Electric Trucks should have better residual values than diesel

 We may be under-estimating the residual value of electric vehicles now that battery and propulsion technology is maturing.  Its time we started to reconsider the long term benefits of electric trucks and perhaps develop creative financing options to exploit the long life. We tend to think about short term economic challenges for electric truck ownership in terms of purchase prices and paybacks.   However, a key advantage of electric is the powertrain should have long life with low-maintenance costs, and there are no tailpipe emissions to get worse with age.  This leads to financial benefits in operating electric vehicles longer.  This is unlike diesel trucks whose maintenance becomes more costly and emissions become worse with age.  There is a concern about battery pack life for older electric trucks, but lets come back to this point.

Electric trucks have a maintenance cost advantage over diesel because:

• Regenerative braking provided by the electric motor reduces usage of foundation brakes (less wear on brake pads) and can also reduce tire wear.

• There is much less regular service required for electric powertrains.  There may be some fluids for gearboxes and differentials and there are cooling systems which may need regular inspection and maintenance, but the main components including the battery should not need any service.   This is much different to diesel and gasoline engines which need much more regular service.

Information from fleet surveys suggest that diesel medium duty trucks average maintenance and repair costs of around $2500 and electric medium duty trucks average $1000.  This does exclude downtime and warranty repairs, but these should become similar between the technologies as electric powertrain design matures. Diesel truck maintenance is known to increase with time.  For high mileage heavy duty vehicles the maintenance costs in years 6-10 can be 3-5x the amount in years 1-5.  For medium duty delivery trucks with less daily driving, the cost increases will be less, but can still be significant.

The chart below illustrates the fuel and maintenance operating costs for older electric truck and diesel delivery truck operating 60 miles per day

The difference is just under $35k for 5 years of older age operation.

This result has two implications worthy of consideration for the business case of electric trucks:

• It can make sense to retain the electric vehicles in the fleet for longer, since the return on investment will significantly improve for later years of operation. 

• If the vehicles are sold after 5 or so years, the residual value of electric trucks should be greater than diesel trucks because there will be a strong financial return on the older trucks.

 The concern on electric vehicle costs with age is battery replacement.  Confidence should start to grow in battery life, especially for delivery truck applications with overnight charging for two reasons:

• Battery cell companies including Tesla and CATL are making announcements on long cycle life, high mileage batteries.  Achieving 3000 complete discharge cycles appears possible with latest automotive battery cells and would equate to life of 10 years, 200k miles for delivery trucks. 

• Furthermore, its likely that delivery trucks will not use all the battery capacity every day due to route variability.   This will lead to much longer life than 10 years, 200k miles.

 Another relief to battery replacement anxiety is the fact battery costs are still dropping rapidly.  Roadmaps suggest that delivery vehicle pack costs should be less than $20k by 2025.  Hence even if a battery replacement is needed in ownership years 6-10, the operation savings identified above of $35k will more than cover this cost.    The future holds even more opportunity on cost benefit as we find improved ways to recover more of the battery costs after vehicle life ends, either from sales to other applications (second life) or recycling.

With California’s proposed mandates on advanced clean trucks, we are entering a new phase of electric truck deployments as the technology matures, battery pricing drops and our understanding grows on the life of batteries in real world operations.   It now becomes important to revisit how we consider the business case for electric trucks to make sure we account for the additional lifetime benefits these vehicles can provide.   This also can also lead to new business opportunities for companies who may want to provide creative financing for electric vehicles and are willing to exploit the changes dynamics in this market.

Our Report contains the complete analysis.