Why The Next Postal Service Mail Truck May Be Electric

February 01, 2021 by Jerry Hirsch, @Jerryhirsch

All the frustrated Workhorse Group investors and others watching the U.S. Postal Service drag out its decision about what vehicles to purchase to replace its aging mail delivery truck fleet should be watching the first actions of the Biden administration carefully.

Workhorse, a tiny, unprofitable electric delivery van and truck company based in Ohio, is one of three teams competing for at least a slice of what’s expected to be well over $6 billion in orders. It is competing against teams that include mature automakers such as Ford offering internal combustion vehicles. Investors are counting on a giant Postal Service contract to launch the company. But constant delays in the program have dampened their hopes. 

The post office now uses about 140,000 Grumman Long Life Vehicles for its main delivery service. Manufactured from 1987 through 1994, they need to be replaced. A 2014 audit from the USPS inspector’s office found that the current fleet could only meet the agency’s delivery needs through the 2017 fiscal year.

Many Workhorse Group investors see the contract as a home run that will create a significant return on their investments and launch the startup on a profitable path. But they have been stymied by constant delays in the Postal Service’s program. The agency says it plans to award contracts this quarter. But don’t be surprised if the Biden administration asks for a review. This contract was a political football during the Trump years. There’s no reason to expect that won’t continue.

One of President Joe Biden’s first actions was pledging to use the government’s purchasing power to build a federal clean vehicle fleet. He sees that as a way to fight climate change, support companies making green products and creating jobs.

Oshkosh Corp., which is teamed with Ford, said it is ready to pivot.

“We’ve got a very strong, very comprehensive bid that meets all of the needs of the U.S. postal service. So I mean, I’ll repeat that, we do meet all the needs of the U.S. Postal Service. Meaning, if they want, under the Biden administration, more weight toward one type of propulsion than another, we’re ready for that. Now we’ve got our fingers crossed. We believe we’ve got high reliability solutions and hope to have good news at the next earnings call,” John Pfeifer, president and chief operating officer of Oshkosh, said in a call with investors last week.

Pfiefer said he expects the Postal Service to make a decision in March.

Tossing part of the contract to Workhorse Group would meet many of the Biden administration’s goals. Turning the Postal Service green also provides symbolism about the administration’s commitment to reducing carbon emissions and fighting climate change.

But they also might worry about saddling the Postal Service, already facing criticism for slow delivery, with new, unproven technology from a small company. That’s why Biden could pressure the agency to go electric but use a mature automaker such as the Ford-Oshkosh team as the supplier. They could also look at new suppliers such as General Motors or Rivian. Such a move would create more delays in the truck replacement program. Yet, given the speed that Amazon is moving to electric vehicles, it could still launch within a year or two with a fast track approach.

Workhorse Group is making some progress without the contract. Earlier this year, the Loveland, Ohio, startup said that Pride Group Enterprises would buy 6,320 C-Series all-electric delivery vehicles. The deal with the Ontario, Canada-based truck leasing and sales company is split between Workhorse’s C-1000 and C-650 models and is subject to various production and delivery conditions.

The deal demonstrates a growing market for electric trucks, even from companies that don’t have a proven track record.

There is broad consensus in the freight and logistics industry that most of the routes a mail delivery truck drives represent the smartest use for an electric vehicle.

They drive a set route each day, returning to a base to sit idle overnight. Charging infrastructure at post office yards would charge the vehicles during this off period. The routes are characterized by slow speeds and frequent stops that provide regenerative charging, extending the trucks’ range.

The payload isn’t particularly heavy for a delivery vehicle – think of all those Amazon boxes containing just one item and plastic bags filled with air for cushioning. These aren’t beverage trucks delivering cases of heavy liquid-filled bottles to liquor stores, bars and restaurants.

The life cycle cost of electric trucks will be less than a vehicle with an internal combustion engine. There’s another broad consensus in both the trucking and automotive industries that electric vehicles will cost far less to maintain. There are few wear and tear parts beyond the tires. The brakes last longer because of the regenerative braking. There are no fuel injectors, oil filters or complicated engines and transmissions. Much of the vehicle’s systems are software-based that can be updated over-the-air from a centralized facility that can service post offices nationally. Many problems could be diagnosed remotely.

Electric vehicles are proving to be more reliable than their combustion engine counterparts. That saves money and enhances the Postal Service’s delivery speed. It will have to deal with fewer broken down trucks.

