I’ll teach you the path to profitable electric mobility (Boogie-woogie-woogie)
Now, let’s get on with the sustainable, clean mobility:
It’s 2021, and we may be reaching peak electric vehicle hype. EVs are snatching up primetime Super Bowl commercial spots, EV companies are flooding stock markets in SPAC deals, OEMs are making big promises for a fully electric future, and you can even buy your Tesla withBitcoin.
But looking at the vehicles on the road, where are all the EVs? EVs accounted for 4.2% of global car sales in 2020. That’s up from 2.5% in 2019, but there’s still 96% of the market that has yet to see the light. So what’s taking so long? When will see 100% electrified mobility? The Simpsons (which has a creepy history of very accurate predictions) did tell us that the proliferation of EVs would take time, but it seems like the market is now ready for a fast transformation.
Unlocking Mass EV Adoption
At Autofleet we’re all about making global mobility more efficient, sustainable and clean, so we set out to understand how to accelerate EV adoption.
Let’s start with unpacking 3 reasons people have previously decided against EVs: range anxiety, access to charging infrastructure, and high costs relative to gas powered models.
Driving an EV introduces a new challenge of finding a time and place to recharge. Recharging may take up to a few hours, and a free charger may not be nearby, so such an unplanned stop could mean the difference between enjoying that Lady Gaga concert, or watching replays on Youtube. With a little planning, these challenges can be mitigated, but for a private consumer that treasures spontaneity, this can be a headache.
On the other hand, for an operator like a taxi or delivery fleet operating predictable tasks, adding route planning and optimization eliminates this concern. Fleets, leveraging such tools, can control and manage their operations to take the unknown variables out of the equation.
So, for those of you keeping score: Private cars: 0, Fleets: 1
Access to charging infrastructure:
The best known treatment for a bad case of range anxiety is access to charging infrastructure — more chargers, less worrying about the next charge. Charging infra is expanding fast, recently passing the mark of 1 million public chargers globally. But your experience may vary based on where you are (see map below), and as a private car owner, there’s not much you can do to change the situation, and you’re limited to charging at home.
Fleet operators also have an advantage here, as they can control their own destiny, and even justify installing charging stations to serve their needs. With correct planning on how many, in what location, and what type of charger should be deployed, fleets can eliminate any concern on charging access.
Private cars: 0, Fleets: 2
Higher Costs of EVs:
Whereas the first two concerns may have a psychological element of the relative comfort of a driver to transition to an EV, here it gets much more black and white — is it more expensive to own an EV? Conventional wisdom says that the savings from the ongoing operation of an EV should offset the higher initial cost.
But when is that going to happen?
According to a 2019 ICCT report, cost-parity of EVs and combustion engine vehicles for consumers is coming in the next 5–10 years. But I’m impatient, and global warming is real, so that’s way too long.
As posed by ICCT, “Perhaps the biggest question for drivers is whether the fuel savings gained from electric vehicles is enough to payback the higher upfront costs.” The problem with adopting EVs for private use is that private vehicles are in use only 5% of the time, often making it difficult to offset the higher upfront costs with the savings from usage.
Fleet vehicles are in use a much higher percentage of the time. Especially for a vehicle working in a high utilization use case, such as a ride-hailing vehicle, the revenue generated by the vehicle, together with the large volume usage, makes the finances of EVs very favorable, immediately.
ICCT analyzed the case of full-time ride-hailing drivers, based on current trends in cost-reduction across multiple vehicle ranges, projecting the year when cost parity between EVs, Conventional, and Hybrid vehicles will be reached.
The analysis shows two important factors that we will revisit: 1. Range matters, and the greater the range, the more favorable the total cost of ownership. 2. Cost-parity in high-utilization use cases is coming fast.
Final score: Private cars: 0, Fleets: 3
It’s clear that fleets are the key to EV adoption — they can manage their range anxiety, control their charging infrastructure, and even save money from immediate adoption.
Recently there has been a wave of research, proposed legislation, and articles and articles and articles claiming the transformation should start with the fleet of ride-hailing vehicles on platforms like Uber and Lyft. Even better, both Uber and Lyft have already volunteered to go 100% electric by 2030. So we’ll make sure all vehicles on ride-hailing platforms are using EVs, and we are fast on our way to a better tomorrow! A job well done!
The Electric Ride-Hailing Paradox:
Unfortunately, the same ICCT study also demonstrates the reason your last Uber trip was more likely in a Prius than an EV: the gig-economy model of ride-hailing, with each driver providing their own vehicle, caps the potential utilization. That higher initial cost of an EV is therefore more slowly offset from the usage savings, delaying the point of price parity. Vehicles operated by fleets however, with drivers sharing vehicles and maximizing the utilization of the asset, can hit that parity immediately.
