Alastair has over 10 years’ experience leading research activities in scaled, high-growth industrial and technology markets. At Interact Analysis he is responsible for electric trucks and buses, autonomous trucks and off-highway electrification.
As we peer out of the gloom of the COVID-19 pandemic, have any lessons been learned? It would appear they have. Or maybe those lessons were on the table anyway. But the virus seems to have focussed our mind on climate change and clean-air issues – remember those blue skies and that birdsong during lockdowns as nature reclaimed its own? Coronavirus also changed our habits. Online shopping has become more the norm than the exception, and those habits are likely to stay. The net result – we are moving into the era of the electric delivery van. Electric cars have been around for some time, but the accelerator pedal is now on the floor in the EV sector as electric delivery vans come onstream in a market made fertile by the boom in eCommerce. A host of start-up companies such as Lion Electric, Arrival, Rivian, Hyliion, Proterra and Nikola have taken the stage. New players offering exciting new technologies. But how do they get on the market? And where does the finance come from?
Special Purpose Acquisition Companies opening the doors for exciting EV start-ups
There is huge investment in the electric van market right now. Special Purpose Acquisition Companies (SPACS) are bringing billions of dollars of capital into the market to support rapid growth. SPACS are publicly traded companies that come into being to raise funds to finance merger deals. In the electric utility and light-duty vehicle sector there have been six or seven such deals in the past 12 months alone. In November 2020, for example, UK EV manufacturer Arrival announced it will combine with CIIG Merger Corp, a SPAC set up by former Remington and Marvel CEO Peter Cuneo. The deal gives Arrival an enterprise value of $5.4 billion, with the combined company expected to raise a total of $660 million. Meanwhile, Lion Electric Co, a Quebec-based manufacturer of electric school buses, mass transit buses and medium and heavy-duty trucks, will go public through a merger with Northern Genesis Acquisition Corp, a Special Purpose Acquisition Company. Other companies such as EV Tech and Proterra are following suit. There is the danger of a ‘bubble’ forming as so many companies rush to raise funds – particularly as there are concerns that SPACs don’t have the same level of scrutiny as a more traditional IPO. However, there is substantial market potential in the light duty space and, if more fleets continue to electrify, the rush to go public may be justified. Putting SPACS aside, significant orders for electric vans have been made by the likes of Amazon, FedEx, and UPS. Amazon, ever the frontrunner in the online retail world where investment in new technology is concerned, have ordered 100,000 electric delivery vehicles from start-up Rivian. A $700m investment.
Significant driving forces behind the electric van market
Our research forecasts that the EV light commercial market in the United States, Europe and China is going to expand at a rate of 37% per year between 2020 and 2030. And it is this sort of projection that is encouraging such massive investments. But what factors are pushing the EV delivery van market?
Let’s start with the COVID effect. Research at the Martin Luther University of Halle-Wittenberg, in Germany, has concluded that high levels of air pollution may be one of the contributors to deaths from coronavirus, pointing to data that indicated that 78% of Covid-induced deaths occurred in the five regions registering the highest concentrations of NO2 in the air. NO2 can inflame the linings of the lungs and reduce immunity to lung infections. Hence the renewed emphasis on low-emission zones. Globally, the overwhelming majority of low emission zones are in Europe. London and Paris probably have the most ambitious plans and schemes – looking to ban all or significantly reduce the numbers of polluting vehicles in city centres. A recent analysis in Belgium concluded that emissions from vans in the EU have increased by more than 45% since 1990. The hugely increased volumes of online shopping caused by the pandemic and the proliferation of low-emission zones form a pincer movement from which the electric light commercial vehicle (e-LCV) is the only escape. According to research commissioned by Bloomberg, same day parcel delivery volumes in the United States will grow to 10 billion parcels by 2030 — a 23% annual growth rate since 2019. The pressure really is on.
Going green is good for a business’s image. Genuine altruism, the need for good PR, and pressure from customers who do not want their streets filled with fumes from delivery vans are all drivers of the electric van market. Amazon, for instance, has recognised that good customer relations is key. The company strives to ensure a seamless and swift customer experience from the point that an item is ordered to the point it is delivered… and returned, if necessary. The company has recognised that non-polluting delivery vans should form an integral part of that positive experience.
Capital expenditure has been an obstacle for companies considering investing in electric van fleets. Upfront costs for e-LCV’s are significantly higher than those for diesel vans. However, with increased production of electric vans, CapEx is going down, and though still higher, it is offset by lower fuel costs (electricity instead of diesel) and there are other advantages, such as lower maintenance costs and lower road taxes. In its launch materials for the e-NV200 van, Nissan claims that it can save operators up to £2,500 in fuel costs, with running costs as low as 2p per mile. They also claim that maintenance costs can be reduced by £575, based on servicing parts, and wear and tear. Our own research shows that electric vans could achieve total cost of ownership (TCO) parity with their diesel counterparts as early as 2021 in France, 2019 in Germany and 2025 in the USA. At the end of 2019, MAN claimed to have already achieved TCO parity for its e-TGE Van, though this was achieved through a significant upfront price cut. The jury may still be out on TCO, but we can expect overall parity to be achieved over the short term, and in the meantime, the other drivers outlined above will continue to push e-LCV roll-out.
A changing and exciting landscape
With the emergence of the SPAC, particularly in the second half of 2020, funding streams have opened up for a plethora of start-up companies offering exciting new technologies in the e-LCV market. Established companies are in on the game too, some offering novel packages. General Motors has launched its new brand, BrightDrop which offers clients’ companies “a complete suite of products and services for first to last-mile deliveries”. This includes the BrightDrop EP1 electric pallet for use in the warehouse or with the van out on delivery. The last mile logistics landscape is changing before our eyes.