When Do Electric Vehicles Make Sense?

FleetAnswers discovers that a combination of rising fuel prices, regulations, and reduced operating costs associated with the smarter application of EV technology suggests promising returns for some.

In a webinar session jointly organized by FleetAnswers and The Electrification Coalition, representatives from FedEx Express, PG&E, and Dow Kokam shared when and why electrification has made economic sense for their companies. Using innovative solutions, early adopters such as FedEx Express and PG&E are working to overcome core barriers to electrification.

With fuel prices being unstable in the current economy, both FedEx Express and PG&E see electrification as a potentially attractive strategy to help manage costs. Dave Meisel, director of Transportation Services for PG&E, said in the webinar that the compounded annual growth rate of the price of fuel over the past 15 years has made petroleum based fuels an unsustainable option for them. Meisel said that he sees rising fuel prices as “a golden opportunity” for fleets to move to electrification and to see “real operational savings and real work-practice benefits.”

Keshav Sondhi, manager of Global Vehicles Asset Management for FedEx Express, added that as fuel prices continue to rise, electrification can become increasingly appealing. Describing the inherent mechanical efficiencies of the electric drive train, Sondhi said, “with 90% to 95% efficiency, (electrification) is certainly the single most efficient way of rolling wheels on the road.” This fits into the broader strategy of efficiency and conservation that has become a focus at FedEx Express as the price of oil has increased in recent years.

The move to electrification has proven to be positive for PG&E. Early results for plug-in hybrid electric vehicles and battery electric vehicles showed savings of up to 70% in operational costs and that electric idle reduction can reduce costs up to 30%. In addition, state regulations have given electric vehicles a substantial economic advantage over gas vehicles. Noise restrictions in parts of California meant that gasoline or diesel operated vehicles could only run during designated hours of the day. Meisel found that with electrification, PG&E no longer has to worry about the noise restriction. “We can work there all night, if needed, in all electric mode, virtually doubling the work day,” Meisel explained.

Despite increased efficiency, productivity and operational savings from electrification, Sondhi recognized that the higher purchase price of an electric vehicle, two to three times the cost of its gas or diesel counterpart, has made it difficult for fleets to recover financially from the purchase of electric vehicles. FedEx found that focusing on electric vehicles for low variability urban routes and working with manufacturers to sell batteries at the sizes that fit route needs could significantly help with costs, providing a potential path for economic viability.

In the total cost of ownership model developed by Dow Kokam, they found that using plug-in electric vehicles made sense in step van applications but not in long haul applications. Mira Inbar, global strategic marketing manager for Dow Kokam, explained that there are common factors where electrification has made sense – It is typically in fleets that keep their vehicles longer, drive more miles, have high baseline maintenance costs, and where the baseline vehicle has much lower fuel economy.

Please visit FleetAnswers to read about the lessons FedEx Express learned from its global electric vehicle deployment as well as how PG&E is using electrification to save money on its fleet.