One of the biggest challenges for many fleets is trying to meet management-mandated CO2 emission reduction targets when it is difficult to source the vehicles needed to help achieve these sustainability goals.
“Unless this supply constraint is resolved, this will prove to be an impediment for companies in meeting their sustainability goals,” said one fleet manager who asked to remain unidentified.
In addition, the ongoing microchip shortage has temporarily halted production on many vehicle models, including EVs. “The push for green battery-electric vehicles (BEV) will take a backseat as fleet managers scramble to get any type of vehicle at this point,” said Peter Belloli, fleet manager for MilliporeSigma in Burlington, Mass.
This is also an issue confronting Canadian fleet managers. “One challenge is the need to meet sustainability targets knowing that ICE has a sunset in the not-so-far future. EVs are very hard to procure and we lack the infrastructure to proceed on a mass scale. Cost and range on EVs is still a huge concern and there is huge trepidation from employees to even commit to an EV,” said Hamid Dean, facilities leader & fleet manager for 3M Canada.
The pressure to electrify the fleet is especially strong for companies whose business models focus on providing sustainability products or services.
“Since we are an environmental company, we need to be more sustainable. We use mostly Class 2 to Class 8 trucks. With electrification in the immediate future, how do we incorporate these vehicles into our fleet? From working in this industry for over 40 years, my experience is to wait two to three years until the OEMs get it right. The people who buy right away are the ones who have all of the growing pain issues. Battery packs that weigh 700 lbs. now could weigh half that in five years with the way technology changes day to day,” said Bruce Ottogalli, transportation manager for Veolia North America in Hackensack, NJ.
How fleets prepare to transition to electric vehicles will vary by vocation and fleet segment. One segment struggling with electrification is the service industry.
“Is there a solution for the services industry where turnover is around 45% and technicians take vehicles home at night? How do we compensate electricity bills and do we install charging stations only to have to pull them six months down the road?” asked David McCauley, North America fleet manager for Service Experts Heating & Air Conditioning in Richardson, Texas.
Despite challenges, the fleet industry sees electrification as the future evolution of most of their fleet assets.
“Sustainability is not a matter of if but when. Our brands and future will depend on the success of these transitions,” said Ken Jack, vice president – fleet operations for Verizon. “Fleet managers will have to cut through the sound-bites and buzz to replace myths with deeper knowledge on the nitty-gritty of implementing EVs. We’ll all have to become more knowledgeable about the technical and regulatory issues that are forming and shaping the future of our industries, and more specifically identify the opportunities to transition.”
One global fleet that is moving strongly to accelerate the electrification of its company fleet is Microsoft.
“Our goal is to transition the car fleet to zero emission. It is Microsoft’s commitment to sustainability that we as a company will be carbon negative by 2030, which means that by this year, we don’t have polluting cars anymore in our benefit fleets,” said Michael Pohl, senior HR benefit program manager for MS Fleet at Microsoft in Munich, Germany. “Knowing this timing, we can do the mathematics ‘backward’ and stop ordering cars with any type of combustion engine by 2026 (assuming the average duration of a lease is 42 to 48 months). From today to 2026, we are challenged to move our carbon emission targets downwards until the moment when we can only order pollution-free vehicles. With this in mind, we need to set the CO2 bar at the right height to ensure that our employees can continue to drive attractive cars with low or lowered emissions for the next four years.”
Limited Product Availability
Due to the limited number of EVs available for fleets to order, many companies face extremely limited options.
“As a result of us launching an EV program, it has limited the replacement vehicle selector to one EV choice (other than Tesla). This has a direct impact to speed of adoption of sustainable vehicles. As is the case industrywide, our field reps prefer a choice of vehicles,” said one fleet manager who wished to remain anonymous.
While there are more EV products than ever before, there are still product holes in not being able to provide EV models that can meet some key fleet applications, in particular higher GVW truck applications. “There is a lack of electric vehicle options for delivery trucks and semis, and there is a lack of charging infrastructure,” said Yogi Shivdasani, vice president, North America supply chain for LKQ Corporation.
DISH Network is also finding it difficult to identify an EV model that will fit its fleet application. “As for my fleet, we still haven’t found a service vehicle that fits our business use case. A positive sign is lower acquisition costs than what we’ve seen several years ago – at first, acquisition costs alone were higher than the entire lifecycle cost of an ICE vehicle,” said Abe Stephenson, DISH Network fleet and administration manager.
Several fleet managers also expressed consternation about the “slow” pace of EV introductions by mainstream and start-up OEMs.
“Tesla certainly has led the way in the BEV market, but other manufacturers have been slow to follow – shame, shame,” said another fleet manager who requested anonymity.
This was echoed by additional fleet managers who likewise requested not to be identified. Here are two examples:
“All OEMs have identified a move to BEV cars, yet it’s taking them years to bring them to market. Current choices are limited, with PHEV units identified first.”
“The OEMs are slow to market with susainable cars; tidbits are being advertised by the OEMs, but choices are currently limited; however, there is the promise of more vehicles to follow in the out-years.”
Transition to Electrification
Despite dramatic improvements in EV battery range, some fleet managers still express skepticism as to whether a BEV vehicle can meet the job requirements of many fleet drivers.
“OEMs are driving the transition to EV vehicles with mileage range limitations, which will have a major impact on fleets, who have drivers working in high-mileage territories. These drivers spend long days on the road in order to meet their customers’ demands and stopping to recharge vehicles adds additional time to already long days, which may have an impact on driver safety over the long haul,” said Oleg Cytowicz, Americas fleet lead for Unilever in Englewood Cliffs, NJ.
