A growing number of California's independent trucking owner-operators are continuing to have difficulty justifying the investments needed to meet the state's zero emission vehicle (ZEV) mandate despite generous grants from the state's Hybrid and Zero-emission Truck and Bus Voucher Incentive Project (HVIP).
For context, the California Air Resources Board's (CARB) Advanced Clean Fleets (ACF) rules requires all new medium- and heavy-duty vehicles sold or registered in the state to be zero-emission by 2036. By 2042, all commercial vehicles must be zero-emission.
These mandates are controversial not because the trucking industry is against clean air and a healthy environment, but rather due to the high buy-in costs and the lack of a readily available and reliable charging infrastructure.
Clean Trucking previously reported on CARB policies not reflecting reality as well as insufficient incentives. Both issues remain unresolved.
[Related: CARB policies don't reflect reality, says Port of Oakland operator]
There is another option available to owner-operators and fleets called Truck-as-a-Service (TaaS). This subscription-based business model allows operators to access battery-electric and hydrogen fuel cell commercial trucks for a flat monthly fee, thus eliminating the need to purchase new vehicles and invest in charging infrastructure. The TaaS company, of which examples include WattEV, Zeem Solutions, and Volvo on Demand, provides everything under one roof, such as insurance, repairs and maintenance, route planning, infrastructure and, if necessary, drivers.
Unfortunately, the TaaS route still remains unaffordable for many small businesses, such as Port of Oakland-based AB Trucking, owned by Bill Aboudi. He has concluded that purchasing some ZEVs - with the help of HVIPs - is currently the cheaper option but he'd be open to a TaaS provider if it made financial sense.
HVIP vouchers are not enough
"I'm a big supporter of HVIP vouchers," Aboudi says. "They streamline the bureaucracy process. That's how I got my Orange EV yard tractors. The vouchers are a good way to get started [towards zero emissions] but they're not enough. Going after additional grants is a nightmare because there are lots of requirements. With HVIP vouchers, the OEM gives you one form to fill out and the money is reserved for you."
Aboudi's next hopeful HVIP purchase will be a Nikola Tre hydrogen fuel cell semi, but the investment is still not without risk. He must also pay the state's 7.5 percent sales tax on zero-emission vehicles, as well as the 12 percent Federal Excise Tax (FET), making the ZEV investment even more of a squeeze in an already low profit margin industry.
"The voucher maxed out at $400,000. The truck costs $450,000, and the kicker is the sales tax and FET which brings me to $550,000. That's still $150,000 I have to pay out of pocket for hydrogen." He is still looking for another $100,000 grant to help ease the cost burden.
"Ditching the sales tax and FET will bring down my investment to $50k. I’ll have a headache. But I’m willing to do so to help improve the technology."
Eliminating these taxes for zero-emission vehicles would also likely bring down a TaaS's $5,000 to $6,000 monthly cost to a more doable $3,000 to $4,000, according to Aboudi's estimates.
Time is money
"Volvo on Demand is a perfect example of the innovation that happens when Volvo Financial Services (VFS) and Volvo Truck join forces with our customer needs in mind," said Michael Drane, director of electromobility business development at VFS. "In simple terms, it's a complete offer through a truck-as-a-service model. It's a total solution that combines the VNR Electric with everything from preventive maintenance and charging to incentives and insurance."
The VNR Electric, for reference, is a pure battery-electric class 8 semi with a 275-mile range, 565 kWh battery capacity, and a 90-minute charging time for an 80 percent charge.
[Related: Volvo announces plans for long-range electric]
"We'd like to see more incentives and grants, but truthfully, we're operating the market, delivering the best solutions possible to help reduce the barriers of entry into electric vehicles by introducing programs with low initial investment, flexible options, and making it super simple and easy to get into electric trucks," Drane adds. "We can take this one stop shop approach to make the process simple for owner-operators and fleets alike that feel the VNR Electric, in particular, is a good fit for all."
Since every owner-operator and fleet has different requirements, TaaS services will vary in price but they're still not affordable for many drayage operators like Aboudi.
"The $5,000 to $6,000 monthly fee is a fortune for a drayage company considering for what you want to do with that truck," he points out.
Another issue concerning Aboudi, specifically with Volvo on Demand, is that his closest certified Volvo dealer is 15 miles away from his business. This would be a problem, for example, for when immediate repairs are required. Compared to diesel trucks, operators like Aboudi already have experienced mechanics on hand for fast repairs.
"Time is money," he stresses.
The good news for many fleets who are considering this service is that Volvo Trucks has certified 62 dealer locations across 27 states and four Canadian provinces. However, Volvo on Demand is not yet available in Canada.
Volvo Trucks
The elimination of the state sales tax for ZEVs is not without precedent. Colorado and New Jersey, for example, previously adopted California's strict emissions standards, yet both dropped the sales tax in order to push ZEV expansion.
"Why is the federal government charging the FET tax on zero emission trucks? Why is California pushing for zero emissions but doesn't pass a law like Colorado and New Jersey to exempt zero emissions trucks from sales tax," Aboudi wonders. "It makes no sense."
Until certain tax changes are made at the federal and state level, specifically for California, owner-operators continue to face difficult financial decisions regarding the future of their businesses. TaaS providers are an excellent alternative to buying new commercial ZEVs and investing in the required infrastructure, but affordability often remains an issue.
Lawmakers need to acknowledge this reality in order to advance their zero emission goals and to better assist already struggling businesses.
