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Troubling Times for Electric Trucking

By December 21, 2023January 28th, 2024No Comments

With all the recent buzz about electric vehicles (EVs), not to mention the push towards sustainability and emissions reduction, it was only going to be a matter of time before electric Class 8 trucks entered the scene.

Class 8s are classic semis or tractor trailers, so they are not just part of the supply chain, they have supply chains themselves. There are a number of companies in the space, some with familiar names and some that are startups. Commercial electric trucking has been in the news recently, and not for entirely good reasons.

Like many of the things we cover on Dial P for Procurement, electric class 8s have been in the news recently. Also like many of the things we cover here, they didn’t make headlines for good reasons.

In this episode of Dial P for Procurement, I cover recent news stories about commercial electric truck makers Volta and Nikola as well as an emerging business model: Trucks-as-a-Service.

Volta Follows Their Battery Supplier Into Bankruptcy

Volta was founded in 2019, and their 16 ton EV truck the Zero was intended for urban use. It has “human centric” engineering and a wide range of safety features. 

Deliveries of their ambient and refrigerated trucks were scheduled to begin in 2023, and they were selling in England, France, Spain, Germany, the Netherlands, and Sweden, with forward-looking plans to expand into North America and Italy.

In October, Volta initiated bankruptcy proceedings in Sweden. Their sole battery supplier, Proterra, had declared bankruptcy in August.

According to the company, they had 6,000 vehicles on order, a $1.3 Billion book of business. Unfortunately that did them very little good when they lost Proterra. They could no longer access the funding they needed to stay in operation.

Proterra is a California-based electric bus maker that struggled to scale effectively. They had too many side projects and business units. Maybe it shouldn’t be a surprise that it was a battery supplier who dragged Volta into bankruptcy, but what dragged Proterra down? It was increasing costs and tight contracts.

Proterra’s production was done in the United States, something that garnered them attention from the Biden Administration in 2021. They were based in California, while much of their battery manufacturing took place in a factory in South Carolina.

Most of Proterra’s profits came from the transit bus unit, and most of those contracts had been signed with public sector entities – like cities. When costs went up, Proterra had to absorb the increases.

As it stands today, Volta’s assets have been purchased by Luxor Capital, their largest investor prior to the bankruptcy

Volta employed 800 people in total, 600 of which were based in the UK. The “vast majority” of them lost their jobs thanks in large part to Proterra. The sale price has not been disclosed, but Luxor is probably just keeping/licensing the IP because most of Volta’s employees will lose their jobs.

No company can be stronger than their most critical supplier, and that is especially true when that supplier provides the most important part of the powertrain.

Is Nikola “In Motion”?

On December 18th, Nikola Founder (and former CEO) Trevor Milton was sentenced to four years in prison for securities and wire fraud.

In his conviction last year, the following misrepresentations were key parts of the case against him:

  • Describing a non functioning prototype electric truck as “fully functioning”
  • Saying the company was producing hydrogen fuel (they weren’t) and that they were doing it for much less than other companies. 
  • Suggesting that the Nikola One could move under its own power.

That third one is my favorite. There is an absolutely gorgeous video of a Nikola One driving through a desert in what looks like the American West. It was described as “In Motion,” a phrase that ended up being word-based sleight of hand. 

The truck looks like it is driving, but Nikola took out the batteries, taped the doors shut, and just rolled the truck down a hill. That is wrong and completely misleading, but creative and hysterically funny at the same time.

Prosecutors have estimated the losses caused by Milton’s misrepresentations at $660 Million, and the charges he faced carried a potential sentence of 60 years in prison. As a first time offender, he got off with 4 years in prison, inspired by the sentence handed down for disgraced Theranos CEO Elizabeth Holmes.

Nikola is now doing their best to roll on – pun fully intended. Their trucks are different because they are not fully electric. They convert hydrogen into electric power by combining it with oxygen. The only byproducts of this reaction are water and heat. 

The energy page on Nikola’s website says “POWERED BY POSITIVITY.” That might be among the truest things they have ever said. We now know that the Nikola One wasn’t powered by a hydrogen fuel cell, or an electric battery, or anything other than the (probably) diesel-powered vehicle that dragged it up a hill and pushed it back down.

Trying Out Trucks-as-a-Services (TaaS)

Part of why companies like Volta and Nikola faced such challenges is because creating new things, and the system required to support them, is difficult and expensive. Looming regulations are raising the pressure to transition to electric vehicles, but it isn’t yet a realistic solution for many companies.

Leave it to the business world, and the cost model folks in particular. They have invented Trucks-as-a-Service.

Understanding how expensive these vehicles are, some companies are looking to make them accessible without the high investment bar associated with ownership.

MAN Truck and Bus, an OEM based in the U.K., has reportedly mastered the model. They sell access to trucks by the kilometer and currently operate about 15,000 trucks. Part of their value proposition is in their analytical capabilities, helping subscribers make the most of every piece of equipment.

As procurement knows all too well, changing the prevailing mindset around how something is bought is hard, and it is early days for this model. Subscriptions often Include charging network access and equipment maintenance. Volta offered a subscription service… until they went bankrupt that is.

This is a cautionary tale for companies thinking of testing out new models and equipment. We still need the equipment manufacturers, their suppliers, and the maintenance ecosystem to be functional and solid

WattEV, based in southern CA, is among the first U.S. based startups to embrace this model. They have ordered 50 Class 8 Volvo VNR Electric trucks. Forum Mobility, also based in California, offers a monthly plan and covers charging and maintenance services. They are focused on drayage, running shorter routes from ocean freight terminals that play to the current strengths of available equipment.

There is no question that innovation and investment in the commercial electric truck space will continue, but until everything stabilizes – between manufacturers and the supporting ecosystem – we’re likely to see more dabbling than transitions.

Either that, or we’re going to have to make sure all delivery routes are planned out so they are downhill. And then in 4 years, Trevor Milton can come give them a push.

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