GM and Ford Will Fight Startups in the Commercial Van Market

(Bloomberg) --

Greetings Hyperdrivers! David Welch here. I’m the Detroit bureau chief for Bloomberg and have been writing about cars, car companies and auto tech for almost 20 years. This week, I’m talking about the hottest electric vehicle you’ll never buy. The cargo van. That’s right. Four wheels, a box and a stripped down cabin. It’s not sexy, but thanks to Amazon and e-commerce, startups and established carmakers are falling over themselves to make these proletarian haulers, preparing for a battle royale.

Just in the past week, U.K. startup Arrival said it will open a second plant in the U.S. to make delivery vans for UPS. Electric Last Mile Solutions, a U.S. startup with Chinese roots, confirmed plans to start building plug-in vans in the former Hummer factory in Indiana come fall. And under-fire Lordstown Motors defied a short seller’s report that it had no revenue potential by announcing a battery-powered van for 2022. General Motors and Ford already said they have e-vans coming.

The Covid pandemic-inspired boom in e-commerce is driving demand for these e-vans, with the likes of Amazon, Fedex and UPS needing more vehicles to keep up with growing freight volume. Combine that with the Biden Administration’s stated desire for clean transport and what you get are big companies moving to reduce their carbon footprint. In the next couple of years, there may be unusually large demand as companies move to replace gasoline burners with plug-in trucks.

“Commercial vehicles aren’t sexy, but it’s a hell of a good business,” said Sam Abuelsamid, principal research analyst with Guidehouse Insights. “They are a crucial part of the economy.”

It’s a smart move for all involved. I see companies trying to sell skeptical consumers on the idea that they don’t need to fear running out of juice on the highway in an EV.  Fleet owners know exactly how far their vehicles will ride before needing a recharge, and it’s usually not much more than 100 miles in a day. Electric vans are also cheaper and easier to build, typically use smaller, less expensive batteries and their customers aren’t nearly as finicky as the wealthy consumers that Porsche, Tesla and GM’s electric Hummer are chasing with their $100,000 electric rides.

That’s why Electric Last Mile, which went public in a SPAC deal in December, is selling a small electric van that goes 150 miles on a charge — it’ll cost $25,000 after the federal government’s $7,500 in tax incentives, said CEO Jim Taylor.

Ford, the largest commercial vehicle maker in the U.S., says it will start selling its E-Transit van later this year — it’ll go 126 miles on a charge. GM is launching a new unit called BrightDrop shortly after, with plans to sell the EV600 van that can go 250 miles on a charge and will save diesel truck owners $7,000 a year if they make the switch, said BrightDrop CEO Travis Katz. He told investors at a recent presentation that electric delivery vehicles will be a $30 billion market by 2025. BrightDrop already has Fedex signed on as a customer.

Arrival builds small vans and buses in tiny factories that cost about $40 million and can make 10,000 vehicles a year. By next year, the company will have two manufacturing operations in North and South Carolina and 31 globally by 2025.

“All of these large fleet operators have environmental goals,” says Mike Abelson, CEO of Arrival Automotive North America. “They all have the stated intent to go electric and their message to us is that there isn’t enough product to choose from.”

There will still be a shakeout. Guidehouse forecasts that electric delivery vans alone will sell at a rate of around 190,000 a year globally by 2030. Electric trucks of all kinds, including work vehicles, garbage trucks and other proletarian haulers, will be 600,000 a year, Abuelsamid says. Will there be enough customers for all the vans being built?
 
“Probably not,” Abuelsamid said. “Certainly not in North America.”

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