What if one day medium-duty trucks could reduce fleet fuel costs by as much as 75-80 percent? What if these trucks didn’t require oil drains, transmission oil changes, or coolant flushes, significantly cutting preventive maintenance expenses? What if these trucks produced absolutely zero emissions, giving customers a sense that doing business with your company is good for the environment?

Is this a vision of what medium-duty trucks will offer five, 10, or 15 years from now? Actually, for some “early-adopter” delivery fleets, such as Frito-Lay, Staples, FedEx, AT&T, and the U.S. Marine Corps, this vision is a reality today.

Although less than 1 percent of the medium-duty trucks U.S. companies will buy in 2011 will be all-electric, according to Americas Commercial Transportation Research Co., LLC, some industry experts are predicting that the medium-duty market will be one of the fastest growing segments of the emerging plug-in electric vehicle (PEV) market.

What makes medium-duty trucks conducive to all-electric drive technology? What’s accelerating expansion of PEVs in the medium-duty market? What’s constraining growth? What does the future hold?

This article explores these questions in-depth to give you a sense of the state of the market for all-electric medium-duty trucks today — and what it might look like tomorrow.

Why Medium-Duty Trucks?

What’s unique about Class 4-7 medium trucks, ranging from 12,000 to 26,000 lbs., that make them viable for all-electric drive technology?

Fleet focus on total cost of ownership: “Medium-duty trucks are heavy users of fuel, which means the economics of switching to all-electric can be very favorable for a company,” said Dave Hurst, senior analyst, Pike Research. “The upfront cost premium of electric trucks can be recovered increasingly quickly as the price of diesel climbs because the cost of electricity is much lower. Since fleet managers tend to look at total cost of ownership rather than just the up-front cost, this is a positive advantage for electric, assuming it fits their route.”

Genevieve Cullen, vice president, Electric Drive Transportation Association (EDTA) agreed. “The battery-electric and plug-in hybrid medium-duty market is growing based on the advances in the technology that improves performance; the regulatory drivers that require increasingly clean and fuel-efficient vehicles; and the continuing volatility in the petroleum markets, which makes electricity an economically-attractive option for business and fleet owners,” Cullen said.  

Recurring routes with return-to-base operations: “Many medium-duty trucks are used in return-to-base type routes. These vehicles leave a central point, run a pre-defined route, and return to base. As long as this route fits within the range of the vehicle then electric could work very well,” said Hurst of Pike Research.

Vehicle size conducive for carrying batteries and other PEV components: “Attributes of medium-duty trucks tend to lend themselves to electrification,” Hurst explained. “The vehicles have more space within or alongside the truck frame for the batteries. The batteries tend to take up a lot of space, which is one of the challenges in a light-duty vehicle and there just aren’t the same kind of space constraints in medium duty trucks.” 

Ideal for off-highway, stop-and-go, lower speed applications: “Trucks used within urban environments often do not need high speed, so a top speed of 45-50 mph is often plenty,” Hurst said. “Since higher speeds tend to use a lot of energy, these lower speeds help extend the range of the vehicle.”

According to Cullen, “Medium-duty vehicles tend to be used in more urban delivery/duty cycles, which optimizes the value of regenerative braking.”

Regenerative braking is a system that leverages the motor to slow the truck when a driver takes his or her foot off the accelerator, reducing wear on the brakes, while also restoring charge to the battery.

What Are the Growth Drivers?

What’s accelerating the expansion of electric-drive technology in the medium duty market?

American Recovery and Reinvestment Act (ARRA) of 2009: Also known as the “Stimulus Bill,” the Recovery Act has catalyzed the PEV market with sizable federal loans and grants available to U.S. vehicle manufacturers, battery makers, and others throughout the electric-drive supply chain, for the purpose of creating new U.S. clean-energy manufacturing jobs.

Here’s a big-picture breakdown of the $2.4 billion in federal grants, from the stimulus bill via the U.S. Department of Energy (DOE), awarded to companies in the plug-in electric vehicle market.

