BANBURY, England (Reuters) – Van and electric bus maker Arrival is battling the global pandemic like other UK companies, but not for lack of business.
The arrival is receiving four to five times the number of inquiries from potential customers compared to a year ago, as increased e-commerce during the pandemic and changes in emissions regulations fueled demand, said President Avinash Rugoobur.
“Around the world, the mindset has changed and people understand that the future is electric,” said Rugoobur. “So now it’s a question of how are we going to get there?”
At Arrival’s R&D center in Banbury, northwest of London, executives at a large British retail group waited patiently to visit the startup’s test van, which is due to start production in 2022.
An increase in interest in Arrival followed Britain’s call in November to ban new fossil fuel vehicles by 2030, and was further aided by the declared interest of new US President Joe Biden in electrification.
The more restrictive CO2 emissions targets in Europe and China have been combined with improved battery technology to provide greater autonomy at lower costs, giving commercial electric vehicles (EVs) their moment in the sun after years of waiting.
“People are talking about an inflection 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, which has ordered up to 10,000 Arrival vans and has a stake in startup.
The investor’s feverish interest in finding the next Tesla Inc and bringing it to the market through special purpose acquisition companies (SPACs) included commercial EV startups like Canoo Inc and Arrival, which will be made public later this month through of a merger with CIIG Merger Corp.
In addition, the coronavirus pandemic has increased the need for vans to deliver goods to consumers at home.
Startups like Rivian, Volta Trucks and traditional manufacturers Daimler AG, Ford Motor Co and General Motors Co have models launched or under development. Rivian will start making vans for Amazon.com Inc later this year.
Since batteries are still expensive, commercial EVs have a higher label price than diesel or gasoline equivalents – a difficult sell for many cost-conscious companies.
But thanks to lightweight materials and battery packs tailored to customers’ reach needs, Rugoobur da Arrival said it is about to change – in some intervals its vans will cost less than the equivalent of diesel.
“If Arrival can manufacture these vehicles at the price equivalent to a diesel van, the total cost of ownership is so favorable that it becomes a competitive advantage,” said David Wyatt, an analyst at research firm IDTechEx.
‘IT WILL HAPPEN FAST’
Fleet operators also face increasing scrutiny of sustainability from retail customers, who feel the same pressure from consumers, said Volta Trucks chief executive Rob Fowler.
“If you look at the logistics operators, they are in the middle and under pressure from all sides,” he said.
Volta Trucks, based in Stockholm, which also operates in the United Kingdom, is developing a 16-ton electric truck, expected to be produced in 2022, for urban cargo distribution routes. The batteries are heavy, so the Volta Zero’s body is made of a lightweight hemp-based compound and its shorter routes through the city center require fewer battery cells.
Volta Trucks has a $ 260 million order backlog and its largest public order so far is 1,000 trucks from the French refrigerated truck company Petit Forestier.
Higher initial costs, challenges associated with loading multiple vehicles simultaneously, and a scarcity of available models mean that there are still relatively few commercial EVs in service.
But Simon Webber, portfolio manager at Schroders, which has about $ 650 billion in assets under management, said that more EVs coming on the market and falling battery costs will change that.
“It will happen quickly,” said Webber. “As the average lifespan of these vehicles is shorter, they turn faster than passenger vehicles and will electrify faster.”
Leading energy consultancy Wood Mackenzie said the commercial EV market will grow from a low base today to global sales of 3 million units in 2025 and 9 million in 2030, led by buses and light trucks.
Based on conversations with manufacturers, “we see commercial electric vehicles coming big, big,” said Tom Jensen, CEO of battery manufacturer FREYR, which is going public through a merger with SPAC, Alussa Energy Acquisition Corp .
‘EVEN MORE EXPENSIVE’
EV manufacturers say that while commercial EVs have a higher label price, their “total cost of ownership” is lower over their lifetime, as electricity is cheaper than diesel and electric motors require less frequent repairs due to fewer moving parts.
The British arm of the DPD package delivery company, a unit of the French La Poste, was one of the first to adopt and its 732 EVs represent almost 10% of its fleet – most of them Nissan Motor Co Ltd’s e-NV200 vans or vans Volkswagen eTGE Unit AG MAN.
In 2020, the pandemic drove DPD volumes to a daily record of 2 million packages during the peak holiday season and the company will buy another 500 electric trucks in 2021.
Olly Craughan, head of corporate social responsibility at DPD UK, said a Mercedes-Benz Sprinter diesel unit costs about £ 25,000 ($ 34,572), but an electric version costs up to £ 45,000.
“It’s still more expensive, but the gap is narrowing,” said Craughan. “If you can operate them for longer than diesel vehicles, this is where you will get the most return.”
DPD will test a Volta Zero later this year and has been talking regularly with Arrival, Craughan said.
In 2025, battery prices are expected to drop enough to give EV price parity with fossil fuel vehicles.
But Arrival’s Rugoobur said some of the startup’s production models will already outperform diesel engine prices – aided by a lightweight, sturdy thermoplastic compound body that compensates for heavy batteries – and includes basic self-steering features to reduce accidents costly in packaging warehouses.
“If we can reduce that price to an acceptable level where you can scale it, it will allow us to make bigger commitments like Arrival,” said Wake of UPS.
Reporting by Nick Carey in Banbury, England; Additional reporting by Kate Abnett in London; Editing by Ben Klayman and Matthew Lewis