Electric vehicles (EVs) have been a shiny object in the public consciousness for years now, especially as companies like Tesla have scaled their technology and helped improve affordability for consumers. And the logistics industry is buying in.
The U.S. Postal Service (USPS) is committing to spend $9.6 billion on 106,000 new trucks over the next five years, with 75 percent of them being EVs. And after 2026, the USPS plans to exclusively purchase EVs.
Shipping giant UPS already has committed to deploying 10,000 zero-emissions delivery vans from U.K.-based EV manufacturer Arrival by 2024, and may buy another 10,000 after that. FedEx has plans to transform its entire parcel pickup and delivery (PUD) fleet to all-electric, zero-tailpipe emissions by 2040, with the company receiving its first 150 electric delivery vehicles from General Motors’ last-mile division BrightDrop last year.
Retail giants like Amazon and Walmart are incorporating the automobiles into their vast U.S. distribution networks, as well. Already deploying more than 3,000 EVs from Rivian in the U.S., Amazon has committed to putting all 100,000 it ordered from the manufacturer on the road by 2030. Walmart is fortifying its last-mile operations with all-electric vehicles from Canoo, having ordered 4,500 last year, with an option to buy 10,000 more.
EVs crack local delivery well ahead of middle mile
Chris Caplice, the executive director of the Massachusetts Institute of Technology’s Center for Transportation & Logistics (CTL), told Sourcing Journal that the last mile and first mile of the delivery are likely to be the areas that see more rapid adoption in the near term due to the ease of conversion when compared to the middle mile, which often consists of long-haul trucking trips.
“Class 3 to Class 6 vehicles like vans are easier to convert to electric, and they tend to make trips and come home every night,” Caplice said. “The range is compatible to EVs, and the rhythm of recharging at night, kind of fits that pattern. Middle mile is harder. A battery that’s able to have a range of 400 to 500 miles, which is what you need to do in that middle mile, is just way too heavy. At this point, it takes too much off the payload. You’ll have to be stopping at multiple points to charge.”
Alex Scott, a professor of supply chain management at the University of Tennessee, Knoxville’s Haslam College of Business, agreed with the sentiment, noting that longer-range over-the-road trucking is unlikely to see widespread acceptance of EVs until charging issues and concerns about range are resolved.
Class 8 heavy duty trucks, which tend to dominate the middle mile, often come with larger and more complex tradeoffs that currently make the conversion to EV tougher, Scott said.
“With trucks, the batteries add weight, and trucks are generally governed and regulated based on gross vehicle weight. If you add weight due to the batteries, that reduces the load you can haul because it contributes to the gross vehicle weight,” Scott said. “So you have things like weight tradeoffs, and range tradeoffs they have to worry about, because if you then change regulations to add weight for electric trucks, well then guess what? Heavier trucks are generally less safe than lighter trucks.”
Heavy-duty trucks are more available, but not always affordable
According to Leilani Gonzalez, policy director of the Zero Emission Transportation Association (ZETA), there’s an uptick in model availability for medium- and heavy-duty trucks that will help this area further scale in the next five-to-eight years.
But perhaps the biggest barrier to the adoption of heavy-duty vehicles thus far, she says, is their affordability. Gonzalez noted that under these parameters, more businesses should be looking to enter partnerships similar to that of Amazon and Rivian or Frito Lay and Tesla.
“These brand partnerships really normalize the idea of heavy-duty vehicles in this space. You don’t look twice past your Class 7 delivery truck passing by you on the road, but I think if you saw a Class 7 last-mile delivery truck in your neighborhood you’d do a double take,” Gonzalez said. “Some of these larger corporations with fleet operations really are going to set the tone of how we can modify the transportation system.”
Whether companies take the partnership route or not, costs are always going to be a concern. And with that, there’s change management issues that traditionally go hand in hand with spending more on a product that will benefit supply chains in the long run.
“The real challenge is to find out why you want to do this, because it probably initially will cost more. How do you justify that? Talking to companies that have done it is the best way to do that, because then you understand how they overcame bureaucratic inertia to not do it,” said Caplice. “Sustainability plays a big role in getting this done now. But to be honest, with the price of fuel dropping almost in half over the past year, the argument goes away a little bit. Of course, price of fuel is not going to always stay down.”
How legislation is incentivizing EV deployment
More government legislation is opening up in the U.S. in an effort to further reduce emissions rates, leading to more incentive for EV production. Despite comprising only 4 percent of vehicles on the road, medium- and heavy-duty trucks account for 24 percent of all transportation greenhouse gas (GHG) emissions, according to the National Renewable Energy Laboratory.
Under the recently enacted Inflation Reduction Act, Congress has expanded tax credits to commercial buyers of EVs.
