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How Long Will it Take Companies to Break Even After Purchasing an Electric Vehicle?

By Bhanu Potluri  March 27, 2019

Bhanu Potluri is an Applied Research Scientist at LLamasoft and wants to share his thoughts on a data-driven decisioning and electric vehicles. Here he tests a simulated model in California, the U.S. state with the most charging stations) and the Midwest, where there are far less charging stations. With endless variables at play, Bhanu Potluri predicts it will take companies approximately 2 – 5 years to break even on the purchase of an electric vehicle. Keep reading to see how he came to this conclusion.

Amid much fanfare, Elon Musk unveiled the Tesla Semi last year promising 300 miles of range, 80000 lbs towing capacity and a starting price of $150k. While certainly not the first electric truck to be launched, it caught everyone’s eye as the first feasible electric truck that can be profitable to operate. Ever since other companies have been playing catch-up. Daimler’s head of trucks, Martin Daum, went as far as saying the Tesla Semi defies the Laws of Physics. Simultaneously, governments around the globe are pushing for stricter carbon emissions especially in urban areas. The EU wants to achieve CO2-free city logistics in major urban centers by 2030 while other US states like California are considering the same.

All of this buzz has companies and executives asking themselves if electric vehicles will benefit their bottom line along with the environment. Many have already pre-ordered them 1. There are more incentives to go electric now than ever before. While the idea of an electric truck sounds cool and futuristic, what does it mean to your business? What regions/routes should you operate them? How many trucks should you buy? Are they profitable after-all? If so, when do they break even?

With SCG X 2.0, you can answer exactly these questions by modeling your transportation network with an electric fleet. While electric trucks have many advantages such as lower maintenance costs, zero emissions, and silent operation, the primary limitations are battery range and prohibitive initial cost. Routing electric trucks poses new challenges because of the newly added constraints around battery range and limited charging infrastructure available. The transportation optimization solver in SCG X 2.0 now supports modeling electric trucks, meaning you can define batteries, charging stations and charging speeds. The solver finds the best routes while respecting the range of your battery and schedules charging stops along the way to minimize overall cost.

In this post, I analyze the effect of adding the all-electric Tesla Semi to my imaginary freight network (LLama Logistics) in California. To understand the cost benefits of using an electric truck, I look at metrics such as additional distance traveled to find a charging station, additional time spent charging, savings from lower operational costs and time to break even given the higher investment. I chose to use California for my example because it tops all other states in terms of charging infrastructure.

Model:

LLama Logistics is a freight shipping company that has shipments coming into Port of San Diego. These shipments need to be delivered to customers in 47 cities/towns across California.

LLamaLogistics has two types of assets:

  • Freightliner Cascadia (powered by diesel) – 1 available
  • Tesla Semi (all electric with a 300-mile range) – 1 available

 Operating Costs: I roll-up all operating costs into “Cost Per Mile” for simplicity

  • Freightliner Cascadia costs $1.691 a mile
    1. According to ATRI (American Transportation Research Institute), it cost $1.691 per mile to operate a truck in the US in 2017 2

  • Tesla Semi costs $1.5 a mile
    1. Approx. figure after factoring in savings from fuel and maintenance costs
    2. In later parts, we’ll also explore a scenario on what happens if this number turns out to be higher or lower than expected

Charging Stations:

  • California has 3952 charging stations (public & private included) that offer level 2 and level 3 charging. Tesla owns 742 of these (Tesla Superchargers and Tesla Destination)
  • At Level 2, you can charge at about 7.5 kW an hour, so it would take our Tesla Semi a whopping 73 hours for a full charge. Since this is unrealistically slow, we ignore charging stations that only support level 2
  • At Level 3 (also known as DC fast charging), you can charge anywhere between 50kw to 200kW an hour depending on the type of charging station. I assume level 3 at 120kW an hour so it would take our Tesla Semi ~4.5 hours for a full charge
  • 1205 Level 3 chargers are considered in this model

As a side note, Chademo announced a 400kW charger3 while Telsa announced a MegaCharger with a whopping 1.6 MW for electric trucks4 so the future looks promising

Analysis:

I run two scenarios,

  • Deliver all shipments with the diesel truck i.e. Freightliner Cascadia
  • Deliver all shipments with the electric truck i.e. Tesla Semi

From the TO solver’s perspective, the major difference here is when optimizing routes for the electric truck, it must keep track of range at every stop and schedule charging stops in segments accordingly. The solver then optimizes where to charge, what charging speed to use and how much to charge.

