Roland Berger is investigating how fleets can transition to a cleaner transport ecosystem

The environment for the electrification of freight transportation, be it through fuel cell battery electric vehicles, has never been more favorable. Even in the US, a market often associated with a rather measured approach to a decarbonised future, things have decidedly turned the corner.

On the regulatory front, the environment is positive not only at the state level (led by California), but also at the federal level with the recent Inflation Reduction Act providing significant incentives for fleet electrification and infrastructure construction. Buyer demand is high. Many fleets have set their own emissions reduction targets and leaders have committed to 2035-2050. Their desire to decarbonise transport reflects the expectations of their key stakeholders – investors, end customers and employees. According to Roland Berger’s observations, many fleets are even advancing their decarbonization targets by four to six quarters.

Technology development is also moving in the right direction. Battery technology is aging, and lower-cost alternatives such as LFPM technology promise cost-effective operation in use cases not only in passenger cars and buses, but also in some commercial vehicles. As for fuel cells, commercial vehicle-oriented powertrains, or the adaptation of passenger car technologies to commercial vehicle duty cycles, are in active development. The remaining challenges should be largely resolved by the end of this decade.

It is necessary to create charging and refueling infrastructure

What then prevents us from moving boldly into a new, decarbonized future? Two major challenges remain, requiring collaboration and investment with a large number of stakeholders. On the one hand, building the right infrastructure is key. For back-to-base operations or special routes between two depots, the investment requirements are likely to be borne by carriers or infrastructure partners. Here, having on-site hydrogen charging or refueling gives the operator complete control over site access, charger type and timing. Also, the price of fuel is lower than at public gas stations, which must pay back the invested funds and earn a profit. However, new capabilities need to be developed, such as for vehicle-to-grid charging or the introduction of green energy.

En-route charging/refueling or potential charging/refueling requires a public network that allows battery electric and fuel cell trucks to refuel in transit as a means of increasing range. Early initiatives are on the way, such as efforts along I-5 in California. Most of these initiatives are currently government and utility driven with commercial vehicle manufacturers first entering the fray. Key issues to address include interoperability testing, authentication, and billing. Also, commercial vehicles need powerful L3 chargers, which are hard to find. As shown in the graph below, a tiny fraction of all public chargers in the US are compliant L3 chargers over 300kW.

Roland Berger slide

Other problems are related to the availability of key inputs. Take battery electric cars as an example. Current BEV penetration forecasts point to a CAGR of around 30% between 2020 and 2030, meaning a sixfold increase in demand between today and the end of the decade.

Clearly, such exponential growth is likely to lead to bottlenecks in terms of access to the main raw materials for batteries (Li, Ni, Co, Mn, graphite) as well as copper, as it would require adequate mining and processing capacity to time Similarly, production of battery cells may not keep up with demand in the medium term. Similar questions exist around the availability and cost of blue and green hydrogen. Roland Berger believes that these problems will be solved, but it is important to understand the problems, take preventive measures and closely monitor the developments.

Finally, fleet electrification is not an easy task either. Based on our work with several fleets, it is clear that we are talking about a major transformation involving both internal and external stakeholders. Fleets understand the main application profiles of electric and hydrogen vehicles, hydrogen being an advantage for long distances and high variability of operations. However, translating the general understanding into the details of fleet routes and operations requires careful discussion. Since the transition is expensive and capital intensive, being able to tap into the right funding pools is a must.

Roland Berger slide 2

Understanding the impact of your activities on the environment requires a detailed baseline analysis, ie. analysis of current energy consumption/emissions, as well as future consumption and emissions based on business development forecasts. With this baseline, companies can move toward setting decarbonization targets. It is important to set these targets while understanding what measures can be taken to avoid, reduce or offset emissions. Achieving goals without knowing how to achieve them is dangerous, as the likelihood of over-promising and under-achievement is high.

Part of the decarbonisation journey should include converting a significant proportion of each fleet to battery electric or hydrogen vehicles. Finding the right routes, apps and vehicles is critical. Ideally, vehicles should be custom-made for specific applications and routes (such as last-mile delivery). However, we must be aware that complexity needs to be kept at a manageable level. After all, fleets need to train their workforce to maintain and repair electric vehicles, spare parts inventory needs to be at an acceptable level, and vehicles need to be integrated into new fleet management solutions. In addition to training their own employees, fleets must also be mindful of external stakeholders. In one case, one of our clients spent a lot of time and effort training first responders on how to handle their electric vehicles.

Finally, ensuring the best possible access to charging infrastructure and green electrons and/or molecules is key to a successful transition. This will require engagement with a wide ecosystem of players, including OEMs, charging solution providers, utilities, infrastructure companies, etc. There are a number of players competing in the sustainable fleet management services industry – OEMs (incumbent and entrants), charging infrastructure providers, utility providers, software providers, construction/services players, spare parts players, renewable energy players and etc. The landscape is complex and evolving, and a clear leader among business models and companies has yet to be found.

Part of the decarbonisation journey should include converting a significant proportion of each fleet to battery electric or hydrogen vehicles

Overall, fleets need to invest in a new set of sophisticated capabilities and activities if they want to drive decarbonized fleets. Advanced analytics, scaling procurement and purchasing power, employee training, frequent regulations, policy and subsidy tracking are some of the areas that require close attention on the road to decarbonising fleets. Perhaps not all of these capabilities need to be fully proprietary, and we see different approaches to sourcing and partnering with different logistics players.

One thing is certain: in a few years, decarbonized fleet operators and the energy and transportation ecosystem in which they operate will be very different. Now is the time to embrace and lead this transformation and stay ahead of the curve.

About the Authors: Wilfried G. Olbur is a senior partner, Walter Renzsch is the director of RAkhul Gangal – Senior Partner, Frank Pietras is a partner and Wenbo Yu is a partner at Roland Berger