As with conventional gasoline-powered vehicles, the consumer market for electric vehicles (EVs) gets the glamour, but fleets can be where real money is made. While the styling of the latest Tesla or the zero-to-60-miles-per-hour rating of the new BMW i3 make headlines, the economic drivers can be stronger for transit buses and garbage trucks. As a result, EVs of all varieties are becoming a growing presence in U.S. fleets, as operators see advantages that go beyond the obvious fuel savings.
Understanding the fleet market
In general, fleets are big customers for vehicle makers. Almost 15 percent of 2015’s 17.5 million light-duty vehicle sales in the United States were to fleet purchasers, according to TrueCar, a Santa Monica, Calif.-based vehicle research and sales-assistance company. This translates into approximately 1.2 million new fleet vehicles purchased last year.
However, light-duty vehicles (essentially, passenger cars) are just one segment of the fleet market, which encompasses a broad range of offerings. Light- and heavy-duty trucks, city buses and even industrial forklifts all fit into this category.
“Fleet purchases will be a significant part of the EV market,” said Dr. Peter Harrop, chairman of market research firm IDTechEx Ltd., London, and co-author of the recently released report, “Industrial and Commercial Electric Vehicles on Land 2016–2026.”
He said commercial and industrial vehicles now represent 60 percent of the total EV market, in terms of sales dollars, and fleets are the major buyers in these two sectors.
“That’s where the big profits are,” Harrop said.
Hybrid EVs, such as the original Toyota Prius, have been a part of many municipal fleets for years. Because these vehicles don’t need to plug in to recharge, fleet owners have enjoyed significantly reduced fuel costs without worrying about travel range or the need for added infrastructure.
Newer plug-in hybrid EVs (PHEVs), such as the Chevy Volt, which can fall back on gasoline for power, and pure-play battery EVs (BEVs), such as the Nissan Leaf and all of Tesla’s offerings, have been a harder sell. Again, governmental agencies have helped give these newer markets a boost.
“The early adopters have been the municipalities, the cities and the state governments, probably because of the federal and state mandates [for greener government operations and zero-emission fleets],” said Alexander Barton, director of accreditation development with the National Association of Fleet Administrators (NAFA). He also oversees NAFA’s Sustainable Fleet accreditation program.
It helped that many of these early EV fleet purchasers were already familiar with alternative fuels.
“The traditional fleet manager/operator is operating gas and compressed natural gas [CNG] fleets, and they’ve been doing that for very many years,” said Michael Jones, a sales vice president with charging equipment and services leader ChargePoint, Campbell, Calif.
However, this isn’t to say that these fleet pros didn’t face a learning curve.
“The first thing was finding out how disruptive this was,” Jones said, noting the lack of the kind of fueling infrastructure fleets had become used to with gasoline, diesel and CNG. “As they met all those challenges, now they’re more familiar; they’ve become the vanguard in the market, leading the way.”
ChargePoint recently expanded its offerings with a fleet-dedicated charging station and a card that fleet drivers can use to pay to power up at a large number of commercial charging stations on the road. Similar to products such as the WEX Fleet Card, for operators of conventional gasoline-powered vehicles, stations across ChargePoint’s extensive network accept these cards as well as those of other networks with whom ChargePoint has established agreements.
With fueling issues becoming less of a concern, EV fleet operators who have been working with the vehicles for several years are beginning to recognize some significant operational advantages with their electric cars and trucks. Fleets can represent a sweet spot for capturing the maintenance and fuel-cost savings EVs can offer. According to FleetCarma, a Waterloo, Ontario-based consulting firm specializing in EV fleet deployment, the average daily distance traveled by a baseline fleet vehicle is just 12.4 miles, well within the range limits of even BEVs.
As these high-use vehicles rack up mileage, they benefit from significantly reduced maintenance requirements. The need to change oil and transmission fluid disappears, along with any emission-equipment upkeep because there are no mufflers or tailpipes to replace.
As these high-use vehicles rack up mileage, they benefit from significantly reduced maintenance requirements. The need to change oil and transmission fluid disappears, along with any emission-equipment upkeep because there are no mufflers or tailpipes to replace. Also, an EV’s regenerative brakes see significantly less wear and tear, rarely requiring replacement. Add in significantly lower fuel costs—even in today’s era of low gasoline prices—and an owner’s total cost of ownership can drop quickly.
