The Heavy Duty Parts Report
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The Heavy Duty Parts Report
The Evolution of Electric Vehicles and Their Technicians
Episode 278: Get ready for an electrifying discussion with James Cade, the founder of AMI on the future of Battery Electric Vehicles (BEVs). We dissect the mandates shaping the BEV landscape and their immense implications for vehicle adoption. California, a pioneer in this field with its far-reaching regulations, also comes under the spotlight, as we analyze its regulatory influence on other states.
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You're listening to the Heavy Duty Parts Report. I'm your host, jamie Irvin, and this is the place where we have conversations that empower heavy duty people. Welcome to another episode of the Heavy Duty Parts Report. I'm your host, jamie Irvin. Today we're going to talk about battery electric vehicles. This is a subject of concern for people who operate commercial equipment, people who repair commercial equipment and people who supply parts for commercial equipment. This is a subject we've talked about in the past and I'm very happy to have our guest on. He's a repeat guest. James Cade is the founder of Asset and Maintenance Insights. If you recognize his name, he was on our live program back in episode 38 of HDPR Live, where we discussed the fleet's perspective on heavy duty parts. He was a returning guest on the podcast in episode 231, where we talked about how fleets can get started with EVs. James is someone who provides subject matter expertise on BEVs, so I'm very happy to have him back on the show. James, welcome back to the Heavy Duty Parts Report.
Speaker 2:Thanks, Jamie. Thanks for having me back Appreciate it.
Speaker 1:We get a chance to talk about battery electric vehicles, bevs again. You might also hear the acronym ICE, that's an internal combustion engine, just to get everybody straight on the terminology. Let's start by talking about the current mandates by the government for BEVs in the United States as it relates to commercial trucks. For those who maybe aren't aware, what are the current mandates?
Speaker 2:There's really not an over-nation-wide mandate. It's more of a patchwork of regulations across the USA. As I said, there's no federal mandate, although there is a. As part of the Federal Inflation Reduction Act, there was lots of incentives that were provided to, which included tax credits, grants that were really meant to encourage the adoption of hybrid electric vehicles, battery electric vehicles and fuel cell electric vehicles Another term you'll hear a lot about. The current leader in implementing mandates for EVs is California, which is really not that surprised anybody, and California is bandating the use of zero-emission vehicles, which they lump together with battery electric vehicles, or BEVs, and fuel cell electric vehicles.
Speaker 2:Fcev California has put in three main regulations in the last few years in an attempt to regulate and really phase out ICE vehicles, as Jamie mentioned, internal combustion engine vehicles. The first one, which has been around for a little while, was the advanced clean car rule, which requires that all cars sold in California by 2035 to be zero-emission or one of those two categories of vehicles I mentioned before. There's also the advanced clean truck rule, which is directed towards the OEMs, meaning the manufacturers of the vehicles, and it requires an increasing number of zero-emission vehicles to be sold in California, starting as early as 2024. It affects the industry in different ways and it's a very complicated process, but roughly about 50% of all new vehicles sold in California are about trucks Sold in California must be zero-emission by 2035 and 100% by 2045. The flip side to that is the advanced clean fleet rule which directs fleets is to purchase these zero-emission vehicles or battery electric vehicles and fuel cell electric vehicles. Again, it follows basically the same rules or timeline as the clean truck rule which the OEMs have to follow. Same thing again. It basically says that all new trucks purchased in the state of California by 2035 have to be zero-emission vehicles and 100% by 2045. Again, as I mentioned earlier is there is a phased-in approach and it affects different industry or sections of the industry in different timelines. So you have to really check the regulations to see where your particular types of vehicles follow in.
Speaker 2:The most critical piece or the most one that's going to be implemented at first, I guess, is the drage industry in California. As of January 1st 2025, all new vehicles and it's all new vehicles to be registered for use in the drage industry must be zero-emission vehicles, which again goes back to they have to be battery electric vehicles or the fuel cell electric vehicles. And then finally, the most recent one, which was just actually this month kind of a surprise to everyone was that California and the truck major truck OEMs entered into what's being called the Clean Truck Partnership and in that is that California it was kind of a compromise for both sides is that California actually agreed to bring their regulations in line with the federal EPA, to not to decrease NOx emissions until 2027, which means good for the industry because it creates one. This is on diesel engines bring their regulations for NOx on diesel engines in line with the days, and that it's good for the country and that we creates one standard. But it really the OEMs gave up some opportunities as well. So still trying to sort through all that. But the big thing is is that by 2027, by lowering, requiring the reduction in NOx emissions will increase the cost of a diesel powered vehicle significantly and that will narrow the price gap between an ICE vehicle and an EV or BEV vehicle.