  • $1.5 billion in grants to U.S.-based manufacturers to produce batteries and battery components and to expand recycling capacity.
  • $500 million in grants to U.S.-based manufacturers to produce electric drive components for vehicles, including electric motors, power electronics, and other drivetrain components.
  • $400 million in grants to purchase thousands of plug-in hybrid and all-electric vehicles for test demonstrations in several dozen locations, deploy them and evaluate their performance, install electric charging infrastructure, and provide education and workforce training to support the transition to advanced electric transportation systems.

Among medium-duty electric truck manufacturers receiving stimulus funding are Navistar ($39.2 million) and Smith Electric ($32 million).

According to Smith Electric, the DOE grant will be used to help offset its future vehicle development costs and to incentivize Smith’s customers to participate in a commercial electric vehicle demonstration program. The demonstration program will gather data on vehicles placed in service in different regions of the country and in a broad range of applications. Participating customers will receive a subsidy from the program for allowing their vehicles to be part of the demonstration fleet.

The federal stimulus money has also been appropriated by state and local governments to subsidize recharging stations in various cities across the country, including Chicago and Baltimore.

Federal and State Tax Incentives: The Recovery Act established tax credits for purchasing electric vehicles ($2,500- $7,500 per vehicle, depending on battery capacity) and conversion kits to retrofit conventionally powered vehicles with electric vehicle capability ($4,000 per vehicle, maximum). For details on the federal tax incentive, visit: www.afdc.energy.gov/afdc/laws/law/US/409.

Some states are also offering as much as $5,000 (in addition to federal incentives) in tax credits for electric vehicles. For more information on these state tax incentives, visit: www.afdc.energy.gov/afdc/laws/state.)

Regulatory Standards: In fall 2010, the Environmental Protection Agency (EPA) and Department of Transportation (DOT) announced the first-ever national standards for emissions and fuel economy for large commercial vehicles, including medium-duties, set to take effect in 2014. Proponents of electric-drive technology believe that these new regulations will drive up the cost to build conventional medium-duty diesel and gasoline engines to comply with the emissions and fuel economy requirements — which will narrow the cost gap between electric drive and conventional drive vehicles.

Furthermore, California has mandated that each large vehicle manufacturer offer a certain number of zero-emissions vehicles (ZEV), including electric drive, by 2016. The production volume required by this mandate should contribute to greater economies of scale, lowering electric drive technology costs and driving growth for the PEV market as a whole.

Federal Purchase Requirements: In October 2009, President Barack Obama signed Executive Order 13514, which requires federal agencies to reduce annual petroleum consumption by 2-percent per year from a 2005 baseline through 2020, resulting in a 30-percent total reduction. To fulfill a requirement of the order, the U.S. DOE issued a Federal Fleet Management Guidance document in April 2010, which recommends PEVs as one strategy to achieve fuel economy and emissions mandates.

What are Limitations to PEV Growth?

Despite these growth drivers, however, there are several obstacles that stand in the way of widespread adoption of PEVs in the medium-duty market. These include:

High Initial Cost: The cost of a medium-duty all-electric chassis, compared to a diesel-powered equivalent, can be as much as two to three times higher, before applying any of the available federal and state incentives. The biggest contributor to the price disparity is battery cost. Until battery cost decreases, acquisition prices for medium duty PEVs will continue to be a significant barrier to entry for most fleets.

Limited Applications: Since the existing range for all-electric medium-duty trucks is approximately 100 miles, there is a narrow niche in which the trucks can feasibly operate — most prominently the urban-delivery market. Expanding the range opens new markets for medium-duty PEV growth.

Limited Charging Infrastructure: All-electric medium-duty trucks currently work best for fleets that have return-to-base operations, where the trucks can charge overnight and then deploy on their routes the next day, without the need to recharge while away from “home.”

Holding back PEV growth in the medium-duty market is the inability to charge away from home base, which would reduce “range anxiety” for drivers and extend routes beyond existing battery range limits.
To overcome this challenge, federal stimulus money is being used to subsidize developing residential and commercial “quick charge” EV charging stations in select urban markets.

There are also a growing number of clean energy start-ups developing technologies to address the issue. Momentum Dynamics Corporation, for example, a Malvern, Pa.-based start-up, has designed a wireless public recharging system to eliminate the constraints inherent to hard-wire cords and plugs.