Based on Autofleet’s analysis of the total cost of ownership of an EV taxi, comparing between a Nissan Leaf (160km range) and Skoda Octavia, at just 20% revenue utilization (33.5 hours per week with a paying passenger), the EV is the superior financial option. For a private driver to achieve that, they would have to work 10 hours per day, 7 days a week, and hit 50% utilization rate during all working hours — not realistic.
For 3 drivers working in 8 hours shifts, they can even take off 2 days per week each, and will only need to reach 28% utilization rate during their active shifts. This is completely attainable.
Furthermore, the problem with the ride-hailing business model is that private drivers can’t be forced to adopt electric vehicles. According an International Council on Clean Transportation report, “Far less than 1% of vehicles on the Uber and Lyft platforms in 2018 were electric. In California — a hotbed for both trends — Uber and Lyft drivers adopt electric vehicles at about one-third the rate of the broader market”.
Recently it was announced that LA is considering legislation to force Uber and Lyft to go all electric. This joins similar legislation in India, which has mandated Uber and Ola to electrify 40% of their fleets by 2026. But with the current operating model, ride-hailing drivers can’t be forced to buy EVs. The initial required investment is high, and the savings may not pay off right away, even for the most motivated ride-hailing drivers.
Ride-hailing companies can run programs, like Uber’s in London, to educate and encourage drivers to adopt EVs, but they cannot force the change.
Herein lies the paradox: The potential benefit is clear: In recent research published by Bain & Company, the advantages of transitioning to EVs for on-demand transportation are calculated as a potential increase in $380 per month per vehicle. But the the independent drivers that power ride-hailing platforms are not likely to quickly make this change. They lack the economies of scale and efficiencies of fleets, and behave more like private consumers in their decision making.
Unlocking the Potential:
Fleets are our hope. They operate at scale, and reach utilization levels that can yield immediate gains in operational performance with EVs. Now that we are pinning all of our hopes and dreams and global climate stability on fleet operators, let’s come out and say it: Electrifying a fleet is hard. Fleet operators must consider dozens of decision factors including vehicle model and range, charging station location, capacity, and charger type. Lack of planning or incorrect assumptions can lead to expensive and wasted investment.
To accurately plan the optimal fleet electrification strategy, we use our simulator to enable any type of fleet to quickly test and project performance. The simulator ingests real historical data from the fleet operation to then simulate the fleet movements in real time, quickly testing multiple variations across the main decision factors for the fleet. In just a few days, fleets can build a detailed plan to uncover their potential for profitable electric mobility.
Optimal Electrification Strategy — NYC Taxi:
As noted above, one of the easiest starting points should be high utilization use cases like taxi and ride-hailing. Using the Autofleet simulator, with real taxi trip data in NYC, we executed several simulations to test the optimal settings of vehicle range, charger speed, and charger location.
Acquiring a vehicle with a longer range increases the initial costs, but also yields higher rates of utilization and rides completed per vehicle, as each vehicle can spend more time working and less time charging. Based on the exact hours of operation and market prices for the vehicle models analyzed, we’re able to calculate the absolute financial benefit for each option and set strategy accordingly. As seen in the graph below, increasing range from 250 km to 350 km will yield a 7% gain in efficiency.
Shifts in performance between vehicles with different range are dependent on the available charging infrastructure, especially the speed of available chargers. With wide access to rapid chargers, even vehicles with minimal range may yield results that approach the efficiency of the maximum range vehicles. The faster the chargers, the less important the investment in range.
Beyond the utilization rate and efficiency of the fleet, the selected vehicle range and charging infrastructure will also impact additional performance metrics such as customer service levels. As fleets invest in faster chargers and longer range vehicles, customers can receive more reliable and faster service. In competitive markets, where service must be maintained, it is imperative that fleets secure strategy to and understand any impact on service, before deploying EVs into their operations.
Finally, the simulations provide fleets with specific geographical insight on the ideal location of charging stations, based on existing networks or operational constraints. For example, let’s assume we can only deploy new chargers within the real estate of existing gas stations. If you haven’t been paying attention, Manhattan has been slowly losing its gas stations the last few years, so we also look at leveraging gas stations off the island. In the visualization below, the optimal locations for installing charging stations that minimize downtime are highlighted.
Manhattan is in fact a great example of what is likely to happen in urban areas of expensive real estate: charging stations will be located outside of the city center.
Through simulation, fleets, who can and should be the leaders on electrification, can build data-driven strategy and de-risk their operations. And the potential benefits are huge — real savings and profitability improvements that start immediately. Not to mention saving the planet.
Fleet electrification doesn’t need to be a headache, or scary. With data-driven decision making like this, maybe even EV-haters like Jeremy Clarkson will have to come around.