Speaker 2:I'm sure most of your, most of your audiences, listen to this and saying no big deal, that's California. That didn't really impact me, for most of your listeners anyway. But the issue is is that 17 other states either are actively or are thinking about implementing California's rules. States such as New York, massachusetts and many others have actually implemented the rules and they're actually have laws or regulations on the books that says whatever California does, we're going to do the same. So, again, I would caution your listeners to look at their state regulations and see where they are, because, again, a lot of states are following California's lead in this area.
Speaker 1:What impact does all of these mandates have on the adoption and acceptance of BEV? In other words, if it wasn't for the mandates, what adoption rate do you think we would have versus what we're going to have?
Speaker 2:The mandates are definitely having an impact. California's requirements I mean that's especially in the state of California and the other states that may be following California's lead definitely has an impact. There's other factors involved is in a recent survey published by Smart Energy's Decisions, they found that there was a when they went out and surveyed companies operating fleets, as they found that they're getting a lot of pressure from governments through the mandates, but also the financial community is talking to them about ESG requirements. There's also interest in reductions in emissions. Even employees are helping to drive those discussions.
Speaker 2:But I think probably is just as important as all the pressure they're getting is the availability in volume of EVs now, especially in the light and medium duty sector, there's a lot of vehicles being built and purchased and going into service this year.
Speaker 2:So there's a lot of that going on. And you look at the investments that's being made Ford just announced a $50 billion investment in battery technology, gm $35 billion and I think that's helping a lot of people allay their fears that EVs are just a passing fan. And that's all being helped by the fact that you see a lot of big companies like Amazon, which is a lot of press on their 100,000 vehicle order from Rivian. Walmart recently placed a 4,500 truck order with Canoe and FedEx is piloting many, many vehicles around the country. But I think also the federal tax credits, state incentives in California, which is way ahead of everybody else, and California is offering $120,000 in incentives to purchase a battery electric vehicle and $240,000 for a fuel cell electric vehicle. So it's not just the government mandating. I have a big impact on it, but I think there's lots of other factors that are driving the acceptance of EVs in our industry.
Speaker 1:You know, I want to talk to you a little bit about the go-to-market strategy for the ever BEV vehicles, the manufacturers of those vehicles. I noticed that when you listed those big mega fleets, you didn't list that they were buying a Kenworth or a Peterbilt or they weren't buying an electric Cascadia. They're buying new brands. So what's the difference in the go-to-market strategy of these new battery electric vehicle manufacturers who are entering the market? How does that differ from the traditional market or the traditional go-to-market strategy?
Speaker 2:Well, it's definitely. You have what I call the legacy players. You know Diamler, navistar, volvo Pack R. You know they're doing the traditional thing. They look at the BEVs being just there, the EVs just being another product in their portfolio and using established dealers to sell and service the vehicles. But the one and I want to make a point about this is one of the things that I've seen difference with the legacy players is that they understand the marketplace. They've been in it for years. They understand how fleets work, they understand what fleet needs are and they've made most of them have made the decision that they're going to help fleets transition through the adoption of BEVs, you know, by offering services and helping to assist fleets through that process.
Speaker 2:The other side of the coin, in which you mentioned, is the startups. Startups have a different problem is that most of them don't have existing dealer networks and what I found is that most cases they don't understand fleet operations and they have a huge learning curve and in some cases, as required, you know, they come out with a vehicle, pilot it, whatever and find that they really miss the mark and they got to go back and redesign the vehicle in some cases. So there's a real lack of resources for the startups as well. I think they concentrated so much on developing the vehicles that they have really not thought about the service side or the parts side or whatever. So it's really challenging for them for several reasons and they, I think, are really looking at a different approach to fleets like you know Walmart, fedex and others that the legacy fleets, legacy players, don't have to go through.
Speaker 1:Is it true, though, that they, by and large, these startup companies are looking at more of a direct to consumer, vertically integrated model and really cutting out in their mind the need for dealerships and aftermarket distributors and repair centers?
Speaker 2:In general, I would say, yes, that is pretty. What I've seen is that they developing their own service networks with third parties, with and market strategy overall parts. I think is really a problem for the startups is they don't have the built-in network distribution that a legacy player would have and they're really struggling with that, and a lot of them are trying to control parts themselves. You can't go down to your local Napa and get an AC to DC converter for an EV. You have to go back to the manufacturer and hoping that they have that part available. One of the things that I am seeing with the startups, especially the startups is that their downtime is not very good for a vehicle because if they have to wait on parts and other things, again, I think the legacy players have an upside because they already have the networking place.
