Will Electric Vehicles Become the Workhorses of Commercial Fleets?

Tesla Model S

In many ways, Tesla Motors (NASDAQ:TSLA) is responsible for most of the hype in the electric-vehicle industry right now. CEO Elon Musk seems to be a limitless well of innovation and energy and has used his star power to help punch the stock up more than 265 percent this year to date. The company has repeatedly slammed the door on critics: just to name a few, it repaid its $465 million loan from the Advanced Technology Vehicle Manufacturing Program at the DoE five years early, and took home Motor Trend’s coveted 2013 Car of the Year award with a unanimous vote.

While Tesla’s major accomplishment could arguably be the design and development of a competitive electric powertrain, the company’s crowning achievement may actually be how it helped legitimize the electric-vehicle movement. The company has helped pursued both consumers and investors that EVs are not for the indeterminate future, they are for the present — someone just has to get the ball rolling.

EV sales in the United States represent a small but growing portion of the total car market. In 2011 electric drive cars represented 2.23 percent of the market with a total of 266,329 sales, 10,064 of which were battery-electric vehicles. In 2012, that share increased to 3.38 percent with 14,439,684 electric-drive vehicles sold (this includes hybrids, plug-in hybrids, and battery electrics). This year to date, the electric-drive market share has increased to 3.84 percent, with more than 41,000 plug-ins sold.

With all this in mind it’s easy to get excited about the consumer EV market, but investors and the curious public would be doing themselves a disservice if Tesla was as far as they looked. EVs are just barely tripped out of their cocoon and a viable mass-market consumer model is not quite a reality (Model X or bust).

So, while the consumer market is way sexier, the electrification of commercial vehicle fleets is well under way and worth paying attention to.

One of the companies leading the charge in this area is AMP Holdings (OTCBB and OTCQB: AMPD) and its subsidiary Workhorse. The company is behind a line of medium-duty commercial-grade electric trucks that are about as every bit fit jobs like package delivery as the Model S is fit for a joy ride.

amp

In April, AMP announced that its fully-electric medium-duty step van had completed an accelerated durability testing program at the Transportation Research Center in Ohio. The testing was intended to demonstrate that an electric truck could meet the rigorous conditions of package delivery even under adverse conditions, such as the Ohio winter in February.

The success of the test was another step toward the legitimization of the EV industry and will likely serve as a boon for the company itself. CEO Steve Burns, a successful entrepreneur with a history in the tech industry, has alluded to interest in the vehicle by a major commercial client. It would be unsurprising to see companies like United Parcel Service (NYSE:UPS) or FedEx (NYSE:FDX) placing large orders for electric medium-duty vehicles to replace their largely diesel fleets.

“We estimate that there are about 100,000 existing diesel step vans on the road today that would be excellent candidates for re-power to our All Electric drive. We have built a bolt-on replacement electric drive that fits most of those step vans and priced at a point that enables the customer to typically pay for the conversion in under 4 years. Most operators of these types of trucks keep their trucks in service for 10 years or more, some 20 years,” commented Burns.

By acquiring the Workhouse brand and its factory facilities, AMP became a flexible OEM with a lot of potential. EVs may be one of the most interesting things the company is up to, but management realizes that wide-spread EV adoption may be a few years out. With this in mind, AMP offers alternative-fuel trucks using the same chassis, and therefore has a foot in the existing market as well as the growing market.

With consideration for fuel savings and perks like CARB approval, AMP is lowering the barrier to entry for commercial access to EV fleets. Many of the challenges that face mass-market consumer EVs don’t exist for a package delivery company. Vehicles travel a limited number of miles a day and return to base each night, effectively solving the infrastructure problem.

As Burns noted, “If you have a 100-mile range on a charge and a 65-mile route, then range anxiety is eliminated. Similarly, the bigger and less aerodynamic a vehicle is, the worse its gas mileage. And the worse the gas mileage, the quicker the premium for electric could be paid off. So, we looked for big, square fleet vehicles that routinely traveled less than 100 miles a day … and the classic diesel delivery step van came clearly into focus.”

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