How expensive it is to operate electric trucks?

Wed May 08 2024
Ray Pierce (828 articles)
How expensive it is to operate electric trucks?

Executives at truck leasing company Ryder System have been attentive to the demands of their largest customers who expressed a desire to transition to battery-electric big rigs.

Now that the heavy-duty trucks are available, the company claims that there is limited customer demand for them.

According to Robert Sanchez, the CEO of Ryder, the financial aspect doesn’t align with the needs of most companies. Ryder, a company that oversees a fleet of 250,000 trucks and vans for numerous retailers and manufacturers, faces this challenge.

Ryder’s experience highlights the difficulties that state and federal governments encounter in their efforts to transition truckers from heavily polluting diesel rigs to zero-emissions vehicles.

In order for battery-electric trucks to pose a serious challenge to diesel rigs in the fiercely competitive freight sector, truck makers will have to make substantial improvements in battery weight, range, and charging times. This is crucial as the industry operates on narrow profit margins.

According to Rakesh Aneja, head of eMobility at Daimler Truck North America, the demand for their Freightliner eCascadia battery-electric semi truck has not met their expectations.

Aneja mentioned that the number of Freightliner eCascadia orders for this year is similar to the orders received in 2023. Despite the growing pressure from various stakeholders, including governments, regulators, and companies themselves, to reduce truck pollution, the situation remains unchanged.

From an economic standpoint, the price of battery-electric trucks is approximately three times higher than that of diesel rigs. There are various federal and state programs available to assist with the purchase costs, although it is important to consider the significant hurdles posed by operating costs and other related issues.

Truckers argue that establishing and operating battery-electric truck operations is challenging, costly, and inefficient. Installing on-site charging facilities for trucks that have shorter travel distances and longer recharge times can be a time-consuming process that can span several years.

Ryder introduced a specialized service one year ago to assist businesses in establishing and managing fleets powered by batteries. This service includes the installation of charging equipment and the maintenance of the vehicles.

Ryder reports that it has only sold 60 vehicles through the program, with the majority being light-duty trucks. According to the information provided, three companies are currently operating battery-electric heavy-duty trucks. However, it is important to note that these five vehicles are currently limited to transporting trailers within yards, specifically between parking spots and loading docks.

Sanchez noted that companies will only transition to battery technology when it becomes cost-competitive with diesel for running their vehicles, unlike individual car owners who may choose electric cars based on principle.

Based on an analysis of the annual operating expenses of battery-electric commercial trucks, Ryder discovered significantly higher costs compared to traditional, diesel-powered rigs. This analysis was conducted using load and route data from the 13,000 vehicles it operates on behalf of customers.

The analysis considered the existing infrastructure for fast charging and primarily examined costs related to purchasing the vehicle, maintenance, labor, and fuel.

According to the company’s findings, the use of light-duty, battery-electric vans results in an increase in annual operating costs by a few percentage points. According to Ryder’s analysis, the cost difference becomes more noticeable as trucks increase in weight. Operating battery-electric big rigs are estimated to be about twice as expensive as diesel trucks on an annual basis.

“The magnitude of the gap was quite surprising,” Sanchez remarked. The costs vary from state to state due to variations in average wages, fuel and power prices.

According to the Ryder analysis, the conversion of a standard mixed fleet of 25 commercial vehicles, which includes approximately 10 heavy-duty trucks, from diesel to battery power in California would result in a significant increase in the fleet’s annual operating costs. Specifically, the costs would rise by 56%, amounting to $3.4 million per year. Transitioning to the same model in Georgia would result in a significant increase in annual operating costs, amounting to a 67% rise or $3.7 million.

According to Ryder, the increased operating costs would contribute an additional 0.5% to 1% to inflation. According to Sanchez, the transportation costs within a single state would increase.

Advocates for battery-electric trucks argue that they offer greater cost-efficiency compared to diesel trucks in the long run. This is due to their simplified design with fewer moving components and reduced maintenance and repair needs. According to certain trucking companies, the claims about battery-electric trucks have not been thoroughly tested due to their limited time on the road.

Electric trucks can provide significant savings on fuel costs in different regions of the country. The amount saved depends on the price of diesel in each state and the time of day when the vehicle is charged, as electricity costs can fluctuate.

Due to the increased weight and longer recharge times of battery-electric trucks, companies find themselves in need of additional vehicles and drivers in order to transport the same amount of freight as a diesel truck. According to the Ryder analysis, it was found that in order to match the performance of a single heavy-duty diesel truck, a company would require approximately two battery-electric big rigs and over two drivers.

Additional operational challenges are arising as the large trucks hit the highways.

According to Penske Truck Leasing, their pilot programs with battery-electric trucks have revealed an interesting finding: due to their heavier weight, battery-electric rigs experience faster tire wear compared to diesel trucks. The company has also discovered that certain maintenance costs are pricier for electric trucks due to the scarcity and higher prices of certain parts.

According to Paul Rosa, senior vice president of procurement and fleet planning at Penske Truck Leasing, there continues to be significant interest in zero-emissions vehicles. However, after expressing a strong desire for an immediate transition to battery-electric trucks in the past, customers are now showing a preference for a more gradual approach.

Trucking executives anticipate that advancements in technology, such as the development of smaller and lighter batteries with improved range, will eventually lead to cost reductions. Meanwhile, certain state and federal governments are implementing regulations that compel truckers to occupy their vehicles.

An announcement was made by the U.S. Environmental Protection Agency stating that manufacturers will be required to increase the sale of battery-electric trucks by the end of the decade. California has implemented a series of regulations that encourage truckers and fleets to transition to zero-emissions vehicles.

Local and national trade groups are in opposition to the rules and regulations.

According to the American Trucking Associations, the recent mandates are too expensive for the majority of truckers, especially since 96% of U.S. trucking companies operate 10 or fewer trucks.

Ray Pierce

Ray Pierce

Ray Pierce is a Senior Market Analyst. He has been covering Asian stock markets for many years.