Speaker 1:It's all fine and good to vertically integrate, but the reality is then you're bumping up against right to repair rules and you're not going to ever stamp out the entrepreneurial spirit of Americans when there's a need. If people can't supply the part through a vertically integrated distribution network, they're going to go make it themselves and figure it out. I can see a lot of dynamics there where there's going to be a new competitive landscape for the trucking industry as we move into this new world.
Speaker 2:It's going to be a challenge, especially with a lot of these. Parts are specially made for these vehicles, all the way down to the common body parts and everything else. Again, what I see right now is the startups are controlling a lot of those parts distribution.
Speaker 1:We're going to take a quick break to hear from our sponsors. We'll be right back. This episode of the Heavy Duty Parts Report is brought to you by Find it Parts, your ultimate destination for heavy duty truck and trailer parts. Discover a vast range of parts at finditpartscom. Don't spend hours a day looking for parts. Instead, visit finditpartscom and get them right away.
Speaker 1:Parts availability and quality have a big influence on fleets and owner operators' total cost of operation. If they can't find a part, it means more downtime. If they install a low quality part and it fails, it means even more costs like tow bills, hotels, meals for the driver and lost revenue. That's why we recommend Sampa. They manufacture a wide range of advanced parts for commercial vehicles. Their website has an intelligent product search engine and broad coverage of suspension, steering and fifth wheel components. Expect more. Expect Sampa. Visit Sampacom.
Speaker 1:Today we're back from our break. Before the break, we were talking about government mandates, the impact that that is having on the adoption of battery electric vehicles or BEVs. We were talking about the differences in the way that the legacy manufacturers go to market versus the startups. I'd like to spend a bit more time talking about parts and service, James, one of the things that we talked about, is there's really two camps when it comes to how to approach service on BEVs? Could you explain to us what those two camps of thought are and maybe then tell us which one you think is the better one?
Speaker 2:I've had many discussions over the last year regarding how to develop and train technicians for working on battery electric vehicles. There is a certain percentage I don't know what it is but there is a certain group within the industry that believes we should go out and hire and develop battery electric vehicle technicians solely for battery electric vehicles. Going further, they believe that those technicians should be certified and even regulated by government agencies, such as, like today you would do with electrician or any other regulated trade. The other side is kind of where I fall is that we need to. We've already have this big workforce of technicians that are out there. They're doing work every day. Let's train those people to become the battery electric vehicle technicians of the future.
Speaker 2:I feel this way for a couple of reasons. One is you just can't throw away a whole workforce. It's got years of experience and those are your company inside and out. I think that's part of it. But again, the other thing is that you have even a battery electric vehicle still has components and systems that are similar to that of ice vehicles tires, wheels, brakes, body components, whatever. Those are still skills that we'll need. Why would you go out and hire a battery electric, this regulated technician and then teach them how to do the other things that we're already doing. It makes more sense to me to take our existing technicians and train them, give them the skills to be the battery electric vehicle technicians of the future.
Speaker 1:Yeah, I mean it's not like we have a shortage of people right now in our industry or anything. I mean we're short technicians as it is, so then to try to spool up a whole other workforce we're talking about service technicians, but this also extends to the parts people that have to learn a completely new vehicle. But if you know how to identify parts, then you've developed a core skill set that allows you to identify parts, no matter who the manufacturer is or what the part is. You can't just walk away from 20 or 30 years experience and expect someone with zero experience to be able to step into that person's shoes and take over.
Speaker 2:With parts identification as a skill that has been developed over years, it will come with the same challenges with the battery electric vehicles. It parts people and will need to be able to pick up a part, identify it and be able to order that part from the manufacturer. So definitely there's a lot of skill there as well, with the parts of people that we need to keep going forward with battery electric vehicles.
Speaker 1:Right, and I mean the one thing I will say is we know that there's a large group of people that are very experienced, that are on the cusp of retiring between now and 2030. The last of the baby boomers will all be roughly exiting the workforce by then. So I do see some logic in maybe having some of your younger people who are mentoring under these experiments. Experienced technicians have a maybe lean towards a specialty of learning BEV as well, but to lose that what some companies call tribal knowledge right, that knowledge that has been accrued over decades of experience, and to not have that transfer over to the next generation, that's just crazy to me.