“The majority of the time, they have a ‘hive,’ and they’re able to do their job and come back to the hive,” Barton said, using an industry term for a terminal or hub. “For fleets, it works very well. They don’t go too far, they know their routes, they know their territories and range for each application.”
Playing with the big boys
One EV fleet application seeing rapid growth is transit buses. In fact, the world’s largest EV manufacturer isn’t Tesla, as one might think, but Chinese manufacturer BYD, which has benefited from that country’s push to reduce airborne pollutants. Though little known in the United States, it has a manufacturing facility in Lancaster, Calif. The Shenzhen-based company has a long history as an electric car and bus manufacturer. It offers buyers a proprietary iron-phosphate battery that can travel 155 miles or more between charges.
Warren Buffett’s Berkshire Hathaway was so impressed with the company that its 9.9 percent ownership stake makes it the company’s biggest shareholder.
“They’re actually facing a billion dollars in orders,” Harrop said. “The small bus companies are going to have to pay attention.”
BYD recently won an 18-bus order from Albuquerque (N.M.) Rapid Transit. The 60-foot articulated vehicles are estimated to cost the city $24 million, which is $7 million more than traditional diesel versions. However, operational savings, including reduced fuel and maintenance, are anticipated to reach $21 million over their 12-year lifespan.
The bus market is important to developing electric heavy-duty trucks because much of the technology is transferable. Barton said this market is potentially more important to reducing vehicle-related pollution—along with operator fuel costs—than with light-duty passenger cars. For comparison, he referred to the Chevy Cruze, a traditional gasoline automobile built on the same platform as the company’s Volt BEV.
“The Cruze is already a pretty efficient vehicle,” Barton said. “But if you take a garbage truck that gets 2–5 mpg, and you make that fully electric, that’s where you see a real impact if you could introduce hybrid or full-electric technology there.”
Mack Trucks, based in Greensboro, N.C., has seen this opportunity and exhibited a prototype PHEV garbage truck at a waste-industry trade show in June. Similar to the Volt, the truck is powered by an electric battery pack but also features an onboard turbine engine, fueled by natural gas or diesel, that can keep the batteries charged to extend the truck’s driving range.
The powertrain was developed by Wrightspeed in San Jose, Calif., a company started by Tesla co-founder Ian Wright. Like most passenger EVs, the truck also features regenerative braking, which recharges batteries with every stop.
As the EV market grows, many people are saying charger-connected vehicles could become a resource for electric utilities. When needed, utilities could draw on the aggregated capacity stored in hundreds or thousands of distributed EV batteries.
Though Jones sees the potential for EVs to assist in smaller microgrids, he doubts that vehicle-to-grid applications will become a reality anytime soon, even in fleet applications where multiple vehicles are connected in a centralized depot. At utility scale, he doesn’t see such transactions making sense.
“When you model, in general, the cost savings, it looks good on paper,” he said. “But, in reality, you’re trying to take a bunch of small batteries that you don’t know where they’re at and trying to aggregate all that. I just don’t see the vehicle-to-grid market being more important to the utilities than just large, stationary storage.”
Utilities might still be interested in integrated communications between vehicles and the connected grid, particularly at the fleet level, where managing the charging process could be a critical step in ensuring the increasing number and power of EV charging stations doesn’t negatively impact grid operations.
This challenge only grows as fleets expand their EV ranks to include heavy-duty buses and trucks, taxis and other commercial and industrial vehicles. For example, New York, Chicago, London and Amsterdam are looking to expand the ranks of electric-powered cabs, especially those serving airports in their cities. Airport transit fleets hope to make that move, too, because the heavy concentration of vehicle traffic, with accompanying emissions, makes airports areas of particular concern for clean-air advocates. However, an impressive charging infrastructure will be required to keep these quick-turnaround vehicles up and running.
“The next big sector is the taxi and bus fleet, and the next big challenge we’re going to have to solve is organizing all these parties,” Jones said.
He estimated the load for a centralized, on-site charging facility to serve an airport could be enormous—up to 25 times that of a large shopping mall.
“It will require some heavy industrial planning,” he said.
Yet, even with these challenges, Jones is bullish on the future of EVs in general and on the importance of fleets to familiarizing the broader public to the advantages these vehicles can offer, beyond the environmental benefits. Fleet vehicles have become emissaries of sorts, showcasing the ability of EVs to address a broad range of needs.
“It’s the ability to see these vehicles in action and [hear] the feedback from the people using the cars,” he said. “When people get into an electric vehicle, they don’t want to go back.”