While President Biden wants EVs to account for 67 percent of new auto sales by 2032, California plans to ban the sale of gas-powered vehicles in 2035 in its move to non-combustion engines. Under the Biden administration’s Bipartisan Infrastructure Law, the federal government is investing $7.5 billion in EV charging, $10 billion in clean transportation and over $7 billion in EV battery components, critical minerals and materials.
ZETA, a coalition advocating for the full nationwide adoption of EVs by 2030, wants businesses of all sizes to gain the benefits of this automotive technology, but believes the results will come from work conducted after the investments are made.
“There’s continual work that needs to be done on the grid to modernize and to accommodate fleet depots. It’s not like the Bipartisan Infrastructure Law passed and there’s a magic wand that added a bunch of new chargers in gas stations across the country,” said Gonzalez. “People need to learn and be educated about the incentives in their states, as well as federally so that they can have a little bit of help to move forward in this transition space. We want to make sure that small businesses, up to the bigger guys, can learn about fleet transitions, and how to modernize their vehicles. Public policy is not one size fits all and we want to make sure that we have different opportunities available as we move forward.”
Autonomous vehicles still have ways to go
One area of electric vehicles that has had a tough time getting out of the trial stage is autonomous trucking, which has endured many regulatory hurdles and already put high-profile players in the space out of business.
To start the Covid-19 pandemic, it felt like the autonomous trucking industry was heading places, and like many other technology-driven sectors at the time—funding was extravagant.
In the first half of 2021, investors poured $5.6 billion into autonomous trucking companies such as TuSimple, Waymo, Aurora, Plus and Embark, thus eclipsing the $4.2 billion invested in 2020 and marking a record for the autonomous trucking space, according to a Pitchbook analysis.
The hype surrounding autonomous trucks and robotaxis came amid concerns that there simply aren’t enough drivers manning the current vehicles. The American Trucking Association (ATA) estimates that there is a shortage of 64,000 truck drivers in 2023, but the association projects that number will expand to a record-high shortage of 82,000 drivers in 2024.
Deployment of autonomous vehicles (AVs) would certainly benefit from a long-term cost standpoint. According to data from Jefferies, driver wages and benefits represent 44 percent of truck transit costs.
But for now, many of the trial runs of these technologies have been strictly along middle-mile routes like interstate highways in states with open space, flat terrain and fewer regulations, preventing wider adoption.
“Pilots always seem to take place in the southwest in areas like Arizona, maybe Texas, doing these test runs, but you really haven’t seen them make much headway elsewhere, where driving might be a little more difficult,” said Scott. “It’s one thing to get 99 percent of the way there with autonomous trucking, but if you don’t get that last percent, that’s pretty important, right? Because if it makes a mistake, and it gets an accident, that’s going to be a big problem.”
The real challenge is to find out why you want to do this, because it probably initially will cost more. How do you justify that?”Chris Caplice, Massachusetts Institute
of Technology’s Center for
Transportation & Logistics
TuSimple, which raised $1.35 billion when it went public in April 2021, has hit plenty of bumps in the road since the IPO, recently ending a deal with truck manufacturer partner Navistar to co-develop self-driving trucks by 2024. Total revenue in TuSimple’s third quarter was a paltry $2.7 million, illustrating the company’s (and industry’s) reliance on forward-looking metrics. In December, TuSimple restructured its business and laid off 350 employees, or 25 percent of total staff.
The company also was the subject of a federal investigation after a heavily publicized crash of one of its autonomous trucks last year. The investigation was closed in March.
Another autonomous trucking firm that went public in 2021, Embark Technology, is in the middle of an even worse time. In March, the company revealed it was cutting 70 percent of its workforce, or 230 employees, and shutting down two offices in Southern California and Houston.
The remaining 30 percent of employees that were retained are currently winding down the business, and as of April, the company is still evaluating strategic alternatives like liquidating its assets, restructuring the company or shutting down completely. In an SEC filing in November, Embark revealed it still hadn’t made any revenue off its technology.
Locomation, another autonomous trucking company, shuttered operations in February.
That’s not to say the industry is without hope. Select AV players remain on track to deploy autonomous trucks within the next year or two, including Aurora Innovation, Gatik and Torc Robotics.
Caplice still says its “only a matter of when and where” until autonomous vehicles have their time. In this case, the AVs will continue to largely remain confined to the middle mile, while EVs with drivers operating them will take care of the last mile.
“It’ll probably start really happening without a driver sitting there just watching, probably within five to 10 years,” Caplice said. “It’ll be point to point, just like intermodal, it will go ramp to ramp. Then a human will come in, and then do the last mile, and they might pick it up with an electric packet. At that point, you’re just doing drayage moves of 50 miles or less. You’re going see a combination of AV to EV handoffs, where the human is just driving locally.”
This article ran in Sourcing Journal’s Logistics report. To download the full report, click here.