract with Oshkosh to replace its fleet with low-emissions delivery vehicles. California is also pushing the adoption of EV’s forward, with a graduated plan to eventually require all new trucks with a GVW over 8,500 to be ZEV “where feasible” by 2045. California is also providing an $85,000 voucher for the purchase of selected medium duty hybrids and EV’s (as well as $120,000 for Class 8 trucks). And of course the existing $7,500 credit for vehicles under 14,000 GVW is still in effect for OEM’s with less than 200,000 units built. Plans are under discussion to renew and expand this incentive.

Currently, the biggest cost associated with running a light-GVW EV is the lifespan of the battery pack. At this point, it looks like 8-10 years or 100,000-150,000 miles is the typical expected life. The savings from reduced fuel, service, and maintenance costs of an EV vs. an internal combustion engine (ICE) vehicle partially offsets this cost, and it is possible OEM’s will offer some type of warranty or assistance with battery replacement.

Bottom line: The cost-benefit equation for lighter-GVW vans and box trucks is already pretty compelling. I expect these segments to be substantially electrified 10 years from now, to the point where ICE vehicles will seem a bit obsolete.

For stats on EV and alternative fuel adoption, this site is a good place to start.