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.