Earlier this year, the Environmental Protection Agency announced an ambitious new proposal that would transform the U.S. commercial transportation industry. Among this aggressive plan’s noteworthy details is the call for a quarter of newly manufactured heavy trucks to be battery-electric-powered by 2032.
The nationwide proposal comes hot on the heels of a new California rule under the state’s Clean Air Act authority mandating that 50% of all heavy vehicles sold be electric by 2035. Under Section 177 of the federal Clean Air Act, other states can take up California's more stringent regulations in lieu of federal standards, and if history is a guide, it’s safe to say they will.
The hope is that a regulatory push will usher in a new era for EVs, sizably reducing freight emissions nationwide.
It’s a laudable goal — according to data from the American Trucking Associations, the U.S. trucking industry comprises more than 12 million freight trucks, of which roughly 2.9 million are the types of heavy-duty Class 7/8 combination trucks used in long-haul operations. And just 2% of the heavy trucks sold in the U.S. in 2022 were completely electric. Transportation, the largest greenhouse gas-emitting sector in the American economy, is due for an environmental overhaul.
But with major uncertainties about customer demand, battery supply, and the speed at which a national network of charging stations can be established, it will take more than regulation to bring the trucking industry into the future.
What’s needed is a reevaluation of how the industry and its stakeholders can work together to facilitate the adoption of electric trucks — and it can’t come at the expense of small fleets and independent owner-operators. A collaborative approach involving all stakeholders is essential to prevent overloading truck drivers during this transitional phase.
Ensuring Regional Equity
As the drive toward electric truck adoption gains momentum, charging infrastructure has emerged as the transition’s crucial, but highly uneven, backbone.
Success stories like that of Portland’s “Electric Island” demonstrate the power of cooperation in creating hopeful solutions for greening the trucking sector. The public-private partnership between Daimler Trucks, the city of Portland, and Portland General Electric is an early example of the possibilities for high-powered charging infrastructure for heavy-duty trucks.
But there is a noticeable bias toward the development of charging networks in more populous areas, like the East and West coasts of the United States.
I would love to see the same attention given to places like Mariel, Wisconsin or Shelbyville, Tennessee.
Unfortunately, a concentration of resources in favored regions has the potential to leave other parts of the country behind, creating logistical challenges and additional burdens for the small fleets and owner-operators who need to traverse vast, less-connected distances. The entire industry, along with its stakeholders, must commit to easing these challenges for truck drivers and ensuring a fair and well-supported shift for all.
Creating a more balanced and robust charging infrastructure is more than just an issue of equality. It has a direct impact on the operational efficiency and competitiveness of the logistics sector as a whole.
That’s why a coordinated investment strategy, one that encompasses both public and private stakeholders, must be developed and implemented to address potential disparities in charging infrastructure.
The Cost Conundrum
Here’s what else we know about EVs in the trucking industry: Cost continues to hamper adoption. A 2021 study published by the International Council on Clean Transportation revealed that the average upfront price of electric trucks exceeds that of diesel trucks by nearly 30%. [Editor's note: For Class 8, many estimates of the price premium are even higher —two or three times the price.]
In a study by The North American Council for Freight Efficiency, electric trucks were found to have a higher total cost of ownership than diesel trucks, a particular difficulty for small fleet operators who often operate on razor thin margins, and who already face challenges regarding charging infrastructure and expenses.
Although the prices of electric trucks have been decreasing recently, smaller operators will still struggle to find the financial means for this transition, which begs the question: how are manufacturers to be held accountable for the products their customers — in many cases as a matter of fiscal necessity — choose to buy?
Acknowledging that truck drivers shouldn't bear the sole responsibility for realizing this change is vital, and truck operators need comprehensive support from the whole industry.
Another complicating factor is the regulatory situation itself.
California's bold mandate not only presents a challenge for the industry but also stirs legal battles that can impact the logistics landscape and its stakeholders. The dispute between the state and a group of 19 attorneys general has the potential to create market uncertainty, which will likely cause manufacturers and fleet operators to delay the adoption of electric trucks until outcomes clarify.
Companies serving the trucking segment should adopt a proactive stance by mitigating the impact of legislation on truck operators. Here are some concrete steps to achieve this goal:
- Establish a multi-stakeholder forum: Create a platform for regular communication and joint problem-solving among truck manufacturers, owner-operators and small fleet operators, charging infrastructure providers, regulatory bodies, and industry stakeholders such as insurance companies.
- Develop regulatory risk management solutions: Work together to design comprehensive financial instruments, including insurance policies, that specifically protect small fleet operators and independent owner-operators from potential disruptions caused by evolving legislation.
- Promote industry-wide training and education programs: Organize programs to educate owner-operators and small fleet operators on the implications of ongoing legal battles, enabling the development of more informed strategies for managing potential risks associated with these challenges.
- Advocate for clear and stable regulations: Engage with policymakers at local, state, and federal levels to convey industry concerns and propose regulations that facilitate a smoother transition to electric vehicles, without disproportionately burdening small players.
- Monitor and share emerging best practices: Keep track of successful case studies, both domestic and international, where collaboration has led to the development of innovative solutions for addressing regulatory challenges. Share this knowledge within the multi-stakeholder forum to enable continuous improvement with an eye toward reducing the burden on drivers and fleet operators.
Insuring for the Future of Trucking
Among the many second-order effects of the uncertain infrastructural and regulatory futures is the way these factors affect insurance pricing — but mitigating uncertainty is what insurance providers do best. To help small fleets future-proof their investments and comply with demanding regulations, we ourselves have to adapt. In doing so, we effectively remove some burden from truck drivers, enabling them to concentrate on their primary responsibilities without fretting over compliance and associated expenses.
Although the conversation is far from over, here are three ways insurers can get started with improving their offerings for electric truck operators:
- Refine our risk assessments: Insurance companies serving the trucking industry must refashion traditional risk assessment models to include complexities specific to electric trucks, ranging from battery and charging system failures to repair costs and loss of charging access in remote locations.
- Avoid penalizing EV adoption: Insurers can offer premium incentives for policyholders who invest in electric trucks by incorporating discounts, rebates, and other rewards for contributing to sustainability goals. We should also begin designing policies specifically for electric truck fleets where risks associated with regional infrastructure disparities and regulatory complications are accounted for in premium calculations.
- Collaborate, collaborate, collaborate: Insurers should aim to work closely with stakeholders, such as truck manufacturers and infrastructure providers, to develop bundled coverage or joint offerings, making insurance and charging solutions more streamlined and affordable for small fleet operators.
Ultimately, the ability of truckers, insurance providers, and other industry stakeholders to adapt to the electric truck revolution will come down to our capacity to innovate.
With the stage ripe for new alliances and targeted strategies, the industry and its stakeholders can pave the way for the next generation of logistics while ensuring the challenges of smaller players are addressed and resolved.
Kevin Abramson is president of Cover Whale, commercial-trucking insurer and insurtech founded by experienced insurance and technology veterans that focuses on technology, underwriting, and data to provide innovative insurance programs for the commercial vehicle industry. This article was authored and edited according to Heavy Duty Trucking’s editorial standards and style to provide useful information to our readers. Opinions expressed may not reflect those of HDT.