“Unlike plug-in systems, wireless charging offers the medium-class commercial operator the ability to readily and regularly recharge a vehicle during the normal course of operations,” said Andrew Daga, Momentum Dynamics founder and CEO. “Because [the wireless system] is automatic, the vehicle is recognized when it’s parked above a charging station and the charging sequence is initiated. This frees the driver from any need to intervene, requires no work rule changes, and most importantly, allows short duration opportunity charging to occur. That’s the key to extending vehicle range.”

Limited Service Infrastructure: Once a fleet has purchased an all-electric truck, where does it need to be taken for service and repairs? Trusted medium-duty truck service centers won’t be able to work on these vehicles. The medium-duty PEV market lacks a network of local service centers to support growth.

Bryan Hansel, CEO of Smith Electric Vehicles, a manufacturer of all-electric medium-duty trucks, wrote in an Op-Ed last year on FoxNews.com entitled, “The Future is Now for Commercial Electric Trucks,” that Smith is exploring a decentralized, “build, sell, and service in one place” model that will allow the company to manage the total customer experience over the full lifetime of the vehicle. 

“Deploying electric vehicles in a commercial fleet is a big leap for customers used to managing traditional gas or diesel powered trucks,” wrote Hansel. “Our co-located production, sales, and service facilities will allow customers to experience the truck beforehand, watch it being built, and trust the people who assembled it for service. Smith is looking to locate these new facilities in markets where we see the greatest economic potential based on customer demand and community support for electric vehicle and manufacturing initiatives.”

PEV Predictions: What Does the Future Hold?

Green Fleet magazine asked industry experts to peer into their “crystal balls” and share what they see five, 10, or even 15 years down the road. Here are their predictions.

Dave Hurst, senior analyst, Pike Research: “By 2017, we are expecting the market to support about 5,600 trucks per year. So, by 2017, that would mean about 20,000 all-electric medium-duty trucks on the roads. Growth in the market through 2017 is expected to be strong with a 36-percent growth rate between now and 2017. That fast growth will slow once you start to look at 10 to 15 years out as the market starts to get into vehicles that are not being used in routes that are well suited to electric such as longer distances or no defined routes.”

Mark Aubry, VP sales and marketing, electric vehicles, Navistar: “Unlike the consumer automobile market, the electric vehicle market for business is very new so it’s still early.  However, interest is high — especially in categories such as local delivery, where vehicles are in use and we are beginning to see total cost of ownership analysis that are favorable for EVs. That said, EVs will not be for everyone or every business.”

Genevieve Cullen, vice president, Electric Drive Transportation Association: “We are bullish on this market. It is an emerging one, but we expect meaningful growth in the next decade based on the factors described above. Technology advances, regulatory demands, and increasing oil costs all reinforce the movement toward electrification in this segment. In fact, Pike Research projects that sales of medium- and heavy-duty hybrid, plug-in hybrid, and battery-electric trucks will grow at a compound annual growth rate of 63 percent, with sales of almost 300,000 vehicles from 2010 to 2015.”

Andrew Daga, founder and CEO of Momentum Dynamics, maker of wireless recharging systems: “We expect the commercial fleet market to develop ahead of the passenger EV market because the economic argument for cutting the cost of fuel for trucks that may get between 6 and 8 mpg by 80 percent is absolutely compelling. However, people need to have confidence in the vehicle, the power storage systems, and the charging technology. When this happens, we will see far broader use and a remarkable shift to electric. The passenger automotive market is larger than the commercial market, of course, but the faster this acceptance comes about [in the commercial market], the sooner we will have complete commitment from the auto OEMs, and this will then lead to economies of scale in vehicle manufacturing costs and profitability.”  

The Bottom Line

What is the future of all-electric medium-duty trucks? There are trends favorable to wider adoption of PEVs in the medium-duty market.

However, critical questions still remain unanswered. Will medium-duty PEVs successfully expand beyond an urban-delivery niche? Will economies of scale kick in to drive down battery costs to make PEVs more financially viable? Will other alternative-fuel technologies win out against all-electric vehicles? When government incentives are phased out, will medium-duty PEVs sell without subsidy?
Time will tell.