Can smaller trucking operations afford the transition to electric vehicles?

The age of EVs has arrived for passenger cars, with every major automaker introducing one or more all-electric models. (And some are already discontinuing older models.) To hear regulators and industry leaders tell it, we’re less than a decade away from dealers’ sales floors consisting entirely of EVs.

Commercial trucking won’t be spared, but its progress toward EV adoption is a lot more complicated — especially when it comes to small and medium-sized truckers.

According to the American Trucking Associations, 95.7% of U.S. for-hire carriers operate 10 or fewer trucks, and 99.7% have fleets of 100 or fewer. Most run on extremely thin margins and lack the ability to make major capital expenditures, especially investment in new tractors. 

The case for shifting to EVs on the passenger side gets stronger every year, as prices fall and the market becomes more competitive, notes Priyesh Ranjan, chief executive officer of Vorto, a vendor of supply chain automation software. But he believes it will be another five or six years before the same trend becomes evident in the market for commercial big rigs. At the moment, he says, “I cannot see the unit economics happening.”

That leaves smaller truckers with a problem: How can they afford the new units that are increasingly being mandated by regulators? And will their failure to do so in a timely manner cause the EV revolution to stall?

“Trucking is a game of small entrepreneurs in America,” Ranjan argues, noting that smaller operators are currently struggling even to make required modifications to their existing fleets. Mandates at the state and federal levels are tightening up on truck emissions and requiring installation of equipment to curb diesel particulates.

Truckers today are mostly concerned with riding out the economic cycles that have become even more extreme in the wake of the COVID-19 pandemic, Ranjan says. A surge in consumer purchasing two years ago brought a new wave of owner-operators into the market. Now, with demand faltering, truckers are struggling just to break even. “Forget about running a sustainable business,” Ranjan says.

A new electric semi truck today runs between $300,000 and $500,000. Ranjan says smaller operators simply don’t have access to the resources available to the big trucking companies, especially at a time when interest rates are on the rise.

That said, he expects the economics of purchasing an electric truck to turn favorable in about half the time it took for passenger vehicles to become relatively affordable. (Starting prices for some passenger models are below $30,000.)

“The EV world is a lot more evolved today,” he says, citing advances in testing as well as a lessening of consumer “range anxiety.” With the industry having matured over the past decades, “there’s a blueprint for how we’ve done that in the car industry that can be leveraged [for commercial trucks].”

Meanwhile, the regulatory clock is ticking. The Biden Administration has set a goal of 50% of all car sales being EVs by 2030. The California Air Resource Board, for one, has set an even more ambitious timetable, mandating that all new cars and light trucks sold in the state be electric by 2035.

It's one thing to make a declaration of intent, or issue a regulatory edict. But when it comes to the current state of commercial trucking, given the economic realities of today, are such ambitions practical?

“Absolutely not,” says Ranjan. “Reality will not allow that, unless government subsidizes the entire freight industry.”

Ranjan believes that government and industry targets for the electrification of trucks will be modified out of necessity. Also lagging at the moment, he says, is an adequate infrastructure of charging stations — which is still a problem on the passenger side as well.

Even so, he views the transition to EVs as a positive and even necessary move toward a greener supply chain. In the meantime, he says, there are steps that commercial truckers can take to make their fleets more efficient. Chief among them is a reduction in the number of empty miles driven.

Half of a typical U.S. trucker’s time is spent hauling air. “We have to solve for inefficiency,” Ranjan says. “The simplest way is to reduce empty miles. Even if we use 10% of that 50% [of empty space], that translates into substantial savings.” New technology, aided by artificial intelligence, can help to identify shipments that can fill up empty trucks, he says.

The future of commercial trucking might be electric, Ranjan says, but practicality demands faster solutions to the plight of the smaller operator.