Private enterprise is already looking at these issues and is in the early stages of moving to electric vehicles for similar uses. Amazon’s investment in, and subsequent order for 100,000 delivery vans, is the most prominent example. Ford is finishing design work on an electric Transit van that will soon go on sale. Mercedes-Benz is selling an electric Sprinter van in Europe and will start to market it in the U.S. General Motors is creating an entire electric delivery van ecosystem under a new business unit called BrightDrop.

These companies are working to provide a cost-effective, quiet and zero tailpipe emission global delivery system.

In a recent report, GM said it “estimates that by 2025, the combined market opportunity for parcel, food delivery and reverse logistics in the U.S. will be over $850 billion. According to the World Economic Forum, demand for urban last-mile delivery, fueled by e-commerce, is expected to grow by 78 percent by 2030, leading to a 36 percent increase in delivery vehicles in the world’s top 100 cities. At the same time, this increase in demand is expected to cause delivery-related carbon emissions to rise by nearly one-third.”

All of this points to even a greater need for the Postal Service to start transitioning to a new, more efficient fleet built to handle the parcel business that has replaced traditional first-class mail.

Moving the fleet to green technology makes sense for business and society and that’s why private enterprise is launching the transition to electric delivery vehicles.

Jerry Hirsch August 31, 2020
The earliest new mail delivery trucks will replace the U.S. Postal Service's aging and troubled fleet is January 2022, according to a new report by the service’s Office of the Inspector General.

24 Responses

  1. Michael Ognar-Pettersson

    I’m curious to why the author is showing clear bias towards Oshkosh and against workhorse. Why is nobody discussing that Oshkosh has no track record of producing electric delivery vehicles? Their first ever electric delivery vehicle order is supposed to replace the entire postal service fleet? What percentage of Oshkosh’s current revenue is from electric delivery vehicles? What current fleets are using Oshkosh electric delivery vehicles or have placed an order for them?
    Workhorse on the other hand has 100% of it’s business committed to last mile electric delivery. They may not be profitable but they still have millions of mile driven on electric delivery vehicles. The patent on their drone technology would also be really beneficial to the post office as well. Why doesn’t the author mention the drone technology? That seems like a total game changer. The workhorse bid is the clear no brainer and the author is blind to that

    Reply
    • Jerry Hirsch
      Jerry Hirsch

      No bias. Oshkosh is partnering with Ford, which does have EV experience and is building an EV Transit. Drone technology is very interesting but does not apply to the Postal Servie mail truck delivery program. It’s not what they are considering.

      Reply
      • Thomas S.

        Hi Jerry, your answer that it does not apply to the NGDV program itself is completely right.
        But in general your opinion about the drones regarding the Postal Service is completely wrong!

        https://www.crowell.com/NewsEvents/AlertsNewsletters/all/USPS-Joins-the-Drone-Delivery-Domain-with-RFI-for-Services

        USPS is actively requesting information about drone delivery.

        And it is a fact that Workhorse owns the complete patent to start a drone from a vehicle. No other company (without Workhorse licensing agreement) is able to develop an own vehicle with drone launcher.

        So Workhorse has definitely responded to the RFI for drone delivery for USPS. And of course you are right, that that is not included in the NGDV program but are you really thinking that they don’t talk to each other inside USPS!! If they saw that Workhorse responded to the Drone RFI they will tell that to the NGDV responsible colleagues. For sure!

        And of course they will never officially say that they also choose Workhorse because of the drones (because then Oshkosh could complain that that was not a criteria and that it was unfair to consider that!).
        But you can think they will nevertheless consider the drones but just without saying it! You know that is how business is working. Sometimes they do things that they don’t talk about for reasons to avoid problems.

        And Workhorse will built the NGDV trucks in a way that they can equip them later with the drone launcher when FAA gave approval. Because that can take 1-2 years in the future but postal trucks could go into production earlier.

        Then USPS will post an official RFP (on top of that RFI from 2019) for drone launcher installation for existing postal trucks and of course Workhorse will also win this. So everything is official afterwards and Oshkosh can’t complain. But in reality it was the plan from the beginning.

        Thinks about this. Just saying they don’t consider drones when they clearly posted an RFI about it is not reality.

      • Jerry Hirsch
        Jerry Hirsch

        Yes, it is interesting to consider how drones might affect delivery, including U.S. mail. I wonder about air space issues and how much neighborhoods will want drones flying around. Certainly, there is a business case for WKHS and delivery services using drones in rural areas so that one truck can cover more ground efficiently. But one could take this to some distant future point where we have drones hovering everywhere and replacing most of what letter carriers do. I am just looking at the mail truck replacement process in the much nearer term. Those vehicles really don’t have much life left. I am truly agnostic on Ford, WKHS, etc, except that I think there is a good business case for electric trucks and mail delivery.