Speaker 2:I think that just spells doom and all kinds of problems for a lot of people, and the other side of it here is that, as Mike Rhof from ACFE mentions, all the time is that we're in the middle of a messy transition. It's going to be years in the process, years in getting from where we are to where we need to be, and we're going to need all the people that we can to be able to do this. And we need the skills that we have for ICE vehicles because they're going to be around for many, many years. Yet it's not going like tomorrow we're going to wake up. They're all going to be gone. They will be around for years and years and we need the skills and the capabilities of those technicians. Many fleets will continue to operate ICE vehicles with BEV vehicles in the same fleet in the same location, probably drivers transferring between them too. So, again, they're going to be around for quite a while and it just makes sense to me to have the people we're using today transition to the vehicles of tomorrow.
Speaker 1:Right. Well, let's talk a little bit about some of the hurdles that would prevent us from flipping a switch and just making the switch to BEV. What would be the biggest issue with BEVs in the near to midterm future?
Speaker 2:For me it's infrastructure development. To me that's the largest challenge to battery electric vehicle adoption. You take anybody, whether you're operating your own car or if you're operating an over-the-road truck, you want to be able to get the power to be able to run that vehicle and you don't want to wait all day in a place to get in line to get power. So the infrastructure is really a challenge and there's two sides to that. I think John O'Leary, the CEO of Daimler North America during the recent ACTAC Expo, said it best is that we need to be doing this at the speed of right, meaning we need to let the market drive the innovation here instead of trying to meet some arbitrary regulations. There's a couple of reasons for that. One of those is that to meet the existing government regulations, there's been several studies made by all kinds of different pro and against electric vehicles looking at how much electricity is going to need to be available when we transition the entire US vehicle fleet to electricity. What they found is that somewhere between 45 and 50% of today's current generation of electricity in the US would be needed to drive electric vehicles. We're sitting here today already struggling to meet the energy demands of today. I just read an article this morning that's talking about a state of New York is facing a 446 megawatt shortage of electricity by 2025. How will that gap be filled? With all the restrictions on fossil fuels, nuclear and other sources, they're struggling to figure that out Again is just being able to provide the amount of electricity that's going to be needed is a big infrastructure gap that I see today.
Speaker 2:The second side of that is okay. Assume we have all the power that's available. We've solved that problem. How are we going to distribute? And if you look at it today, there's 162,000 chargers available in the US today, with 70% of these, though, being level one or level two home chargers, meaning they're in somebody's garage and only used for their purpose. And to meet the, to fully meet the needs of an electrified vehicle fleet, the US will require about an estimated two and a half million chargers, more than 15 times the number of chargers available today, and that's according to S&P Global, I think tank. Another organization, atlas Global, an industry resource organization, estimates that it will require more than 87 billion billion that's with a B in investments, to build out the required charging network to meet the EV demands in 20 by 2035. And where is all that capital is going to come from is the big question I go back to. I think to that John O'Leary's comment about doing it. The speed of ride is the correct approach to the infrastructure.
Speaker 1:Yeah, and when you start talking about some of the major players having issues with getting finances, getting capital because of ESG compliance and that coming through the financial sector, you can start to see where there is so many layers to this. So you've got the environmental people talking about climate change and really taking a catastrophe kind of viewpoint. You've got the financial sector with their ESG angle. What I worry about is I worry about some of these really critical decisions being made from an ideological perspective, and I think that's where we have an opportunity for huge mistakes to be made that could really hurt a lot of people. So my last question to you, James, is do you see a scenario where the transition to BEVs lead to human flourishing for everyone? Because to me, that is the speed of ride. What's your thoughts on that?
Speaker 2:Yeah, I do. As I mentioned, this transition is going to be messy, it's going to be frustrating, there's going to be a lot of differences of opinions, but I see a time in the future where BEVs, battery electric vehicles and maybe other competing technologies will certainly improve the health and well-being of our population. Although we face a lot of challenges in the coming years, I believe BEVs will have a positive impact on people's lives.
Speaker 1:I feel like there's a but there.
Speaker 2:Yeah, it's just like anything. You're going through a transition. There's a lot of challenges, a lot of frustration, and I think calling it the messy middle is a good. That's the reason I refer to it all the time, and that's my growth comes from. My growth from NAFI is I think it's a good description because it is going to be a messy transition. You don't do something like this in the timeframe that's been applied here without it being getting really messy. But I think we all have to keep our eye on the end, or the prize, I guess, which is helping reduce emissions. Whether it will impact global warming, that's another issue, but again, I just think from reducing the emissions we'll have a positive impact on people's health and livelihood in the future.
Speaker 1:You've been listening to the Heavy Duty Parts Report. I'm your host, Jamie Irvin, and we've been speaking with James K, the founder of Asset and Maintenance Insights, to learn more about AMI. Visit fleetamicom, James. Thank you so much for being on the Heavy Duty Parts Report again. It was a real pleasure speaking to you today.
Speaker 2:You too, thank you.