Electric truck market infrastructure deficit raises concerns

The logistics industry has been warned of persistent inflation and consumers in the United States are feeling the effects on their wallets. In Q4 2022, rate levels for international air, ocean, and domestic trucking fell significantly amongst inflationary pressures and fallout from the global supply chain crisis. Demand is outpacing supply in 2023 most in the warehousing, domestic parcel, and labor sectors, causing further inflationary pressures. National warehousing capacity remains low and is expected to remain tight for the foreseeable future as there is a lack of new facilities coming into the market.

The rebalancing of US inventories from recent overstocking is taking longer than expected, drawing out the slump in global shipping. As a result, the global supply chain has been attempting to pinpoint when the bottom of market ocean and trucking shipping rates may be reached. Ultimately, capacity will not reset until Q2 or later, leaving the ball is in the shipper’s court for the first time in two years. Ocean carrier contract season is in full swing, giving shipper’s the ability to push down on contracted rates and be selective when choosing contractors.

Trucking has a massive impact on nearly every sector of the supply chain and the novelty of introducing battery electric vehicles into the industry has picked up speed in recent years. Trucks play a foundational role in the US economy, with forty million of them roaming the nation and delivering three-quarters of its freight. Current federal regulations hope to see zero-emissions trucks make up 30 percent of big-rig sales by 2030 and the US signed on to an effort to achieve zero-emission truck sales by 2040.

Fleet owners absorb cost burden of new equipment

Over the past three years several truck makers have rolled out battery electric trucks, however the cost remains at around half a million dollars per truck. Truckers are suffering in today’s inflationary supply chain environment and most owner-operators are not positioned to take on this cost burden. A recent survey from FreightWaves found that the current market is tough enough that 35.2% of owner-operators are considering leaving altogether. For the group considering leaving the market, revenue growth was strong at 9.3% YOY but that was crushed by expenses increasing 38.6% YOY.

This is not the first time that truckers are feeling squeezed by the market. Last year, conditions converged into a brutal combination of sky-high fuel prices, equipment and insurance costs increasing, and spot market rates trending downward. The drop-off in trucking demand the last 12 months has hit smaller carriers the hardest, since their business models have less flexibility. The freight industry has experienced more than a dozen recessions in the past 50 years, but no one has historically been hit harder than the trucker.

“I am absolutely for less pollution, carbon emissions, and a cleaner planet. However, the timing of current industry mandates for electrification are costly for the trucking community, which are mostly small businesses. This burden will drive up costs, exasperating the current inflationary pressures in the US. This mandate, like many others, is cyclical and the costs are passed to the trucker, which is then passed to the BCO, and, ultimately, the consumer.” – Paul Brashier, ITS Logistics VP of Drayage & Intermodal

EV charging infrastructure falling behind electrification

Drayage has been a logical place to start decarbonization of trucking fleets, due to the short transportation routes from ports and rail yards to distributions centers (DCs). The shorter distance of about 50 – 100 miles per day requires less battery range, as there are currently no electric trucks on the market that offer more than 200 miles or so of range.

However, charging can take hours and puts drivers in an impractical position. Charging in the middle of a driver’s shift would take too long and there are not enough charging stations yet available. For example, the Port of Long Beach (which handles ~40% of the nation’s freight) currently has just two. The California Energy Commission estimates that in order to support the 180,000 electric trucks meant to be on the road by 2030 would require installing 157,000 chargers. According to the American Trucking Associations, there are 1,215 MD/HD electric trucks currently in operation and 140,000 on order.

States across the nation are working to install additional charging stations for non-commercial vehicles as government incentives have rolled out under the National Electric Vehicle Infrastructure (NEVI) program. However, there has largely been a hands-off approach for long-haul trucking. The Federal Highway Administration (FHA) published a final rule under NEVI which states it will not regulate standards for medium- and heavy-duty (MD/HD) electric trucks. By not addressing the charging of MD/HD, the trucking sector is essentially being overlooked when it comes to electric infrastructure development.

“Infrastructure-wise, there are not enough viable charging stations close to the terminals. And there isn’t always enough time for a recharge. Typically, truckers sit in line for 4 to 6 hours waiting for their appointment. Afterwards, most of that freight needs to be taken to its next destination quickly. What happens when one of the two chargers at the nation’s busiest port complex isn’t available? The number of charging stations required to support this level of electrification requires more time and resources than we currently have.” – Paul Brashier, ITS Logistics VP of Drayage & Intermodal

Electrification along major freight corridors challenges power grids

No state has moved more aggressively than California to implement electrification regulations. The state’s Advanced Clean Fleets Rule declares that beginning in 2024, all newly registered CA drayage trucks must be zero emission. The rule further outlines that by 2025, any trucks with an engine 13 years or older must be replaced with a zero-emissions truck once it hits 800,000 miles. However, the lack of infrastructure and the timeline of improvements are no doubt a challenge for electrification.

With 15 times more electric cars expected on California’s roads by 2035, the amount of power that they will consume will also grow. Experts are questioning whether the existing grid can handle the added pressure. The state’s power grid was so taxed by heat waves August 2022 that an unprecedented, 10-day emergency warning asked residents to cut electricity or face outages. The juxtaposition of the mandate and the citizen’s experience with the grid has sparked widespread skepticism.

In the Northeast, electrification along major freight corridors is under consideration with intentional preparations. There is an imminent need for major transmission upgrades and expansion of charging infrastructure and a key part of strategy will include preparing state highways for high energy loads. To accomplish this, New York and Massachusetts-based utility company National Grid is conducting a two-year study to identify critical charging locations along highways in nine Northeast states. While this is a longer-term investment, it will help to illuminate electrification of commercial freight.

“Power grids across the nation are at risk of failure once the load of charging hundreds of thousands of trucks is added. The state of California has a history of rolling blackouts with its existing power grid and is not currently equipped to handle a bigger load. CA has passed a law to electrify drayage trucks by January 2024 – currently, that is going to be very difficult to enact. A mandate with this fast of a deadline will put strain on an already overstrained infrastructure and could ultimately break the system. Mandates like these will continue to push shippers to divert freight to the Gulf Coast and the Southeast where there aren’t regulations like this.” – Paul Brashier, ITS Logistics VP of Drayage & Intermodal

Managing drayage and transportation with a trusted logistics partner

By looking down the supply chain, there are strategies to avoid or minimize the impact from disruptions. While the global electric truck market remains uncertain, there will likely come a time when it is the new normal. With a footprint of 33 markets in North America and deep industry knowledge, ITS offers the flexibility to be your sole source of logistics solutions despite changes within the supply chain. Trust our team to execute creative solutions from port to door.

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