UPS and FedEx, two major package delivery companies in the US, are facing challenges in their efforts to electrify their fleets with big, boxy electric step vans. These vans are crucial for reducing their carbon emissions and aligning with President Joe Biden’s transportation climate goals. However, they are encountering obstacles such as battery shortages and high prices for electric vehicles (EVs), as well as the financial struggles of startup electric van manufacturers.
Luke Wake, UPS’s vice president of fleet maintenance and engineering, expressed concern over the future of these electric van companies. He questioned how many of them would still be operating in five or ten years. This uncertainty further complicates the path to electrification for UPS and FedEx.
In addition to the supply constraints, the delivery companies are also losing access to California vouchers that previously helped offset the higher prices of EVs compared to traditional delivery trucks. UPS and FedEx obtained some relief when California paused a rule that required them to exclusively purchase electric delivery vehicles starting this year. The companies joined an industry group in filing a lawsuit claiming that California needed approval from US regulators before implementing the rule.
Sam Fiorani from AutoForecast Solutions describes UPS and FedEx’s situation as a Catch-22. To have demand for electric step vans, there needs to be a supply, but the supply is limited due to various factors. This challenge hinders the progress of achieving widespread electrification in the package delivery sector.
Despite these obstacles, UPS remains committed to its plan of using EVs and other alternative fuel vehicles to reduce emissions. The company has been testing and purchasing EVs for decades and is considered a bellwether for demand. UPS currently has more than 150,000 delivery vehicles globally and replaces about 7,000 of its brown trucks each year in the US alone.
FedEx, on the other hand, is exploring opportunities to incorporate lower-emission delivery trucks into its fleet. The company announced its goal to make 100% of vehicle purchases in its Express unit electric by 2030, but it adds the caveat of “subject to availability.”
However, both UPS and FedEx face a shortage of available electric step vans. CALSTART, a nonprofit organization, reported that deployments of these vans by UPS, FedEx, and other carriers declined from 275 in 2021 to 238 in 2022. The number is estimated to be between 220 and 250 for 2023. In contrast, Amazon.com has already deployed over 10,000 smaller electric cargo vans from Rivian in the US and Europe.
UPS and FedEx mentioned the limited availability of larger capacity electric vans, expressing difficulty in finding suitable options. FedEx stated that larger capacity vans are particularly hard to come by.
The cost of electric step vans remains a significant challenge as well. The price for an FCCC MT50e electric step van is over $260,000, more than double the cost of a traditional model. These higher costs contribute to the cost-prohibitive nature of EVs. UPS did not disclose the exact price it pays for EVs but acknowledged the high expenses.
Another hurdle for UPS and FedEx is the change in California’s purchase vouchers for electric step vans. Previously, California offered up to $85,000 in vouchers to commercial buyers of these vehicles. However, large companies like UPS and FedEx must now purchase 30 trucks without incentives before they become eligible for half the value of vouchers on additional purchases. These incentives for large companies will end on January 1, 2025.
The recent change in California’s incentives could impact EV adoption in the delivery sector since the largest fleets historically represent a significant percentage of new truck purchases. CALSTART’s Vice President Tor Larson believes that if the US Environmental Protection Agency allows California to restrict large delivery company fleet purchases to electric and other zero-emissions vehicles, it could have a regulatory ripple effect similar to Europe’s approach.
Scott Phillippi, a former UPS executive, compared the ways the US and Europe incentivize cleaner vehicle adoption. The US primarily uses financial incentives (“carrots”) while Europe employs stricter regulations (“sticks”). A shift towards more regulatory-driven measures in the US, similar to Europe, could accelerate the adoption of electric step vans in the market.
In conclusion, UPS and FedEx are facing challenges in their pursuit of electrifying their fleets with electric step vans due to battery shortages, high prices, and financial troubles faced by electric van manufacturers. The limited availability of larger capacity electric vans and the cost-prohibitive nature of EVs are also obstacles. Additionally, changes in California’s incentives for these vehicles further complicate the situation. However, both companies remain committed to reducing emissions and exploring alternative fuel vehicles as they navigate the complex landscape of electrification in the package delivery industry.
