Commercial Fleets Driving EV Take-Up
The invasion has begun; it’s massive, and it promises to be unrelenting.
The popularity of EVs is getting to the point where they’re taking over one of the last great bastions of the ICE Age – the large commercial fleet. In October, US vehicle rental incumbent Hertz announced that it will take delivery of no less than 100,000 Teslas by the end of 2022 and that’s only the initial part of the order. What’s more, Hertz has hired future Hall of Fame American football star Tom Brady to star in a series of TV commercials hyping the sleek cars.
For context, those 100,000 EVs will comprise over 20 percent of the company’s global fleet. That’s a significant number, given that this is merely the start of the industry-shaking deal between the two iconic businesses.
Or is it? As everyone knows, the auto sector has seen more than a few monster deals shrink into irrelevance or folly. Does this one have a better chance of seriously and permanently impacting the landscape? Jamie Schiel thinks so, and he’s in a position to know. He’s the CTO of Stable Auto, a company that specializes in analytics about charging stations – work that will be crucial the more we electrify. In his opinion, such a deal has the power to influence and reverberate through the client ranks. “Fleets underscore the economic benefits of making the switch to electric, which can ultimately benefit consumers too once they get acclimated,” he says.
However, one element they will need to get acclimated to is pricing that’s higher than the ICEs many of us are used to renting. This could be a key reason why Hertz is paying the handsome and personable Brady to put a pleasant face on the company’s EV offerings. If you’re willing to pay a bit more for your rental, you too can be like Tom. “Green fleets will come at a premium– it’s another source of income or upsell to a standard ICE offering,” says Jimmy Spears, head of automotive at artificial intelligence (AI)-powered repair solutions provider Tractable.
Not that this premium price state of affairs is going to last. Competition will intensify. We can bet the legacy carmakers will fight that much harder to get Tesla-sized EV deals with commercial fleet operators and advances in the tech will bring the costs down. In fact, if length-of-ownership expenses are considered, we’ve already passed the tipping point. Also, we have to consider the tough-to-quantify “green” benefits of the Great EV Switch. “The lifetime cost of ownership [for EVs] is now lower for electric vehicles than gasoline and electrifying one taxi can save as much [carbon dioxide] as electrifying three consumer cars,” says Schiel.
Since governments are now deeply entrenched in the fight against climate deterioration – witness China’s immense effort to green its car industry fast – there’s also top-down momentum for fleet operators to go green sooner rather than later. In the US, ever a bellwether for the industry as a whole, some top-level officials are effectively forcing the switch through various types of decree.
“Legislation and other environmental factors have pushed the manufacturers into sunsetting ICE production and introducing EV’s into consumers’ lives,” says Spears. “Both Uber and Hertz are learning how to manage the future. Governor Gavin Newsom in California signed into law that all vehicle sales in California, the world’s largest car market, will all be EV by 2035.”
Few auto industry professionals need to be told that 2035 is hardly a long time away by the standards of their business. For perspective, it was barely over 13 years ago that Tesla itself delivered its first model and look where the company is now.
However, this illustrates an important point about EV take-up for commercial fleets. The landscape is changing rapidly and even some of the most important fleet operators might not necessarily be prepared for this. For instance, Schiel points out that “infrastructure isn’t adequately prepared and charging needs to be improved for greater reliability”. Even a brief drive around any major American city makes this obvious; gas stations are frequent sights, while finding a dedicated EV charging station takes quite a bit of hunting.
Meanwhile, says Spears: “Change is expensive. In change management you have to manage ‘un-learning’ the old behavior: it’s easier to learn than to ‘un-learn.’ Once the new standard operating procedures are documented, the advantages of the EV can be realized along the value chain. How are unneeded petroleum fuel costs to be distributed and consumed in the new operating model? How do you take advantage of greatly reduced maintenance costs? How do you handle the increased price of the vehicle through purchase or lease? The advantages have to be identified and outweigh the drawbacks.”
Since EVs are quickly becoming the standard for autos throughout the world, these are pressing questions that will need to be asked. Hopefully for Hertz and other large commercial fleet operators ready to take a big EV plunge, they have at least some of the answers.
