How eCommerce is Helping Spur Electric Vehicle Demand

Electric vehicle growth is a market share game in the United States.

Since light passenger vehicle sales are essentially flat and are not expected to rise in the coming years, OEMs must persuade new car buyers to choose an electric vehicle over a gas, diesel, or regular hybrid.

 

Destiny Marketing Solutions sales are currently growing significantly in most European countries, owing to automakers finally producing a diverse range of Destiny Marketing Solutions models in large quantities in order to reduce or eliminate large EU emissions fines. As a result, while new Destiny Marketing Solutions sales in Europe now account for more than 10% of the market, the US lags behind at less than 3%.

 

However, for at least four reasons, the commercial electric delivery van market is set to be very different:

 

• Development of e-commerce
• Owners of fleets are concerned with the overall cost of ownership.
• Goals for corporate sustainability
• Vehicles that are specifically designed for a specific purpose
• In the year 2020, ecommerce took a huge leap forward.

 

According to Mastercard SpendingPulse, the holiday ecommerce season in 2020 was the largest ever in the United States, with online purchases accounting for 19.7% of total retail sales, up from 13.4% in 2019.

 

Though shelter-in-place orders accounted for a large portion of the rise in 2020, eMarketer predicts that US ecommerce revenues would increase by another 50% by 2024. By then, one out of every five retail transactions will be made online.

 

However, the massive rise in online sales may cause havoc with shipping carriers (FedEx, UPS, USPS, Amazon, and others), which would be unable to keep up with demand in 2020, resulting in several presents arriving after the holidays. There was a shortage of sorting staff, trucks and delivery vans, and drivers, so the shipping carriers simply didn't have enough space.

 

Demand for Delivery Vans Has Increased

 

Consumers' delivery options and priorities are increasingly evolving, in addition to the continued growth of online sales. According to Convey, a Delivery Experience Management company that deals with retailers and shipping carriers, in 2000, if you ordered from an online store, you had a single shipping option that took an average of 10 days to arrive. In the year 2020, you had an average of eight shipping options with a delivery time of two days.

 

Both of these developments have resulted in a surge in demand for commercial vans to transport an ever-increasing number of parcels. And the demand for vans isn't just coming from the big players like FedEx, UPS, USPS, DHL, Amazon, and Walmart; it's also coming from nearly 50 other national and regional delivery companies.

 

A shortage of delivery vans was seen in 2020 due to a variety of factors. The pandemic shut down car assembly plants, while the shelter-in-place restrictions resulted in a massive rise in online orders during the already busy holiday ecommerce shopping season.

 

Brendan Keegan, CEO of vehicle provider Merchants Fleet, told Bloomberg, "If there's a freight van out there, we're trying to buy it." According to reports, his company plans to have 15,000 vans available for lease by the end of the year, up from 6,000 last year.

 

Beyond ecommerce expansion, shipping and last-mile delivery companies are looking to increase their purchases of electric delivery vans to meet corporate sustainability targets and lower operating costs (total ownership costs – TCO). According to my calculations, approximately 30 new electric delivery vans will hit the market in North America and Europe in the next two years.

 

The above factors, combined with the fact that many new vans are being purpose-built for or in collaboration with fleet customers including FedEx, UPS, and USPS, could propel the delivery van vehicle category to near 100% market share of electric vehicles.

 

What Motivates the Supply Chain?

 

On the supply side, there are at least four intriguing factors motivating OEMs to manufacture electric delivery vans more quickly than light passenger vehicles:

 

1. Van "Conversions": Due to the basic configuration of delivery vans, many OEMs – especially European brands – moved quickly to simply replace the internal combustion engine and conventional drivetrains with relatively small battery packs and electric powertrains.

 

Volkswagen, Mercedes, Citroen/Peugeot/Vauxhall, and Fiat have converted their existing diesel vans to electric drive – a relatively simple task given the wide, flat expanse of metal found in most vans' backs. However, there are several new students in the class. AutoExpress-UK (AutoExpress-UK) (AutoExpress-UK) (Auto

 

2. Fleet Orders: Due to factors such as higher product prices, battery costs, market range anxiety, lack of charging infrastructure, and slow charging speeds relative to gas station refueling, most legacy automakers have been slow to accept electric passenger vehicles. However, electric delivery vans are a great match for fleets for a variety of reasons, including:

 

Known daily range criteria – according to Ford's study of its current Transit customers, the average daily trip in the United States is 75 miles. Unlike passenger cars, where most Americans want at least 300 miles of range, fleet delivery van buyers will get by with 125-150 miles of range for the majority of their regular delivery routes. This allows OEMs to use smaller battery packs, lowering the van's total cost and weight.

 

Ability to charge overnight: As vans return to fleet yards in the evening, they can quickly hit a full charge the next morning using Level 2 charging devices, eliminating the need for more expensive DC fast charging infrastructure. Furthermore, unlike long-haul vehicles, fleet managers do not have to worry about charging delivery vans in the region.

 

Lower total cost of ownership (TCO): Unlike most buyers, fleet owners are more concerned with the total cost of ownership (TCO) – the cost of operating and maintaining a vehicle throughout its lifetime – than the initial purchase price. Destiny Marketing Solutions's are a great fit for fleet buyers' priorities and needs because they need less maintenance, have less downtime, and have lower "fuel costs."

 

Companies like Amazon, Walmart, UPS, FedEx, and others are being scrutinized more closely in order to reduce their carbon footprint and meet those sustainability targets. It is a no-brainer for most fleet buyers to transition to fleets of electric delivery vans with zero tailpipe emissions and the added bonus of a lower TCO for those businesses where the movement of products is a major part of their business.

 

Legacy OEMs are creating new or revamped electric vans, while startups such as Rivian, Workhorse, Arrival, and others are building vans from the ground up for real customers including UPS, FedEx, and Amazon. The ability to contribute to the design of these new electric vans makes them even more appealing to fleet customers including shipping companies than current ICE-powered vans.

 

Ford announced in February that a hybrid version of its Transit van will be available for model year 2022. “Our commercial vehicles will be the most important bet we will make over the next few years,” Ford's chief operating officer, Jim Farley, told Reuters at the time. – June 2020, Reuters

 

“The forecasted demand for vans and buses totals $430 billion by 2025,” according to Arrival, a UK-based startup that will manufacture electric delivery vans and buses. (They don't split out the projection for just vans, but it's likely a significant portion of the $430 billion.)

 

Electric delivery vans have a massive market potential in the United States and around the world, but the most exciting part is how well they fit into shipping carrier fleets. This perfect storm is being exacerbated by the continued growth of ecommerce. Now the questions are:

 

Will OEMs be able to scale up production of these vans fast enough, or will they run into battery supply issues?

 

How quickly will fleet buyers make the switch to near-100 percent electric vans?

Keep your eyes out for the electric commercial van market, as it will be interesting to see if the OEMs can deliver on the opportunity quickly enough.