The Ram ProMaster Battery made by the Chrysler brand is just one of many upcoming electric delivery vehicles on the horizon in 2022. Technically the vans are made by Stellantis, formed last year as a merger between the Italian-American conglomerate Fiat Chrysler Automobiles and the French PSA Group.
What makes it different is that Amazon has committed to buying more of them. How many more? As many as 10,000 of the trucks could hit the road this year. And as more companies move toward a carbon-neutral future, last-mile delivery, including FedEx routes, are moving toward electric vehicles.
But what are the pros and cons? And what does it mean to you if you are buying or selling a FedEx Route? Here are some things to think about.
What’s the Current Electric Vehicle Delivery Situation?
Currently, according to the EPA, medium and heavy-duty trucks make up 24% of the carbon emissions in the U.S. That’s a lot. To combat that, there are a lot of electric vehicles emerging on the market in this space.
- The Ram ProMaster is just one. Others include:
- The Canoo MPDV (Multi-Purpose Delivery Vehicle)
- GM subsidiary BrightDrop with two delivery vehicle options
- The Rivian EDV (Electric Delivery Vehicle) also designed for and in conjunction with Amazon
- The Udelv Transporter
And there are more, including semi-tractors by Tesla and Nikola and smaller delivery vehicles in the works from Ford and others. In short, delivery companies and even independent contractors have choices.
But what’s the cost vs. the long-term benefit?
Long Term and Short-Term Electric Vehicle Cost-Benefit
Currently, the largest delivery vehicle cost is fuel, followed by maintenance. These costs are relatively volatile: the price of fuel and even driver behavior that affects fuel economy can have serious impacts on the profitability of a delivery route.
However, vehicles are relatively inexpensive to purchase. Used vehicles that are in reasonable shape abound, and even new delivery vehicles are not prohibitively expensive.
The reverse is true of electric delivery vehicles. The largest cost is the initial purchase. To offset that cost, the cost to operate per mile is much, much lower. At least at the moment, and we will look at that in a second.
The key part of this equation is how much each truck is driven. The more the electric vehicle is driven, the sooner the overall cost of purchase is “paid for” and the Return on Investment equals out. For example, let’s say contractor A has two drivers who use the same vehicle, and it runs six days a week. The average mileage of the daily route is 180 miles.
In this case, the vehicle will need to be charged overnight in most cases, as range hovers around 250 miles per charge. In cold weather conditions, that might go down, and a charging stop at a fast charger might be necessary during the day. But fuel costs would be much higher for that vehicle and can vary with the price of diesel. Also with a high-mileage route, oil changes and other maintenance will happen more frequently. Therefore, the electric vehicle will quickly pay for itself.
However, let’s say contractor B has an urban route in a downtown area. Her route mileage is only about 45-50 miles a day. Using some of the same assumptions as the example above, it will take the EV three times longer to equal the same return on investment.
In other words, you’ll have to do some math with your route to determine how quickly an electric delivery vehicle will pay off. But that’s not all you have to factor in.
There’s also one other concern. As more electric vehicles roll out onto the market, this puts a strain on the current power grid, and the cost of upgrades may very well be passed on to consumers. So while charging and electricity are cheap now, they might not always be as inexpensive. They will likely never reach the cost of fuel on a per-mile basis, but it may take longer to reach a positive ROI.
However, some areas are enacting new laws you need to be aware of.
Local Regulations and Zero Carbon Targets
States like California and Washington have already passed laws governing the sale of non-electric vehicles, Washington as early as 2030 and California not far behind with 2035. What that means for the future of fossil fuel vehicles is that eventually, they will be obsolete. If demand rises as regulations go into effect, the cost of electric vehicles may go up rather than down.
It is worth watching the regulations where you live, and deciding if you want to be ahead of the curve or forced to make a change at the last minute. It’s likely that being better prepared will also pay off long term.
But with some of these regulations also come tax and rebate incentives. States want people to move to electric, and they are offering incentives for them to do so. Tax breaks and even cash rebates may be available that offset those initial purchasing costs.
While some Federal incentives are set to expire, it is likely new ones will take the place of the current ones. Either way, early adoption could pay off in a big way for FedEx route owners.
Your Future, Your Route
Quite often if you are selling a FedEx route, you are also including the vehicle that is used on that route. Buyers like this, even if they end up replacing the vehicle eventually. But he newer and better the vehicle, the higher price you can get for your route. The time may come sooner rather than later where an electric vehicle could be a huge plus if and when you decide to sell.
When you’re buying a new route, you may want to look at routes with an electric vehicle from the start, or factor in the cost of obtaining one to your business plan. In the long run, it could save you money, and is much better for the environment.
Ready to buy a FedEx route? Considering your options when selling a route? Either way, contact us here at Route Advisors. We’d love to talk about how we can best help you in your journey of FedEx route ownership.