Fleet Electrification in USA

The momentum of fleet electrification in the United States is on the rise, spurred by ambitious targets established by the federal government. The White House has decreed a mandate for federal fleets to transition to 100% electric vehicles by 2035. In tandem, various states, cities, and public agencies are making assertive pledges to electrify their public fleets, encompassing city buses, school buses, utility vehicles, and garbage trucks. Nevertheless, the present status of public fleet electrification in the U.S. exhibits variability, with certain agencies making notable advancements, while progress is unevenly distributed across the nation.

Key Trends Regarding Fleet Electrification in United States:

• Many municipalities and government agencies have begun to adopt EVs for their fleets, as a way to reduce emissions and meet clean air regulations

• Companies such as FedEx, UPS, and DHL have begun to incorporate EVs into their delivery fleets to reduce emissions and improve efficiency

• Companies such as Uber and Lyft have announced plans to convert their fleets to electric vehicles as part of their sustainability initiatives

• Several school districts have begun to adopt electric school buses to reduce emissions and improve air quality around schools

• Corporates are also increasingly switching to EVs for their fleets, as a way to reduce emissions and fuel costs, and to demonstrate their commitment to sustainability

It is worth noting that fleet electrification can be affected by various factors such as government funding, local regulations, and company's sustainability goals. Moreover, some industries such as long-haul trucking are still facing challenges to electrify its fleet, mainly due to the lack of charging infrastructure and high battery costs. However, with the advancements in technology, these challenges are expected to be overcome in the future.

Key Drivers for the Growth of Electrification in United States:

• Government Targets: A key driver is the commitment from US government to ensure 50% of vehicle sales to be zero emission by 2030. This has led vehicle manufactures to increase investments in electrification.

• Renewed Commitment to Emissions Targets: There has been a renewed commitment to global emissions targets, which has led to a greater focus on electrification in the fleet industry

• Government Incentives: Federal and state governments offer various incentives, such as tax credits and rebates, to encourage consumers to purchase electric vehicles. Examples of some incentives include: (a) Federal Tax Credit: The federal government offers a tax credit of up to $7,500 for the purchase of a new EV. This credit is available for the first 200,000 EVs sold by a manufacturer, after which the credit begins to phase out (b) State Incentives: Many states offer additional incentives for the purchase of EVs, such as rebates, tax credits, and exemptions from sales tax or emissions testing (c) HOV Lane Access: Some states allow EVs to use carpool lanes even if there is only one person in the vehicle. (d) Smart Charging: Some states and utilities offer smart charging incentives to EV owners, allowing them to charge their vehicles during off-peak hours and earn credits on their electricity bill (e) Inflation Reduction Act: Passed in August 2022, IRA offers subsidies for all vehicle segment is the latest growth drivers introduced by the United States government

• Technology Improvements: Advances in battery technology have led to longer-range EVs and lower costs, making them more attractive to consumers

• Support from Major Automakers: Many major automakers are investing heavily in EV technology and production, making EVs more widely available and increasing consumer awareness of their benefits. Popular manufacturers such as Tesla have increased their production to keep up with demand while others are introducing new models (e.g., Ford F150 Lightning pick-up truck). This gives more options for consumer to switch to EV

• Smart Charging: Investments in the R&D for smart charging systems are increasing, which will support EV growth

• Cost Competitiveness: As the cost of batteries and other EV components decrease, the total cost of owning an EV is becoming increasingly competitive compared to traditional gasoline-powered vehicles

• Rising Uptake: There has been a growing trend towards fleet electrification in the United States, as more and more companies are switching to electric vehicles (EVs) to reduce emissions and fuel costs. There have been developments in government, delivery, ridehailing, school buses and corporate fleets

• Increasing Environmental Awareness: As concerns about climate change and air pollution grow, more consumers are looking for ways to reduce their carbon footprint and are turning to EVs as a cleaner alternative to gasoline-powered vehicles

• Aggressive Plans to Electrify School Buses: There are several plans and targets to electrify school buses in the United States. Several states have already established targets for electrifying school buses, while others are in the process of doing so. For example, California has a goal of transitioning to 100% zero-emission school buses by 2030, and New Jersey has a goal of electrifying all school buses by 2035. Montgomery County Public Schools (MCPS) has aggressive plans for electrification of its fleet and is targeting 100% electrification by 2035. Additionally, Biden administration's infrastructure plan includes funding to replace diesel school buses with electric buses

