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By Peter Valdes-Dapena, CNN Business
Major automakers are coming out with electric cars and SUVs that could, one day, threaten Tesla’s dominance in that field. But there’s a big fight brewing in another electric vehicle market where Tesla doesn’t even play. Electric work vans.
Electric vans present a big opportunity because of two concurrent trends. Demand for vans is increasing as Americans having gotten used to having stuff delivered to their homes and companies, including online retailers and automakers, are working to lower their carbon emissions.
In terms of startup competition, established automakers aren’t taking on Tesla but Rivian, the $50 billion electric truck and SUV-maker with a huge built-in customer. Amazon, an early investor that maintains a roughly 20% stake in Rivian, gave the then–fledgling EV titan a big boost early on by placing an order for 100,000 electric Rivian cargo vans.
Amazon also recently made a deal with Stellantis to buy its electric Ram vans when they come out in 2023. (The two companies also made other arrangements in areas such as software and data storage, which Amazon will provide.) General Motors has recently made deals for FedEx and Walmart to buy vans from GM’s newly formed electric cargo van subsidiary, BrightDrop. Ford announced Tuesday it has started shipping E-Transit electric vans from a Missouri factory. It had previously announced deals, including with Walmart and various city governments for over 10,000 of the new electric vans. Ford is also an investor in Rivian, but, unlike Amazon, Ford has no seats on Rivian’s board. And Ford and Rivian dropped a plan to work together on vehicles.
For its part, Rivian insists more automakers getting into the electric van game is all for the greater good.
“EV growth in the fleet industry is a good thing. Electrification at scale has always been a part of our mission and is critical to decarbonization and making the planet a better place,” Rivian spokesperson Kenya Friend-Daniel said in an email.
No one is getting into this business for the excitement. Cargo vans, electric or not, are about as boring as motor vehicles get, the automotive equivalent of dry white toast. You can do amazing things with them, but, fresh from the factory, they’re square and flavorless. Even as work trucks go, they entirely lack the cowboy swagger of pickups.
The coronavirus has brought renewed attention to these bare-bones metal boxes. Online shopping, which has increased during the pandemic, has brought fleets of cargo vans onto America’s streets. Online holiday shopping, for instance, increased 43.5% between 2019 and 2021. according to Adobe Analytics.
Today the vast majority of work vans are powered by gasoline, but battery-powered vans could be ideally suited to this sort of use, giving companies more incentive to buy them. Work and delivery vans rarely make long interstate highway drives that would require recharging along the way. They generally drive relatively short routes and they return to company parking lots or garages at night where they can recharge for the next day’s driving.
“When you look at the actual, already existing use cases for vans, you can see that electric adds to the value in a lot of different ways,” said Kathryn Schifferle, CEO of Work Truck Solutions, a company that closely tracks truck and van purchases by businesses.
Market share of work vans, in general, has dropped in the last couple of years, according to J.D. Power, but that’s mostly due to reduced inventories, said Tyson Jominy, vice president of data analytics at J.D.Power. Demand, however, has gone up a lot, according to Work Truck Solutions. The number of requests to dealers for vans has doubled over the past two years, according to the company.
At the same time, many companies that operate big fleets have made public environmental commitments that essentially require electric vans.
“A lot of these companies have made commitments to carbon neutrality,” said J.D. Power’s Jominy. “This is a big step to getting there.”
Automakers have also made their own commitments to sell large numbers of electric vehicles, so these purchases help them, as well, said Jominy. Car companies often have to invest in the development of electric vehicles and in refitting factories to build them without a clear idea of how large the market is. Because electric vehicles share many common components, a committed customer for one type of electric vehicle can help defray costs for electric vehicle development as a whole.
“Many of these contracts are done ahead of time for many hundreds of thousands of vehicles,” Jominy said. “It will absorb manufacturing and fixed costs.”
The combination of high demand and low inventory presents an opportunity for fast moving automakers, whether established companies or startups, to steal business away from competitors, said Schifferle.
It may not be that easy, though, said J.D. Power’s Jominy. Electric vans may be new, but these large business customers know Ford, GM and Stellantis and may have worked with them for years.
“Adding an EV to one’s fleet from your commercial sales rep at the automaker with whom you have a great and long-standing relationship, would be an easy add and relatively low risk,” he said in an email.
Rivian wlll have a harder job building customer relationships and convincing commercial fleet buyers to take a new type of product from a brand new company.
“Either way, it’s going to be an exciting race to watch,” Jominy said.
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CNN’s Parija Bhatnagar contributed to this story.