It All Comes Down to Unit Economics
Matt McLelland, VP of Sustainability and Innovation, Covenant joined Grayson Brulte on The Road to Autonomy podcast to discuss why it all comes down to unit economics when fleets are evaluating new trucking technologies such as battery electric trucks and autonomous trucks.
The conversation begins with Matt discussing how Covenant is thinking about implementing battery electric trucks into their fleet. With limited range and reduced weight capacities, the right lane and freight have to be matched up to ensure a successful run.
The fleet of the future is actually going to be something that is made up of a lot different pieces of equipment that reflect the different and diverse needs of our customer base.
– Matt McLelland
Reduced capacity comes with increased cost, as battery electric trucks cost roughly 50% more then traditional diesel trucks. Factor in stubborn inflation, slim margins and a Fed Funds interest rate of 5.33%, fleets are hamstrung when it comes financing the increased cost of battery electric trucks.
Is a hybrid solution the right solution? As companies look to lower their carbon emissions, could electrified trailers be the solution? Or it could be renewable diesel or B100 (pure biodiesel)?
Hybrid solutions that are not full on zero-emission vehicles, that’s what I think the future is.
– Matt McLelland
The costs to implement low carbon, zero-emissions technologies for trucks is going to cost more. For the business model to work, that cost is going to have to passed onto the consumer. But the economic reality is, consumers will not pay more for shipping as they are used to fast free shipping commonly known as the “Amazon effect“.
Could the push towards low carbon and zero-emissions trucks inadvertently accelerate the implementation and adoption of autonomous trucks?
It all comes down to the unit economics.
– Matt McLelland
Autonomous trucks offer better unit economics than traditional trucks, and the economics only get better as the size of the fleet increases. Covenant is taking a measured approach to autonomous trucking by rolling up their sleeves and developing relationships with the developers. This approach has led to commercial relationships with Aurora and Torc.
Wrapping up the conversation, Matt shares his thoughts on the future of the trucking industry.
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Recorded on Friday, February 9, 2024
