The electrification of transport, despite being crucial to achieving net zero, has for some time been considered an issue for the passenger transport market. New investment in EV truck manufacturer Orange suggests this might be about to change.
Manufacturer of heavy-duty electric trucks Orange raised $35 million from institutional investors.
Investor interest in heavy trucks continues to grow at a brisk pace, suggesting a shift into hard to abate sectors.
We should expect to see accelerated investment into electrified heavy trucks.
Electrification is seen as part of a wider process of improving energy efficiency across the industrial landscape, and a necessary step in the develop of autonomous vehicles, for example. However, safety issues notwithstanding, AVs and automation raise questions about displaced jobs which have thus far not been adequately addressed
Electrification of transport a core part of the low carbon transition
The IEA has hailed electrification is seen as a vital step towards decarbonisation in hard-to-abate sectors like shipping and trucking. Its Tracking Transport 2021 report estimates electric and alternative fuel vehicles will need to make up 30% of heavy trucks sold in 2030.
This is despite a long-held view that heavy-duty, hard-to-abate sectors – such as trucking – would be dominated by new lower carbon fuels from renewable diesel to LNG. While transport emissions fell during the pandemic and are expected to rebound, the Net Zero Emissions by 2050 Scenario requires transport sector emissions to fall by 20% to 5.7 Gt by 2030. That means that every part of the transport sector is going to need to evolve.
Financing to electrify Orange EVs production and development
A $35 million financing round from institutional lenders S2G Ventures and CCI will provide heavy electric truck maker Orange EV with funds to speed up its manufacturing efforts, as well as to develop new technologies. This latest round of funding suggests that investors are seeing an increasing opportunity in this sector of the market.
Orange’s equipment consists of yard trucks used in distribution centres, manufacturing plants, warehouses, and other facilities to move trailers and containers. Together with batteries and charging stations, the company provides a complete turnkey solution.
Orange EV claims to be the first maker of 100% electric class 8 vehicles in the US but faces competition from traditional domestic heavy-duty truck makers like Freightliner, Mack, Peterbilt and Tesla.
These latter competitors will compete for the long-haul market initially, which may give Orange time to consolidate its early mover advantage in the on-site category. The company estimates each yard truck can prevent more than 1,700 tons of CO2 emissions per truck over a 15-year lifespan
Electric Class 8 trucks heavy lifting needed to decarbonise transport
Heavy-duty electric trucks make up only 2.7% of all U.S. trucks, but they use 22% of the total fuel used by the trucking sector, and account for 7% of total road transport emissions. Efforts and commitment from most major class 8 truck makers in North America, Europe, and Asia, will likely help electrify fleets globally, but will also need government incentives to reduce the upfront cost of switching from diesel.
Several US states provide incentives ranging from $90,000 – $300,000 to make the switch depending on models and technologies used, to help make the total cost of ownership competitive with combustion engine vehicles. DHL Supply Chain affiliate Exel benefited from Drive Clean Chicago’s point-of-sale discounts of up to $150,000 per Orange EV truck for its warehouse logistics operations.
In addition to increasing the proportion of electric vehicles, building a robust charging infrastructure is critical to achieving the related targets sought by industry and regulators.
The Bipartisan Infrastructure Law provides $7.5 billion to develop the charging infrastructure in the US, with a goal to install half a million public chargers by 2030. That’s a good start, but nowhere near enough – analysis by McKinsey shows that if half of all vehicles sold are electric by 2030, the US. would need 1.2 million public EV chargers, which is 20 times more than it has now.
The development and deployment of a charging network, of longer-lasting batteries and innovations in charging will require more funding, both from the government and from PPPs. For developers of these technologies, investors interest looks like it’s on an upward curve.