Fleets Can Gain Big Benefits From Electrification - If They Think Big

Buying an EV for your personal use is generally about wanting to do the best thing for the planet. But while this is a message that companies mostly would also like to promote, the economic implications of change weigh heavily. According to VEV, the e-fleet solutions provider backed by Vitol, the cost savings are clear – so long as you do the sums and are prepared to think differently.

"In Europe, for example, 2% of vehicles for buses and trucks produce nearly 28% of emissions," says Mike Nakrani, Managing Director of E-Mobility at VEV. "If you really want to make a big dent in that CO2 universe, then you really need to be working on fleets. When we started a couple of years ago, you had Amazon and Tesco doing bits and pieces and they were progressing. Then you had a gap between them and the rest of the world. Lots of companies are still struggling with the capex burden, but the ones who can afford it are moving quite progressively."

Legislation is proving to be a driving factor. "If you look at the bus market, in particular, by 2030, 100% of all new vehicle sales will be electric and they're saying by 2025, 90% have to be electric," says Nakrani. "So the big bus companies like Stagecoach, National Express, Arriva, and RATP have started to move progressively. But the biggest challenge is how to do this at a level that's affordable, with something that gets close to the diesel cost structure."

Economies Of Scale Required

The VEV solution starts with looking at the existing fleet usage patterns. "We analyze what's needed through their telematics offering using our data science platform," says Nakrani. "We then introduce our digital capability for charging infrastructure, vehicle purchasing and energy management. When you put all that together, many fleets are finding that they can afford it and that they can meet their CO2 requirements."

However, savings are only fully realized with a large commitment, not a small trial. "When you migrate a diesel fleet, a lot of the companies migrate five or ten out of a fleet of a hundred," says Nakrani. "The problem is that you don't get the economies of scale, and it is a scale game." An example of this is VEV's work with electrifying buses in Columbia, of all places. "We have three of the largest electric bus depots in Colombia. It's the biggest bus electric bus market outside of China, in Bogota."

"There we've converted nearly the entirety of each depot," continues Nakrani. "There are almost 200 buses running from 5AM through to 1AM the following day at each depot and all of them are fully electric There are another three or four players there. They've done nearly 2,400 buses, and MAN wants to do the next 7,500 over the next five to six years."

This is an example of where scale pays off. "You buy the bus for the right price, you get the grid connection at the right level rather than pay through the nose by doing it in stages, you get the efficiency of the charging equipment, and you're also able to bank the saving on servicing and other elements. One of the Columbia depots were comparing it to the diesel fleet, and they've realized a 40% or so reduction in maintenance costs. But also, when you go to the depot, it's completely different. It's clean, it's quiet, it's organized in a very different way."

However, the initial capital expenditure is still the major hurdle for most fleets. "The vehicles typically cost 40 to 50% more than the diesel equivalent, depending on the product, so you need to run it hard and for a decent length of time," says Nakrani. This leads companies to worrying about battery degradation due to heavy utilization. But VEV now has a lot of research in this area. "We're able to agree to work with the bus manufacturers on a warranty for the full lifecycle of the vehicle. In Columbia, we have a bus warranty that includes one battery replacement cycle in year seven and a half, with the OEM for the bus."

VEV offers BYD buses for its customers in Columbia. These use Lithium Iron Phosphate (LFP) batteries, which have greater durability than the NMC cells employed by most EVs. "LFP does seem to be winning because it's got many more cycles," says Nakrani. "The traditional cycle is three or four years. But for our buses in Colombia, we're seeing up to 10 years with the warranty. They see their cycle get better and they can also repair them. When we started off everyone said you can't repair a cell and you can't take one cell out and replace it. But you can. Every bit of it can be replaced."

Commercial EVs Are Getting Cheaper

The message appears to be getting through as commercial vehicles improve in capability. "Initially, the three-and-a-half-ton transit van was not great, but now it's working," says Nakrani. "Now you're seeing EV technology creep into 16 and 18 tons and Volvo, DAF and SCANIA are launching 40 tons. Prices are coming down substantially for buses. You'll see the same also for trucks. When I first talked about an electric 40-ton truck, they were 500 plus thousand Euros. You're now talking for the high-volume guys 280 to 300,000 Euros." BYD, for example, has just launched the 19-ton ETH8 in Europe.

However, it's still essential to have positive case studies. "We did a trial with Serco refuse collection trucks," says Nakrani. "We converted two trucks from a diesel powertrain. We put in a 344kWh battery and EV powertrain. Then we gave them to Serco, who tried them with two councils for eight weeks. They saved about £2,500 ($3,300) worth of fuel of value, and nearly 9,000kg of CO2, which is like two cars on the road full time for two years. They're still running them. I jokingly say they won't give them back, but they are really pleased with them. The Serco pilot has the potential to save between 4 and 14% on TCO, depending on things like weather pattern."

Waste managements is almost the perfect candidate for electrification. "Refuse collection trucks have an ideal footprint," explains Nakrani. "They need massive power, but do relatively limited miles, and have a decent charging window when not used overnight. So why are all our refuse collection trucks not electric yet? This is the thing. And they're quiet. The bins are still loud, but otherwise it's much quieter and less polluting for the public."

Maintenance savings are another win for electrification. "In the Columbia example, in a depot they have number of buses that are sat there spare," explains Nakrani. "It can be anything up to 12% in the UK and European cities. The Columbia electric buses are running at 7%, trying to get down to 4%, just because they have fewer moving parts. They also have a lot more digital capability, so you'll know the problem before it presents itself in a stopped vehicle."

Changing Mindsets With Electrification

The key point here is that while you can swap a diesel vehicle directly for an electric one, there are other implications of electrification that change the way the fleet operates, and these contribute greatly to the cost saving. "When you put the two side by side what tends to happen is an unfair comparison initially, which is that it costs £1.45 per liter for diesel at the pump and that's it," says Nakrani. "But after three years, you must start to do the annual MOT test, you must change the filter, there will be breakdowns, and the fleet will have a five- or six-year lifespan. The issue is that the diesel fleet is not doing enough miles to make electrification seem cost effective. That's probably our number one problem when you compare diesel versus EV. If you have vehicles only doing 30 miles a day, you're only saving so much on the fuel with an EV."

"However, with an EV you should also be able to extend the vehicle life considerably," says Nakrani. "The vehicle should last. It's got a 10- to 12-year warranty on the body itself; we can give a 10-year warranty on the battery; you don't need to worry about throwing the vehicle away or swapping it out in year four. At that point, we're starting to see the mathematics work. Most companies then say we're right, and put EV transformation into the budget."

"We still need the government to do their bit, but the technology is now working," says Nakrani. "There are people out there who are willing to finance it, there are people like us who have got the ability to do the whole package. The jigsaw pieces of the puzzle are now clearer. We're confident now the product works for a diesel to an EV switch for a lot of vehicle types. The cost structure has come down already. Batteries are getting to less than $100 per kilowatt hour. When we get to $70 or $80, then the cost equation disappears."

"But you've also got to think about this differently," concludes Nakrani. "It's not a simple like for like. It should be like for better. You're going to have more information. You're going to a digital platform. You're going to be able to fundamentally save costs if you manage it better. You're going to keep your vehicle for longer." The journey is only just starting, but it's an exciting time with a positive future. "It feels like being at Google or Facebook when they started."