UPS and FedEx find it harder to replace gas guzzlers than expected

LOS ANGELES/SAN FRANCISCO — UPS and FedEx are facing uncertainty in U.S. supplies of big, boxy electric step vans they need to replace their gas guzzlers and make a dent in the country's climate-warming tailpipe emissions.

The path to electrification by the package delivery giants is critical to U.S. President Joe Biden's transportation climate goals. Achieving that aim, however, is hampered by battery shortages that are limiting EV supplies and keeping prices high, and by startup electric van makers that are running out of money and shutting down.

"The question is how many of those (companies) will be here in five years, 10 years?" Luke Wake, UPS's vice president of fleet maintenance and engineering, told Reuters.

In a double whammy, UPS and FedEx are also losing access to California vouchers that help defray EV prices that can be about two times higher than traditional delivery trucks.

UPS and FedEx obtained some relief from EV supply constraints when trend-setting California, the epicenter of electrification, put on hold a rule that would have required them to purchase electric delivery vehicles exclusively starting this year. An industry group whose members include UPS and FedEx has filed a lawsuit claiming that California first needed the approval of U.S. regulators.

The delivery companies and their electric van suppliers face a Catch-22 situation, said Sam Fiorani, a vice president at AutoForecast Solutions.

"You need the demand to have the supply and you need the supply to have the demand. Getting both of them to work at the same time is the problem," he said.

UPS has tested and purchased EVs for decades and is a bellwether for demand. It has more than 150,000 delivery vehicles around the globe and is among the top buyers of step vans, replacing about 7,000 of its ubiquitous brown trucks each year in the U.S. alone.

UPS and FedEx, which each have rolled out about 1,000 electric step trucks, are keeping their options open.

UPS is sticking with its plan, set in 2016, to rely on EVs and other alternative fuel vehicles to reduce emissions. Those other vehicles include 13,000 step vans that run on renewable natural gas (RNG).

FedEx told Reuters it is looking for opportunities to incorporate other lower-emission delivery trucks into its fleet.

'SUBJECT TO AVAILABILITY'

UPS and FedEx favor step vans — larger, often custom-built trucks with roomy cargo areas.

U.S. deployments of EV step vans by UPS, FedEx and others such as bread and linen carriers peaked at 275 in 2021 and fell to 238 in 2022, according to data from the nonprofit CALSTART. Those deployments were between 220 and 250 for 2023, the group estimates.