Here’s a snapshot of the optimized routes from SCG X for the diesel and the electric trucks (Notice the green circles representing charging stops):

An important point to note here is that the route design is quite different for the electric and diesel trucks. The solver optimizes routes for the electric truck from scratch by exploring many candidate routes with charging schedules rather than simply finding the charging schedule for routes operated by the diesel truck. This helps to find the optimal route design for electric trucks given the charging station infrastructure rather than forcing your electric trucks to operate on the same routes as diesel trucks.

To compare routes from the two scenarios, I look at the total distance traveled and total route time when using only the diesel truck versus using only the electric truck.

Thanks to California’s dense charging network and our optimistic assumption that we can charge at level 3 charger, using the electric truck only results in an additional 4.6% (444) total miles traveled compared to the diesel truck. In other words, my “Per Mile Operating Cost” for the electric truck needs to be only 5% cheaper than the gas for me to break-even (of course excluding the additional capital investment). This was unthinkable just a few years ago. As a bonus, we also save the world from 19.54 metric tons of CO2 emissions (California would be very pleased).

That being said, we spend a considerable ~105 hours charging across all routes. This is excluding the overnight charge time at the home base (Port of San Diego). While some of this time could be part of a driver’s break, it still calls for an adjustment in the per mile operating cost for the Tesla since the drivers now need to be paid more for their additional duty time. Can’t wait for those super-fast MegaChargers and fully autonomous trucks that Elon Musk promised5.

When do you break-even?

In the above scenario, I would save $1172.6 every time I make this trip. With a reasonable assumption that I make 15 of these trips a year totaling about 145k miles, my total savings every year would be $17,588.92.

While the average Cascadia costs $120k, I expect the average Tesla Semi to cost around $180k (Base $150k + options) which is $60k in extra capital to start with.  Given my yearly savings, I would break even with the Tesla Semi in a little over 3 years. While not as optimistic as the 2-year break-even that Elon Musk promised, it is still promising.

In reality, our expected operating cost of $1.5 a mile might be lower or higher depending on the charging infrastructure and extra duty time for the drivers.

  • Adjusting for extra duty time, what if the Tesla Semi costs $1.6 a mile to operate?

Yearly savings would be just under 2.5k and it would take us forever to break-even. I probably would just stick to my diesel unless California decides to impose stricter emission laws.

  • Going by Elon Musk’s optimism that the operating costs will be 20% cheaper than a comparable diesel truck, what if it costs $1.4 a mile to operate?

I would break-even in a little under 2-years and save ~$32.5k every year thereon. Definitely makes the Tesla Semi a very attractive proposition.

After looking at different scenarios, going electric seems like a reasonable investment for future operations of LLama Logistics in California.

What if I add the Tesla Semi to my operations in the Midwest?

Maybe California is too optimistic given the dense charging network which is years ahead of the rest of the country. What if we were to add the Tesla Semi to LLama Logistics fleet in the Midwest?

LLama Logistics operates in Michigan, Illinois, and Ohio. These 3 states combined have only 343 Level 3 charging stations (less than 1/3rd of California). Here’s an SCG X snapshot of my optimized routes for the Tesla Semi in the mid-west:

The total miles traveled by the electric truck are now ~7.1% (602 miles) higher than the diesel which is surprisingly not bad given the lack of charging infrastructure. Two things that help here are that we always fully charge the electric truck at the warehouse before sending it out on a route and most of the charging stations are conveniently located along highways.

Similarly, my break-even time in Michigan would be a little under 6 years at an annual savings rate of $10,651.

Conclusion:

Electric trucks are poised to be profitable to operate whether it’s California, a state with the best charging network or the Midwest with a sparse charging network. Perhaps it’s time to find out how they impact your transportation network? Find out using SCG X 2.0.

P.S. Watch out for when full self-driving capabilities become a reality, that’s going to be a game changer.

Like many questions related to supply chain decisioning, these answers are complex. Let us enable you to make smarter data-driven decisions that will impact your bottom line. Request a demo of our solutions here.