Another dilemma facing fleet managers is deciding which powertrain technologies to incorporate in future fleet vehicles. “Are electric vehicles here to stay? How about hydrogen-fuel? Is it really time to say goodbye to the ICE? Is diesel dead? There are still a lot of unknowns,” said John Brewington, CAFM, CEO of Brewington & Company, a fleet asset and management consulting company.
Initial fleet manager investigations on electrification focus on the vehicle itself and sometimes fail to appreciate the full complexity of this transformative undertaking. This is true not only in North America, but also with European fleets.
“Many companies want to introduce electromobility. However, the topic is complex. It’s not just about the vehicles, but also about the associated investments, such as infrastructure adjustments at the company location and charging stations at the employee’s place of residence,” said Balz Eggenberger, co-owner of fleetcompetence International GmbH based in Rebstein, St Gallen, Switzerland. “Charging at public charging stations is also an important issue, especially in view of the sometimes massively higher electricity costs. We believe holistic solutions will be required.”
The emergence of electric vehicles has created a vibrant but volatile market with established manufacturers competing with many start-up companies, which has created many questions in the minds of fleet managers looking to acquire EV assets.
“There is exposure to potential long-term issues with deploying EVs. Will the OEM be in business in a few years? If not, how does that impact our ability to service a vehicle – does it become obsolete if there’s a problem? What are the types of repairs we should expect, when, and how much?” asked Stephenson of DISH Network. “Similar considerations should be made for the companies that provide charging infrastructure. The limited range of many EVs is compounded by colder temperatures or weight that can vary significantly from published amounts. There is a lack of mobility with these types of vehicles to move out of the particular area that could be dependent on charging infrastructure or service network. In general, there will be a disproportionate amount of time that it takes to stand-up and maintain exception case scenarios.”
While some fleets may complain of the lack of product, in other quarters (in particular senior management), many are impressed with the initial EV availability and are receptive to adding EV models in their fleet operations.
“With the rise in popularity of EVs, production and sheer model availability, leaders are now interested in introducing EVs,” said Mark Brochtrup, CAFM, fleet manager for the City of Coppell, Texas.
“It’s imperative that a well-planned move to EVs be followed and the seasoned fleet manager is typically the SME in this area. Putting on the brakes in an effort to be effective in this transition should not be construed as fear of the unknown but rather a practical and intelligent process to reach the goal. It won’t happen overnight.”
Obstacles to Electrification
Getting fleet stakeholders within your company to support the use of EVs is the easy part; the hard part is the execution of the plan, which typically is more complex because it involves many variables. As a result, the push to electrify fleet assets begs the question, ‘what is the right strategy?’
“Fleets are facing pressure from a corporate governance to continue to find greener ways to operate their fleets and electrification is on everyone’s radar. Fleets are looking at the costs associated with electrification. Educating managers on the steps and costs to move to an electric fleet is now a primary focus of many fleets,” said Grant Chitty, account manager for Foss National Leasing.
In today’s inflationary and supply-constrained environment, one of the difficulties facing fleet managers is communicating to their management that incentives are going to be reduced and pricing will increase for all vehicles.
Here is the perspective from Canada. “Product is not readily available yet, and most fleets do not have electric charging capabilities at their facilities or at their drivers’ homes. Questions exist about the capability of the current grid; can it support the increase in demand?” said Chitty of Foss National Leasing. “In addition, municipalities are trending to removing fossil fuels from home heating that will provide an even greater demand on electrification. Can our grids provide all the electricity that will be needed? Are the auto companies fully prepared for complete electrification? And some large questions still remain unanswered about the ability to recharge effectively.”
For the past several decades, sustainability is a focal point for most, if not all, fleets. “An initial challenge was to create a roadmap to reducing our fleet carbon footprint. Working within focused cohorts, peer groups, and other professional organizations in the space has increased the speed at which we have been able to work towards completion of our planned roadmap and begin implementation," said Chad Fay, vice president – fleet for Lewis Tree Service, Inc. “While this is viewed by most as a big challenge the opportunity has proven to be substantial. We look forward to working through our plan and seeing improvements in the near-term.”
Inadequate recharging infrastructure, range anxiety, and limited inventory makes the initiative to migrate to EVs a substantial investment. There is a dearth of vehicles available in the market that are able to operate at longer ranges and that are available at a reasonable and competitive cost.
Other questions in the minds of many fleet managers are how to charge EV vehicles at an employees’ homes, the cost associated with personal charging stations, and how the employee will be credited back the expenses for use of home electrical systems. Is there a reasonable solutions and who pays for the hardware?”
Often fleet managers tend to focus on the challenges, but there are many opportunities in transitioning to electrification. “Obviously, there are a lot of challenges and opportunities for fleets in the alternative energy arena. Even if fleets are not affected today, they need to be cognizant of the upcoming technology, regulations, and expectations,” said Phil Samuelson, fleet and capital asset manager for USIC Locating Services, LLC in Indianapolis, Ind. “ Begin looking at charging options, working with power companies, OEMs, and companies that provide stations. If fleets have pooled or corralled vehicles, look at large charging station options. If a fleet has drivers that take vehicles home, look at options to provide home slow fueling stations with payroll/HR involved.”
But more work needs to be done regarding the recharging infrastructure to facilitate fleet use. “Charging stations need to be less expensive and able to charge battery packs as if you were filling up you truck with standard fuel. What about the electrical grid? Once we are fully committed to EVs, how will this affect the grid? Will there be major price increases due to the demand and will there be enough power to supply the demand,” said Ottogalli of Veolia North America.