Buy now, pay later

Probably the most significant story in this issue of Destination Net Zero is the frank admission by DAF Trucks managing director Laurence Drake that, as things stand in the UK, batteryelectric trucks are a poor business choice when compared to their modern, clean and efficient diesel counterparts.

There are diverse reasons for this. The capital costs are higher, and promises from lobbyists that battery costs would fall in five years have been heard for over a decade. There is no sign that battery costs have fallen, and I’d challenge anyone to produce hard evidence that they ever will. Scaling up volumes will reduce production costs on the one hand, but increased volumes mean greater demand for materials, which are in finite supply, so cost overall will go up, rather than down.

So far, so predictable. But what was not so predictable was the steep rise in the cost of wholesale electricity, which was triggered by Putin’s invasion of Ukraine and a consequent rise in gas prices. In the UK, for reasons that aren’t clear, electricity prices are hard-linked to gas prices…or that was the explanation when the price of both was going up.

The strange thing was, even customers of the so-called green generators, who were selling only electricity produced by solar and wind, found their prices going up too. And, even stranger, the price of wholesale gas has now dropped to below what it was before Putin had his rush of blood to the brain, yet there is no sign of the price of electricity to the end user falling.

So, we are stuck with a situation that sees purchasers of electric trucks facing a higher capital cost, a less-than-certain residual value, and absolutely no saving on the operating cost, because in terms of pence-per-mile an electric vehicle is up there with a diesel one. Nevertheless, the Government’s net zero ambitions remain intact.

But this really isn’t a situation where Government can expect the market to provide a solution without intervention. There are grants for the purchase of electric vans and trucks, but they are paltry when compared to the financial and operational burden that these vehicles will place on their operators if current trends continue.

Yes, there are advantages in running electric vehicles: but these are mostly societal rather than financial. If low or no carbon electricity can be sourced then the world benefits from the reduction in fossil fuel combustion, but that won’t pay the bills. Equally there are immediate improvements in local air quality from the removal of combustion engines, although road traffic is by no means the only (or even the biggest) contributor to atmospheric pollution to be found in most cities, and any benefit to the operator is marginal.

So, what’s to be done?

One solution would be to swing the balance back in favour of electric vehicles by increasing fuel duty: the old ‘make the polluter pay’ approach. But, what would the consequences be? Transport operators run on slim margins, and initially the response would be to pass the increased cost on to customers. These increases would be particularly felt in the food sector, hitting the poorest hardest, and further fuelling inflation at a time when increased agricultural input costs and failed harvests in Spain and Morocco (where record low temperatures are being reported) are already stoking prices. Eventually, there would be some interest in replacing diesel vehicles with electrics, but financial constraints would mean that most operators would hold on to their existing vehicles for as long as they could. So that’s not going to work.

What might work, however, would be financial incentives to vehicle operators to go electric. Getting a grip of the electricity pricing mechanism would be one way of reducing the running cost of electric trucks. Another way might be for Government to offer an incentive to purchase electric trucks by offering so sort of guaranteed residual value or buy-back. This would give operators the confidence to buy (or at least lease at lower monthly payments) battery trucks. And, this might end up not actually costing the Government anything at all. Encouragement of early adoption of electric trucks would drive the construction of a charging infrastructure, which would in turn remove one of the current constraints on demand (I can’t use an electric truck because I can’t charge it).

If the electric truck parc reaches a certain critical mass, it may just be enough to swing the pendulum away from diesel for good. But it won’t happen without intervention.

Matthew Eisenegger, Publisher