The first ever major auto show was in the year 1900. It opened on November 3rd in NY at Madison Square Garden. According to Wired, “The weeklong event…featured 66 exhibitors displaying 31 newfangled autos and a variety of accessories to pimp the ride.” In this country and around the world, we were in the process of moving from the horse and buggy to the internal combustion engine.
New York and other large cities were all concerned about the pollution that was occurring – horse manure in the streets. They didn’t think they could sustain it for another few decades. Automobiles could be the answer to the pollution problem. The NY papers at the time were writing about the need for federal and state infrastructure changes and rules of the road to manage these vehicles if they were going to come and for policy updates to incent manufacturers. There was concern about how users would adapt – would they give up this traditional way of travelling? People at the auto show described seeing and riding in these vehicles as a “jaw dropping experience”. And now, 122 years later, we are going through a similar transition from Internal Combustion Engines (ICE) to Battery Electric Vehicles (BEVs).
Throughout 2021 and at the NAFA I&E Expo last September in Pittsburgh, the Wheels Donlen team has promoted eight steps as the process by which you can assess your BEV readiness published in our BEV Readiness Guide. Now, over eight months later, we are revisiting these steps, critiquing the process and sharing the top five lessons we’ve learned so far.
The steps are:
- Define Sustainability and Budget Goals – All successful journeys begin with planning and a budget and a timeline.
- Track BEV Availability – Know your options today and know what is coming.
- Build Fleet Vehicle Profiles and Forecast Replacement Needs – Know your fleet needs including driver distances and driver patterns then forecast out three or four years which becomes your cycling strategy.
- Match Needs to Availability – Cycling out your old ICE vehicles is your best opportunity to cycle in the new electric vehicles.
- Use TCO and CO2 Models – TCO and carbon models will generate the data you need to make decisions about what vehicles to go into. Plug gathered data into your models and use your historical data to assess if you are on the right path to meeting goals.
- Develop Charging Infrastructure Planning – Have a charging infrastructure in place before your vehicle hits the road.
- Assess Credits and Rebates – Understand federal and state level assistance available and use it to your advantage.
- Consider Short Term Alternatives – Hybrids, reducing idling, alternative fuel options and carbon offsets can fill short term gaps along the journey towards electrification since the journey may take five to twenty years.
While using this framework, we learned several lessons and identified a few gaps that I am going to share with you.
Lesson One: The process still holds.
Gap: A ninth step is needed: repeat the process.
We still feel like this is the right process a year later although there are variations of these steps. Some of our customers call it by a different name or they use the steps in a different order and or they combine the steps. Our framework provides a good road map, and it also helps generate critical thought areas that are needed along the way.
One gap we found is that a ninth step is needed: repeat this process and assess regularly because things are so volatile and change quickly. Forces out of our control can alter plans quickly which leads to the second lesson we learned. Katie Keeton, Fleet Manager, Mobility Services for Siemens, “We definitely see this being something we are looking at every six months. When we initially set out our plan, more EVs were supposed to be available. We’re just going to have to continue to fine tune things as we move forward.”
Lesson Two: Set Flexible Goals and Timelines
Gap: World events, OEM plans and new terms create uncertainty.
Do set your goals and timelines but really recognize that this is a marathon and not a sprint. So be flexible and adopt. Vic Stewart, Director, Corporate Purchasing for Fisher Auto Parts, says “Our timelines are continuously being evaluated and we remain very flexible based on what is happening in the industry.”
Yet there is still much uncertainty when it comes to BEVs making it essential to be flexible in your planning. In the near term, there is the question of how quickly vehicles will be available – the models that we need and the volumes that we need. How the words electric vehicles are used and how we interpret these words still causes some confusion. We still have the lingering effects of the pandemic – the chip shortages and world events taking place right now have slowed production down for the time being. And then there is the uncertainty of user adoption – how difficult will it be to give up ICE vehicles that have been around for 120 years especially if the infrastructure and federal and state support is not there to meet demand.
The headlines are full of organizations and entities drawing a line in the sand by making commitments to electrification. President Biden issued an Executive Order that half of new car sales should be EVs by 2030. Referring to the US auto industry, he said it is “electric, and there’s no turning back,” before signing the order at a White House ceremony. More recently the administration has clarified that one half would be PHEV, EVs, fuel cells or plug in electric vehicles. Then we have the following headline, “Six Major Automakers Agree to End Gas Car Sales Globally by 2040” referring to an agreement Ford, General Motors, Mercedes-Benz as well as 30 national governments signed to stop the sale of gas and diesel vehicles by 2040 and in major markets by 2035. VW is drawing its line in the sand at 2035 to phase out ICE vehicles. Toyota is setting their sights at being 70% electrified by 2030, while also suggesting that most vehicles will be hybrids (which have the dual ICE and electric powered systems).
