'Suspended belief': Electrification next wave requires a rethink

PORTLAND, Maine—Electric vehicles are now commonplace, though the cost of new trucks and of developing a charging infrastructure has limited commercial adoption to certain applications and regions—and to how much emphasis (and investment) shippers and commercial fleet leadership commit to the clean energy transition.

The key to moving forward is to rethink the supply chain in ways that support EV technology that is already good and rapidly getting better, or so concluded numerous discussions here at the WEX Venture Capital Summit.

“We used to think we needed hydrogen for trucking, that we needed a whole bunch of other solutions—and we really don't. Batteries do extraordinary things now, and they're going to do extraordinary things at an order of magnitude better over the next decade,” said Andrew Beebe, managing director for Obvious Ventures, which invests in carbon-free industrial solutions. “So I would just encourage everyone to go on a journey of suspended belief, where you sort of think through what that curve might look like.

“And then remember the solar cost curve and other cost curves that we've seen that have blown our minds in terms of the capabilities to reduce costs. And I think we will get to those places faster than a lot of people anticipate.”

Supporting the notion: What "seemed impossible" just a few years ago, when Beebe was pitching investment ideas, solar panels have dropped from $10 a watt to 15 cents a watt, largely due to learning curves and production improvements rather than fundamental breakthroughs.

“The same thing will happen with batteries—again, without a lot of breakthrough, and that transforms things on the road, in the air, and on the sea,” he said.

Evolving landscape

Beebe spoke as part of a panel, The Next Wave of Fleet Electrification, that opened by polling the audience of investors and entrepreneurs.

While 100% electrification of passenger vehicles by 2035 might be optimistic, the show-of-hands consensus shifts toward 95% global adoption for passenger cars and medium-duty vehicles by 2040. Heavy-duty and over-the-road trucking are projected to reach 95% electrification closer to 2050. The poll included the ongoing development of other non-ICE technologies like hydrogen.

Despite some "misleading" headlines about slowing EV growth, the market is experiencing a "drop in the rate," not a decrease in total sales. 

Part of the pushback on EVs comes from a generational “emotional stigma,” suggested Mathias Krieger, CPO and co-founder at HIVED, a U.K.-based all-electric parcel delivery company.

“We are arguably already there in many respects, where electric just wins hands down, even at today's battery cost, today’s vehicle infrastructure—certainly in most cases,” Krieger said. “From a European perspective, if you look at heavy-duty trucking, arguably, we are aleady 80 to 90% there.

“But we have to wait for a lot of hearts and minds to change. So that's my reason for not being as bullish on it, more so than as a technology.”

See also: Autonomous trucking is more than autonomous trucks

Mixed fleet future

Early resistance to commercial EV adoption centered on range concerns, but a thorough analysis of how a fleet operates typically shows range is not at all a problem for most applications, suggested Sarah Booth, director, strategic business operations at Sawatch Labs, a WEX company that specializes in fleet electrification software.

Economics, however, continues to be a challenge.

“There's a lot of shifts coming, but it's going to be a mixed-energy fleet for the vast majority for the foreseeable future,” Booth said. “And new technologies that we're not even thinking about right now might come into the space.”

Another source of resistance, ironically, might stem from the rapid improvement in EV technology, noted Lisa Drake, director of fleet electrification for Merchants Fleet. Drake came to Merchants in 2021, and hopes were high for EV deployment.

“Vocational fleets are the heart and core of our business, but those pickup trucks and cargo vans in 2021 really weren't ready,” Drake said. “The excitement and the curiosity and some level of readiness to at least get started were there, and the vehicles were not.”

On the other hand, funding incentives and clean vehicle regulations kept the EV market moving forward. Now “the world has changed”—or, at least, U.S. policy has.

“Among the uncertainty in the economy, among all the concerns about vehicles and tariffs and whatnot, it's kind of like electrification is the least of fleets’ worries, unless they have sustainability goals,” Drake added. “We see many, many fleets taking a break. And I don't think it's because they don't think that it's going to happen. Eventually, EVs are going to be part of their future, but it doesn't have to be today.”

For Class 8, Beebe is optimistic that widespread adoption is forthcoming, as vehicle pricing decreases and the operational advantages of EVs become more apparent. He’s particularly hopeful for full production of the Tesla Semi, noting that Obvious Ventures has invested in Forum Mobility, a zero-emission trucking solutions provider focused on port drayage.

“They're signing now for orders to be delivered next year,” Beebe said. “It’s extraordinary. It will blow people's minds as those numbers get out—and that's just on today's technology—and the range is incredible. It's still not good enough for over the road, but the pricing alone is really going to change the industry.”

Facing the challenges

While the technology is largely available, the journey to fleet electrification is not without significant hurdles, as outlined by the panel and in follow-up conversations with representatives from other WEX portfolio companies:

• Infrastructure pain points: Upgrading the grid for heavy trucks requires immense energy and faces challenges with thousands of diverse utilities and state regulators reluctant to increase rates in anticipation of future demand. HIVE has had to adapt by seeking locations with existing power infrastructure due to slow utility responses, Krieger noted. “It's a big problem. For the actual running of a business like ours, it's probably one of the only remaining problems because the technology on the vehicle side is pretty much there now.”
• Charging deployment delays: Fleets frequently experience 12-month-plus delays in getting charging operational after vehicle delivery. Early engagement with utility account managers and providing data-driven analyses can help optimize infrastructure planning. But the trucking industry should advocate the benefits heavy-duty EVs will offer when not on the road, as battery storage for the grid, suggested Nick Woolley, CEO and co-founder of ev.energy. “These fleets that are electrifying are challenging for utilities to digest in the moment, but the opportunity is that they are a big asset to the energy system. That's the story we are communicating with regulators and utilities: that we can use electric trucks as an asset to help reduce rates for everybody in this new world where we have lots of flex in the grid.”
• Home charging hesitation: While economically advantageous, installing charging infrastructure on employees' personal property is a barrier, especially for companies with high turnover rates.
• Maintenance and TCO unknowns: Light-duty EV maintenance is generally less, but major repairs can be costly and time-consuming. Access to repair facilities and trained staff, especially for medium- and heavy-duty EVs, varies regionally. Crucially, reliable resale value data for medium- and heavy-duty EVs is scarce, forcing fleets to adopt a conservative approach in TCO calculations. Even on the light-duty side, the used market is developing as three- and four-year-old models are being traded in, but battery technology has evolved so quickly that the older models are less appealing, noted Sawatch’s Booth.
• Specialized vehicle limitations: For specific applications like police patrol vehicles, current EV payload limitations are a major obstacle, as officers carry significant gear that quickly exceeds capacities. Ballistic shielding and charging availability at training centers are additional concerns.