EV mandates are throwing a wrench into commercial truck dealers’ operations as regulations around zero-emission trucks tighten and available financial incentives for customers appear inadequate.
A federal rule finalized in March will require more truck manufacturers to sell zero-emission vehicles starting in model year 2027, according to the Environmental Protection Agency (EPA). EV models could account for 60% of new medium- and light-duty trucks and 25% of Class 8 tractor sales by 2032 under the EPA rule, according to the Institute of Energy Research (IER).
Moreover, regulations in effect in California and other states are requiring that zero-emission trucks comprise 5% to 9% of sales by the end of 2024, depending on the truck category, according to the California Air Resources Board’s (CARB) Advanced Clean Trucks rule (ACT).
CARB also implemented the Advanced Clean Fleets rule in 2023, requiring “high priority” and federal fleets to purchase either zero-emission or near zero-emission vehicles until 2035, and only zero-emission vehicles after that. In 2024 50% of purchases for state and local government fleets must be zero-emission vehicles; in 2027 that number will be 100% under the rule.
Thus far, ten more states have adopted at least some of CARB’s mandates for heavy-duty vehicles:
- Colorado;
- Maryland;
- Massachusetts;
- New Jersey;
- New Mexico;
- New York;
- Oregon;
- Rhode Island;
- Vermont; and
- Washington.
Despite president-elect Donald Trump’s pledge to end the electric vehicle mandate on his first day in office, the regulations in place are unlikely to “swing quickly or wildly,” Wayne Hammond, vice president of strategic initiatives at Portland, Ore.-based dealership TEC Equipment, told Equipment Finance News. TEC Equipment has locations in seven other states, including California and Washington.
‘I can’t sell you those diesel trucks’
Global EV truck sales increased 35% in 2023, according to the International Energy Agency. The market is projected to grow 14.5% annually to roughly $78 billion by the end of 2033, according to market research firm Fact.MR.
Global EV truck sales and registrations in 2023
However, the regulatory push for manufacturers to make and sell more EVs may hinder diesel truck sales, as evidenced by a 50% year-over-year decrease in new Class 8 truck sales in California in June, according to IER.
While no mandates are aimed at dealers directly, dealers are pressured by regulators and OEM partners to prioritize selling EVs, Scott Pearson, chairman of trade group American Truck Dealers and president of Peterbilt of Atlanta, told EFN.
“It’s very difficult to process at the dealer level to have a customer come to you who wants to buy their trucks for the year, but then say, ‘I can’t sell you those trucks because I haven’t sold an EV yet. And ‘I’ve got to sell and register an EV in the state before I have enough allocation of [internal combustion] engines to be able to take your order.’”
— Scott Pearson, Chairman, American Truck Dealers
Dealers essentially must sell the same ratio of EV trucks as their OEM partners due to regulatory pressures, TEC’s Hammond said. The mandates require dealers to operate under a credit-based system they say has become increasingly challenging.
Under CARB’s ACT rule, “If you sell one battery-electric truck, you now get enough credits that you can sell a dozen diesels if their emissions are at a certain level,” Hammond said. “But if you layer on top of that the Low NOx regulation that says for every battery-electric truck we sell, maybe we can only sell two diesels.”
CARB’s Low NOx rule, also known as the Heavy-Duty Omnibus regulation, aims to reduce nitrous oxide emissions from heavy-duty trucks by 75% in 2024 and 90% starting in model year 2027.
Are incentives enough?
EV trucks typically cost more than twice as much as their diesel counterparts. For instance, a new Class 8 EV may cost around $400,000 while a comparable diesel truck costs $180,000, according to the American Trucking Association.
State and federal agencies are offering incentives to offset higher upfront costs and bolster EV truck sales. These include:
- CARB’s Truck and Bus Voucher Incentive Project, which provides up to $120,000 for heavy-duty electric trucks and up to $375,000 for electric school buses;
- The federal Commercial Clean Vehicle Credit, providing up to $40,000 for EV trucks weighing more than 14,000 pounds;
- CARB’s On-Road Heavy-Duty Voucher Incentive Program, which grants fleets of 10 or fewer trucks up to $410,000 per vehicle to replace heavy-duty diesel trucks with zero-emission models; and
- Washington’s Diesel Emissions Reduction Act, offering up to $50,000 for medium-duty EV trucks and $100,000 for heavy-duty EVs, plus up to 50% of costs for charging equipment and installation.
