The Business Times

Picture brightens for commercial EVs on rising demand from delivery customers

Soaring e-commerce during the pandemic and changing emissions regulations drive interest

Published Fri, Mar 12, 2021 · 05:50 AM

Banbury, England

ELECTRIC van and bus maker Arrival is wrestling with the global pandemic like other UK firms, but not because of a lack of business.

Arrival is fielding four to five times the number of queries from potential customers compared with a year ago as soaring e-commerce during the pandemic and changing emissions regulations have fuelled demand, said president Avinash Rugoobur. "Worldwide, the mindset has shifted and people understand the future is electric," he added. "So now it's a question of how do we get there?"

At Arrival's R&D centre in Banbury, northwest of London, executives from a major British retail group patiently waited to tour the startup's test van, due to start production in 2022. A spike in interest in Arrival followed Britain's call in November for a ban on new fossil-fuel vehicles by 2030, and was further helped by new US President Joe Biden's stated interest in electrification.

Tightening CO2 emissions targets in Europe and China have combined with improving battery technology to provide greater range at lower costs, giving commercial electric vehicles (EVs) their moment in the sun after years of waiting. "People talk about a tipping point for commercial EVs, but I think we're already there," said Luke Wake, vice-president of maintenance and engineering at United Parcel Service Inc (UPS), which has ordered up to 10,000 vans from Arrival and owns a stake in the startup.

Feverish investor interest in finding the next Tesla Inc and bringing them to market via special-purpose acquisition companies (SPACs) has included commercial EV startups like Canoo Inc and Arrival, which will go public later this month via a merger with CIIG Merger Corp.

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Also, the coronavirus pandemic has boosted the need for vans to deliver goods to consumers at home.

As batteries are still expensive, commercial EVs have a higher sticker price than diesel or petrol equivalents - a hard sell for many cost-conscious companies. But thanks to lightweight materials and tailoring battery packs to customers' range needs, Arrival's Mr Rugoobur said that is about to change - at some ranges its vans will cost less than a diesel equivalent.

"If Arrival can manufacture those vehicles at the equivalent price of a diesel van, the total cost of ownership is so heavily in their favour it becomes a competitive advantage," said David Wyatt, an analyst at research firm IDTechEx.

Fleet operators also face increasing scrutiny over sustainability from retail customers, who feel the same pressure from consumers, said Volta Trucks chief executive Rob Fowler. "If you look at logistics operators, they're in the middle and under pressure from all sides," he added.

Stockholm-based Volta Trucks, which also operates in the UK, is developing a 16-tonne electric truck, due for production in 2022, for urban freight distribution routes. Batteries are heavy, so the Volta Zero's body is made of a light hemp-based composite and its shorter inner-city routes require fewer battery cells. Volta Trucks has an order book of US$260 million and its biggest public order to date is for 1,000 trucks from French refrigerated truck firm Petit Forestier.

Higher upfront costs, challenges associated with charging multiple vehicles simultaneously and a paucity of available models mean there are still relatively few commercial EVs in service.

But Simon Webber, a portfolio manager at Schroders, said more EVs coming to market and falling battery costs will change that. "It's going to happen fast," Mr Webber added. "Because the average life of those vehicles is lower, they turn over faster than passenger vehicles, they will electrify faster."

Leading energy consultancy Wood Mackenzie said the commercial EV market will mushroom from a low base today to global sales of three million units by 2025 and nine million by 2030, led by buses and light trucks.

EV makers say while commercial EVs have a higher sticker price, over their lifetime their "total cost of ownership" is lower as electricity is cheaper than diesel and electric motors require less frequent repairs due to having fewer moving parts.

By 2025, battery prices are expected to fall enough to give EVs price-parity with fossil-fuel vehicles.

But Arrival's Mr Rugoobur said some of the startup's production models will already beat diesels on price and includes basic self-driving features to cut down on costly accidents at package depots.

"If we can get that price point down to an acceptable level where you can scale it, it allows us to make bigger commitments like the one with Arrival," UPS's Mr Wake said. REUTERS

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