Ford is projecting that 50% of its production will be electrified by 2030 though it is unclear what Ford means by “electrified.”
In addition to manufacturing challenges, we now have high fuel prices sparking interest in electric vehicles, without knowing if the charging infrastructure will be there to support the demand. Finally, there is user adoption to consider: it may need a nudge. As an example, Sharon Etherington, Sr. Manager, Fleet and Travel at Roche Diagnostics, implemented a leader board at their quarterly driver/leadership meeting recognizing the drivers who were making the most of the EV part of their PHEV SUVs which, she said, “turned into a competition that was unexpected and a competition like no other that I’ve ever seen.” The transition is here and under way, but it requires some flexible planning which really leads to our third lesson.
Lesson Three: Tracking and projecting EV availability is a challenge.
Gap: Policy and infrastructure advancement are underlying keys.
Understanding what models are and will be available and when may be a challenge that is with us for a while. During the Super Bowl, a commercial featuring the Sopranos theme advertising the Chevy Silverado ended with the message: RESERVE YOURS NOW. That Silverado was a 2024 EV vehicle, but they failed to mention when the vehicle will be available. The very next day, my first call of the day was a request to do a TCO model on that Silverado. We had six calls that morning looking for Silverados. As more EV models become available and replace ICE, we may see gaps in the charging infrastructure as well as federal and state policies and incentives.
To track availability, we use third party data from various sources including the EPA which rates and recognizes vehicles, Autodata which is where we get pricing and a guidebook on auction data for residual indicators. When looking at the data, you can see how availability is changing quickly. In September of 2021, there were 51 BEVs that we could find through third party sources. As of mid-March 2022, there are 97 BEV models and combinations available. The hybrid side has remained about the same over time.
Lesson Four: TCO models (and data) are more readily available.
Gap: Expect a cost (and strategy) shift – from variable to fixed.
We do now have more and better data to build TCO models for BEVs than we did a year ago. The models are starting to show a cost shift away from our traditional buckets. Correspondingly, maybe we should look at shifting our cost strategies. When it comes to forecasting TCO, whether you are looking at models for gas, hybrid or electric, the buckets of cost are the same components: acquisition pricing, costs to power vehicle, maintenance and residual value at turn in. As acquisition pricing is released, it becomes our easiest data point to plug into models. Residual guidebooks like black book are now a resource for future values of BEVs. And in some cases where one is not available, we can use a residual of a gas counterpart or a similar BEV to get us in the ballpark.
Maintenance and cost to charge has been harder to estimate because we have lacked the data and the data sources. The Department of Energy has put out a study that suggests the cost of maintaining EVs to be about 60% of an ICE vehicle. It is not a perfect measure, and there are certainly some assumptions, but it provides us with guidepost to use. Similarly with fuel, the EPA rates BEVs with an MPGe or MPG equivalent.
The cost per mile projections are really promising when comparing similar ICE and BEV models. You can calculate an ICE vehicle’s cost to fuel by dividing miles driven by MPG to get the fuel consumed and multiply the fuel consumption by the fuel price to get total cost. For a BEV, we start by taking miles driven and dividing by MPGe. This gives you the gallon equivalence.
It is interesting to look at how the TCO categories for like ICE and BEV models compare. Depreciation is greater for BEVs which is expected, but the accident category is also higher for BEVs. It is not because accident spend is more; it is because the accident category becomes bigger in relation to maintenance and cost to charge categories for BEVs. It suggests that a cost strategy may be to shift away from managing depreciation towards managing accident and safety costs.
Lesson Five: BEV replacement models will take time.
Gap: Telematics to fill odometer gathering void?
It will take some time before we come up with our optimal replacement parameters and cycling models for EVs. I think it is just too early and the data is just too few. Certainly, you can keep BEVs for longer and have that operating cost per mile continue to decrease. It will be interesting to see how manufacturers respond in the forms of incentive dollars and technology or something else to keep that order stream going.
Historically, the fuel card and fueling process has been a way of capturing odometer changes in the vehicle. Telematics has been a better solution, although not utilized by enough fleet vehicles, to be a sole source of odometer data. As we move from ICE vehicles and away from fuel cards, telematics will be a vital tool used to capture key BEV data points, including odometer.
In February of this year at the Chicago Auto Show – one of hundreds that have taken place since 1900 – there were similar headlines, similar concerns and hopes and the same excitement about a new type of transportation – the electric vehicle. Experiencing a BEV going from zero to sixty in a few seconds with that quiet electric sound is also “jaw dropping”. And just as the automobile overtook the horse and buggy a century ago, so will the BEV overtake ICE over the next few decades.
Want to start your EV Journey, Contact Us to Learn how we can electrify your fleet.