Purchasing an EV truck would not be possible for most fleet owners without such grants, Lisa McGhee, zero-emission vehicles programs and affairs manager at Santa Fe, Calif.-based Tom’s Truck Center, told EFN. However, the EV truck market would benefit from more incentives, she said, including tax credits for smaller fleet owners.
“Even if you give the truck away from me for free, the truck price tag is $500,000. There’s still a 12% federal excise tax and 10% sales tax, so you still have a $150,000 [investment]. … For a small fleet, there are lots of barriers when it comes to that.”
— Lisa McGhee, Tom’s Truck Center
Qualifying for all available incentives is another hurdle for many customers, Duane Welty, head of zero-emission vehicles and transportation technology strategy at San Leandro, Calif.-based dealership Peterson Trucks, told EFN.
“To offset the cost 100%, you have to have every single grant and every bit of funding that you can get, which you may or may not qualify for,” he said. “So, it’s a very narrow demographic that’s fully covered by the funding.”
‘Pay me now, audit me later’
A more streamlined funding process would help dealers, McGhee said. Receiving funds from CARB incentive programs can take up to six months after an EV sale due to an arduous review process.
CARB is “managing the entire process of a transaction, and it’s a nightmare,” she said. “So we are asking them for two things — pay me now, audit me later. Instead, you’re holding back my funds for three to six months after I’ve delivered the truck because of your review process. … You’ve forced a stop sale internally.”
TEC’s Hammond agreed.
“We offer the discount at the point of sale, but then we have a receivable on the books of $250,000,” he said. “And then we have to float that amount for some unspecified amount of time while we get CARB to approve all the paperwork that they already kind of pre-approved but, for whatever reasons, takes a long time.”
Hiring specialists strains dealers
While EV-related jobs grew 36.4% year over year as of March, according to the U.S. Environmental Defense Fund, meeting EV mandates can adversely affect truck dealers from a human resources standpoint, ATD’s Pearson said.
“We have two EVs that are on order … but before I could order the two EVs, I had to have trained two technicians,” he said. “So, you spent money on training and whatnot. Yet, there’s really no market out there.”
The strain of hiring mandates shows that regulators aren’t fully considering smaller dealers, Peterson Trucks’ Welty said.
Owners and managers of smaller dealerships are “typically wearing a lot of hats already, and now they’re going to have to wear more hats,” he said. “They can’t just add more people and throw more money at it, because they don’t have it.”
While larger dealers may have more resources to meet requirements, the challenges they face are proportional, Welty said. A large dealership, for example, may have to implement an entirely new operating system for selling EVs, equating to hundreds or thousands of software installations, which can be a “logistical nightmare,” he said.
Too far, too fast
Dealer pushback against zero-emission rules is not a result of anti-EV sentiment. Rather, it stems from unrealistic demands when the industry had already started embracing some of the benefits of EVs, Pearson said.
“It’s too far too fast,” he said of the new EV regulations. “We all see the potentiality of EV and need for it, but mandates have pressed it to the point where it’s going to start compressing.”
“We, the dealers, have got to sell it to a customer who doesn’t want to buy it. And so that’s where we get constrained.”
EVs offer advantages in the medium-duty truck market, especially for school buses and short-haul trucking scenarios, Welty said. EV trucks are more likely to hold their charge for an entire trip in those instances.
Plus, trucking companies can save 40% to 60% with EVs when comparing fuel costs to electricity costs, according to the Natural Resources Defense Council, a non-profit that advocates for sustainable practices. And commercial EV costs could fall 50% by 2030, according to research firm Statista.
Inadequate charging infrastructure is also a major obstacle to widespread adoption, especially in the heavy-duty and long-haul trucking sectors, Hammond said. “There’s inadequate public stations available,” he added.
“So, almost every customer has to look at on-premises charging, and that can be a nine-month to three-year project, depending on what kind of power they have available, what kind of power they need for their fleet. So, it’s no longer a truck sale. We’re really trying to sell customers an entirely different business model.”
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