• Optimism and Planning for Electrified Transport: Many companies across the fleet value chain are optimistic about the outlook for electrified transport. As per a survey conducted by McKinsey, more than 50% of companies are planning to fully decarbonize their fleets by 2027, which indicates a strong trend towards electrification (Source: McKinsey)

Key Restraints for the Growth of Electrification in United States:

• Impact of Pandemic: The pandemic severely impacted auto industry and restrained EV growth. Work-from-home became the new normal and customers started travelling less. The impact was evident in the PV fleet sector.

• High Upfront Costs: While the total cost of ownership is becoming increasingly competitive with traditional gasoline-powered vehicles, the upfront cost of purchasing an EV is still high for most consumers. EV prices are substantially higher than for internal combustion engine (ICE) vehicles, which dampens demand. Battery prices have increased because of skyrocketing raw material costs as the price of lithium carbonate increased fivefold, cobalt doubled, and nickel rose by 15% by the end of 2021

• Limited Charging Infrastructure: While the number of EV charging stations is increasing, they are still not as widely available as traditional gas stations, making it difficult for some consumers to charge their vehicles while on long trips or in rural areas. The availability of fast-charging infrastructures is relatively low in United States, which hampers EV growth as the potential owners worry about long charging durations and range.

• Range Anxiety: Some consumers are hesitant to purchase an EV due to concerns about the vehicle's range and the availability of charging stations. This would change through increase in awareness and with more models on the road

• Lack of Consumer Education/Awareness: Many consumers are not familiar with the benefits of EVs, including lower operating costs and reduced environmental impact, which makes it difficult to encourage them to make the switch from gasoline-powered vehicles

• Less Generous EV Incentives: Government incentives for EVs are less generous in North America than in Europe, which has taken cues from Norway, the leader in EV adoption

• Challenges for Fleet Electrification: Several fleet managers and operators are reluctant to electrify their fleet because of high upfront costs, limited driving range, limited public charging infrastructure, battery degradation, limited model availability, limited maintenance options and limited incentives and regulations

• Limited Model Availability: While more and more automakers are introducing new EV models, the selection is still limited compared to internal combustion engine vehicles

• Battery Degradation: The long-term durability of EV batteries is still a concern, as the range of an EV can decrease over time, which can make it difficult for fleet managers to predict and budget for the cost of replacing batteries

• Limited Maintenance Options: Some of the EV models (commercial vehicles) are still new to the market and their maintenance options are limited, which can make it difficult for fleet managers to ensure that their vehicles are properly maintained

• Range & Payload Limitations: Electric vehicles currently have limited range and payload capacity compared to traditional vehicles. This can be a significant constraint for 3PL companies that need to transport goods over long distances

Forecasts regarding Electrification in United States

• Electric vehicles (PV and CV) in United States are estimated to grow from 645K in 2021 to 6.2 Million in 2030. Some industry sources forecast the electric vehicle (including HEV) sales to be between 11-18 Million by 2030.

• Electric passenger vehicles are expected to reach about 4 million units sales by 2030 where as electric commercial vehicles are expected to reach 2.17 million units sales by 2030. Commercial vehicle operators would increasingly move towards electric vehicles to reduce fuel cost, reduce emissions, meet emission norms, reduce overall cost of operations and possibly receive incentives

• In 2030, penetration of EVs in LCVs Total Industry Volume (TIV) is expected to be 16.1%, 15.9% in case of MCVs, 16.6% in case of HCVs and 54.1% in case of buses. Buses are a key focus area for electrification in United States

• As per a survey conducted with utility companies in United States in 2021, only 1% companies have an EV penetration of >40% in their fleet. 90% companies have less than 10% EV penetration. The scenario is expected to change significantly in coming years (Source: Sepapower)

The anticipated role of depot charging in the future of electric vehicles (EVs) is poised to be crucial in facilitating the electrification of heavy-duty vehicles like buses and trucks. As per the International Energy Agency (IEA), a substantial portion of the energy for electric trucks and buses will be obtained through off-shift charging, predominantly occurring at private or semi-private charging depots.

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