GM's New Startup Targets Commercial EV Market

The Evolving Automotive Rivalry: Ford vs. GM in the Commercial EV Sector

The long-standing competition between Ford and General Motors, spanning over a century, is extending beyond traditional gasoline and diesel vehicle sales. The focus is now shifting towards the rapidly expanding commercial and electric vehicle markets.

New Strategies for a New Race

As they compete with a growing number of EV startups, both companies are adopting distinct strategies to attract delivery and fleet-vehicle clients. The goal is to secure a significant share of this burgeoning market.

GM's BrightDrop Initiative

GM is leveraging BrightDrop, a new venture introduced at CES 2021 under the leadership of Chairman and CEO Mary Barra. This initiative offers a comprehensive ecosystem of EV hardware and logistical software specifically designed for fleet and delivery operations.

GM views this market as a substantial opportunity, projecting the U.S. delivery sector – encompassing food and parcel services – to exceed $850 billion in value by 2025. This demonstrates a serious commitment to the commercial EV space.

Economics Drive Commercial Adoption

Brett Smith, Director of Technology at research firm CAR, explained to TechCrunch that commercial clients prioritize financial benefits over technological advancements. They are primarily concerned with the economic implications of their choices.

While electric vehicles offer environmental advantages, fleet managers are ultimately focused on cost-effectiveness. Incentives and reduced maintenance expenses associated with EVs are making electric vans a financially viable option.

The Advantage of Scale and Stability

Companies like BrightDrop benefit from the established infrastructure and financial resources of their parent automakers. Being aligned with a legacy manufacturer provides significant advantages.

Although BrightDrop operates as a private entity and doesn't disclose financial details, GM’s investment signals its dedication to the project. The company has allocated $800 million to convert a Canadian manufacturing facility, currently producing the Chevy Equinox, for the production of the EV600 delivery van.

This level of investment is difficult for many companies to replicate. Furthermore, BrightDrop benefits from the century-long reputation and stability of its parent company, which is particularly appealing to smaller businesses.

Risk Mitigation for Small Businesses

As Smith pointed out, small business owners often prefer established companies over startups. The risk of a startup failing and leaving them without support is a significant concern. Purchasing from a well-established manufacturer provides a greater sense of security.

BrightDrop's Hardware and Early Success

BrightDrop’s offerings include the EP1, an electric-motor-powered pallet, alongside the EV600 delivery vans. These are currently being tested in partnership with FedEx.

FedEx reports that the implementation of the EP1 has resulted in a 25% increase in individual package deliveries per day, showcasing the potential efficiency gains offered by BrightDrop’s technology.

The Significance of Data in Modern Logistics

According to Travis Katz, CEO of BrightDrop, the data collected from these vehicles represents a key area for fostering enduring customer relationships. The logistics infrastructure is capable of monitoring the complete chain of custody, tracking vehicle routes, and observing package movement.

This allows for the identification of delivery bottlenecks and the implementation of strategies to enhance operational efficiency. Katz stated, “In the long run, we believe this presents a truly compelling opportunity; we envision ourselves as a solutions provider, fundamentally driven by software.”

General Motors is not the sole player pursuing a larger stake in the last-mile delivery sector, a market projected to expand by $59.81 billion by 2025, as indicated by research from Technavio.

Ford has introduced both the electric E-Transit van and a commercially focused version of the F-150 Lightning electric truck, both integrated with Ford’s proprietary logistics system.

Ford's Investment in Fleet Solutions

“We are significantly investing in software and digital services to empower our fleet customers to expand and operate their businesses more effectively,” declared Ford CEO Jim Farley.

Further solidifying its commitment to the future of electric commercial vehicles, Ford acquired Electriphi, a startup specializing in battery management and fleet monitoring software.

This acquisition is a calculated step, with Ford anticipating revenue exceeding $1 billion solely from charging services by the year 2030.

Rivian and Amazon's Partnership

Rivian, a newer entrant to the market, has successfully secured substantial funding and a significant order of 100,000 delivery vans from Amazon, slated for delivery by 2030.

An initial 10,000 vans are scheduled for deployment as early as 2022, and are currently undergoing real-world testing, with plans for further expansion.

Synergies Between Commercial and Passenger Vehicles

For each of these automotive manufacturers, participation in the delivery vehicle market ultimately benefits their passenger vehicle development. As Rivian manufactures vehicles for Amazon, economies of scale come into play.

Over time, the cost per vehicle decreases as the production team refines its EV construction processes. This accumulated knowledge and cost savings can then be applied to passenger vehicle production.

While Rivian does not directly market its passenger vehicles to commercial clients as Ford intends to do with the F-150 Lightning, its collaboration with Amazon ultimately supports its consumer sales objectives.

Essentially, an automaker engaged in building fleet vehicles has the potential to produce superior and more affordable EVs for the general public. Furthermore, it contributes to increased awareness of EVs through their discreet delivery operations within residential areas.

The Financial Advantages of Electric Vehicles

Richard Smith, FedEx’s regional president for the Americas, is a firm believer in the economic benefits of EVs. Having owned a Tesla Model S for five years, he quickly observed the cost savings they offer. He noted the exceptional reliability of these vehicles, requiring minimal maintenance beyond tire rotations and fluid refills, with updates primarily delivered through software.

According to a BrightDrop representative who spoke with TechCrunch, the company is developing a specialized dealer network. This network will not only facilitate sales but also provide comprehensive service and maintenance for the EV600.

BrightDrop also intends to empower customers with the ability to perform their own vehicle servicing. This is particularly appealing to large-scale operations like FedEx, where continuous, 24/7 service is essential.

FedEx's Commitment to Sustainability

FedEx has publicly committed to achieving carbon neutrality by 2040. A key component of this plan involves transitioning its entire FedEx Express parcel pickup and delivery fleet to electric vehicles by 2030.

The company projects that the cost of EVs and traditional diesel vehicles will become equivalent by that time, making the switch economically viable.

Despite Smith’s positive personal experience, FedEx acknowledges that mechanical issues can occur. He emphasized the advantage established automakers possess through their existing, extensive dealer networks.

These networks are capable of providing the same level of service and support currently offered for internal combustion engine vehicles.

GM's Increased Investment in EVs

GM’s dedication to electric vehicle technology is now undeniable. On June 16th, the company announced a 30% increase in its investment, bringing the total commitment to $35 billion by 2025.

This investment includes the construction of two additional battery production facilities, supplementing the plants already underway in Ohio and Tennessee.

In their fourth-quarter 2020 investor letter, GM highlighted anticipated revenue streams from BrightDrop. They foresee growth from new ventures like BrightDrop, subscription services such as Super Cruise and OnStar Guardian, and OnStar Insurance Services.

The Future of Electric Fleets

While much of the current attention surrounding electrification focuses on passenger cars, the near future will likely see a greater presence of electric delivery vans. These vans will be responsible for delivering packages to consumers.

Automakers like GM, Ford, and Rivian, who have invested heavily in electric fleet vehicles, are poised to benefit from the EV transition across all market segments.

• Key Takeaway: Electric vehicles offer significant cost savings due to reduced maintenance.
• Future Outlook: Electric delivery vans are expected to become more common than electric cars in the short term.