Startups and air quality regulators are committing to aggressive goals and strategies in the path to zero-emissions transportation as slower-going corporate entities try to figure out what exactly the green future is going to look like.
That was one of the key takeaways from an ACT Virtual conference session Thursday focusing on the how and why of getting clean commercial vehicle markets to scale.
“We see a lot of pilots, demonstrations, but what we want to talk about today is true commercial scale and global acceptance,” said Erik Neandross, CEO of Gladstein Neandross and Associates, the producers of ACT Virtual, delivering introductory remarks.
Legacy companies eye new markets
Moderator Matt McLelland is the innovation strategist at Covenant Transport (NASDAQ: CVTI), where he focuses on what freight markets will look like several years down the road. He noted that the mere existence of his position shows that even long-haul, over-the-road carriers are starting to restructure around clean vehicle solutions.
A major impetus for a traditional carrier like Covenant is that shippers in their request for proposals (RFPs) are asking trucking companies to explain their sustainability commitments.
“That was a question even a few years ago we never got,” McLelland said.
Significant improvements in battery technology coupled with increasing urgency around reducing greenhouse gas emissions are driving the next phase of the electric truck market, said Morgan Andreae, director of growth at Cummins (NYSE: CMI).
Best known for its diesel engines, Cummins “is trying to navigate this new space,” Andreae said. “It creates significant challenges but also opportunities.”
Startups and corporations in the space are playing by different rules, Andreae added, as investors don’t necessarily hold new entrants to the same profitability standards as a publicly traded company.
Startups: Get in early and focus
Zero emissions vehicle startups seeking to move the market face challenges of their own, said Pasquale Romano, CEO of ChargePoint, an electric vehicle charging company based in Campbell, California.
“If you see something early, the investor set hasn’t seen it, because if they have you are late,” Romano said.
The key is to be relentless in securing funding, he urged. Then, “pick one thing in one geography to do completely. Don’t spread it wide, stick with your thesis and only expand that circle when you can do a complete job with a wider radius.”
Stay with that theme, Romano advised, and you can “get a startup to scale pretty easily.”
Like startups, like regulators
Mary Nichols, director of the California Air Resources Board (CARB), the state’s air quality agency, noted the synchronicities in the way startups and regulators dive into the zero-emissions market.
“When California started moving in this space, we were alone, we had no other entities emulating us or competing with us,” Nichols said.
In the beginning, the world thought the state’s zero-emission vehicle sales mandate was “a wild idea” — everyone except Tesla’s Elon Musk, Nichols qualified.
“But as the market has grown, we’ve seen other states jump in and recognize this is not just as a useful way to achieve environmental goals but also as a way to get a foot in the pond of what is looking like a really important economic opportunity.”
California vs. industry
The conference session did highlight ongoing tension between California and trucking companies, which have had reactions to the state’s spate of zero-emissions regulations ranging from outright opposition to concern about the lack of charging infrastructure and purchasing incentives.
In June CARB approved a first-of-its kind zero-emissions sales mandate for commercial trucks. It requires fleets to sell an increasing number of electric vehicles, with a goal of phasing out fossil fuel models by 2025.
“Industry has made it clear that some of those [models] just aren’t available for scale,” said McLelland. Rolling blackouts in California, he suggested, raise questions about the possibility of charging electric fleets.
“Is there a better way for CARB to achieve clean air goals than costly regulations and encouraging technologies that aren’t ready to scale?” he asked.
Saying she disputed the premise of the question, Nichols said CARB “wouldn’t be doing what we are doing if we didn’t believe that technologies are not there now.” The agency’s approach, she explained, is to survey the marketplace, see what’s out there and ask: How many years will it take to get to the point where it will be commercially viable?
While CARB is flexible when necessary, “if you don’t set a goal out a few years and stick to it, there is no point,” Nichols said. That means adopting regulations that get people thinking about buying these technologies while also putting money behind it in the form of purchasing incentives and pilot projects.
“That’s what we are doing with the trucks right now.”
Electric trucks are no iPhone
Established trucking companies need to take the long view when investing in disruptive technologies, Romano said.
Unlike some other industries, transportation has a long gestation period, he said. “Apple comes out with a new device and it goes ‘bang.’ But you can’t do that with a fleet.”
If fleets are going to get disrupted — and they are — they need to look 10 years out to that disruption and start spending, he advised. “And you’ve got to spend not in proportion what it’s returning but in proportion what it’s going to return later. And that is the hard thing for an established company in any sector.”
The reasons so many trucking businesses are “rushing into” the clean vehicle market today, Romano added, is because they see disruption bearing down and “are realizing they might have a company in peril.”
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