  2. steve C

    Hi Jerry, I appreciate your posts and dedication to keeping us informed on the latest USPS information made a available on the delivery truck contract. I do have one question that maybe you can help me with. This contract bid has been going on for years now with many companies and has since been reduced to only 3 company bids, and the vehicle they submitted for the contract. With such a bid, wouldn’t their submitted vehicle be final? Meaning if one company submitted a hybrid as their proposal, they are locked in, and can’t just decided to change their submitted vehicle to an all electric vehicle. Are not all proposals final? If so, wouldn’t Workhorse be the only company of the 3 eligible to supply an all electric option to the USPS?

    Reply
    • Jerry Hirsch
      Jerry Hirsch

      You would think so, but I am guessing there is more fluidity to this because vehicle architecture has changed so much since the first RFP for prototypes was distributed. Things like advanced drivers assistance and the cost of batteries would be examples on the vehicle side. And what about the architecture of the body? I don’t think 7 or 8 years ago when the planners launched into this they anticipated pandemic level e-commerce and the on-the-route storage needs that creates. The Oshkosh president said they could supply whatever powertrain and he was speaking in a conference call with investors and industry analysts. He would have detailed knowledge about the process.

      Reply
    • Concerned Investor

      So many people have convinced themselves that Workhorse is getting a portion of this contract. You’ve never seen a Workhorse truck on the streets. You don’t know anyone who owns or drives one of their trucks. You don’t even know if their trucks are real, you’ve just read stories about them. Yet you’ve convinced yourselves that they’re real, and they’re going to win.

      Reply
  3. Mmaschin

    The main problem with the Oshkosh / Ford entry is that it can’t be used for mailbox deliveries which make up 75 os USPS routes.

    In order to fill the sliding driver’s door and sliding side cargo door they needed to add an external rail system. The rail system added significant distance between the driver and drivers door window. This added distance and the fact that the drivers seat is in the standard Transit location for RH models, the driver can not reach the mailbox without removing their seatbelt and hanging out the window. This WILL NOT be acceptable.

    The OSK/F version WILL work for routes where the driver exits the vehicle to deliver packages or mail on foot, but so will a COTS Transit. So for those situations it would make sense to just purchase COTS Transits or Sprinters – which the USPS is already doing.

    Reply
    • Showhorse Believers smh

      You assume that it won’t work for Mailbox deliveries. You are not apart of the decision making process so YOU DON”T KNOW. It might not make sense to you because you have made it make sense. However, unless you have all the info (which you don’t) you can’t assume that one company or the other is the better fit.

      Reply
      • Steve C

        I think that response was a little over dramatic. We are leaving comments based on some opinion and some fact. I thought what Maschin posted was informative. Of course I’m taking there word as being accurate. Bottom line is there has been plenty of public information made available and when you apply that along with some basic knowledge on how a contract bid with the Gov works, along with good old common sense, I think that would say to most that workhorse is a favorite to at least get a nice chunk. I love Ford, but I can’t imagine a postal vehicle that big making routine delivery to street mailboxes like I have. For rural routes, or area where mail person is on foot, that would make more sense. I also don’t think that Ford/Oshkosh have some super secret vehicle that no one knows anything about. It has taken this long for a reason. All the vehicles were field tested and evaluated at great length. Time will tell!

  4. Dan Fargo

    Not clear to me that the manufacturing and all the mining/transport of materials and later disposal/recycle of all these batteries meets anyone’s definition of GREEN.

    Reply
  5. Concerned Investor

    Workhorse CEO has sold a third of his stock, most of which was in 2021. If he thought his company was winning a huge contract in a few months, why would he be so eager to dump his stock?

    Reply
  6. Harsh Vardhan

    Jerry – What is your opinion on the new proposal from a couple of senators (led by Sen Martin Heinrich) to stop bid all the current acquisition proposals. Could Biden’s Federal fleet order and the senators proposal compel USPS to issue a new RFP? one with an all electric vehicle prototype? Given the dire situation of most of the Grunmans do you think that is still a possibility?

    Reply
    • Jerry Hirsch
      Jerry Hirsch

      It is possible that the USPS revisits the entire contract considering the changes in vehicle technology and the greater need to transport packages. However, I have no insight into whether that happens. I would only be speculating.

      Reply
  7. Terry

    Other EV advantage is no storing and removal of old oil which is hazardous waste. That old oil has certain requirements that goes away when using EVs. Also EVs do not leak oil and do not require oil to operate. Time to get away from polluting

    Reply

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