Volvo Financial Services’ latest leasing offering for Mack MD Electric trucks is rolling out across the country in a bid to accelerate a shift toward all-electric fleets, but concerns over cost and functionality could be roadblocks.
VFS’s new usage-based leasing product for Mack MD electric medium-duty trucks is underway, the company said during its fourth-quarter 2023 earnings report last week. The new product was designed in part “to help customers more easily adopt better electric vehicle technology into their fleets,” Volvo Group Chief Executive Martin Lundstedt said.
The program offers Mack MD Electric users a “full service, off balance sheet truck lease,” inclusive of regular repairs and maintenance, Volvo Group told Equipment Finance News.
The lease terms are typically three to six years and invoiced based on the number of actual miles run each month at a per-mile charge. At the end of the lease, Mack reclaims the truck — just like a full-service lease — or, the driver can either sign a lease extension or purchase the vehicle at fair market value, Volvo said.
The program, launched in November 2023, is being pushed by Volvo at three customer ride–and–drive events in California and Pennsylvania as the company is in the “early stages of selling.” Volvo hasn’t yet signed any contacts, but has received “a good deal of interest in this product with our early orders,” according to the company.
Dealers voice concerns about electrifying
This new leasing model for medium-duty trucks “gives customers confidence in adopting new technology with no risk at an operating cost that compares to current diesel product,” Volvo said.
But not every dealer is excited about electrification. Concerns about battery life, cost, range and weight remain top of mind.
Barry Milea, president at New York-based dealer Milea Truck Sales and Leasing, told EFN that while he does sell commercial electric trucks by manufacturer BYD, a Japanese firm that operates its U.S. headquarters out of Pasadena, Calif., he is skeptical of widespread adoption.
“Everybody’s interested in it, but there isn’t a great demand for it,; It’s very expensive,” Milea said of electrifying trucking. “So the only people who are going to delve into it are big box [retailers] looking to make a statement. Other than that, Mom and Pop shops can’t do it.
“Financially, it makes absolutely no sense,” Milea said, proposing that hydrogen-electric trucks could be a safer bet for dealers. “A hybrid, that makes sense. But an all-electric truck in New York City at this point doesn’t make any sense. The demand has actually vanished,” he added, citing the need for electric refrigeration in many trucks.
Hydrogen trucks are gaining momentum as a viable competitor to fossil fuels but could be hard for dealers to sell. McKinsey reported that hydrogen can help decarbonize heavy industry processes like trucking, but will also come at a steep cost of providing new charging infrastructure for filling both hydrogen tanks and high-powered truck batteries.
While Volvo and Mack don’t offer a commercial hydrogen-powered truck, Nikola began producing Class 8 hydrogen-powered trucks for wholesale consumers this year.
There could be more demand for Volvo’s Mack MD electric models soon. A 2022 report from BCG estimated that 21% of new commercial vehicles in the U.S. will be battery electric by 2030 as regulations tighten.
“We have started to see customers that are asking about financing options, specifically leasing,” Melissa Esparza, corporate director of finance for Portland-based dealer TEC Equipment, told EFN, adding that TEC began offering a full-service lease option for electric trucks late last year.
Most customers looking to buy electric trucks have taken advantage of state grants and paid cash, she said.
Dealers on the West Coast could embrace diesel alternatives first, especially in California, which aims to replace 300,000 polluting trucks with cleaner-fueled vehicles by 2035.
Esparza said that until regulations shifted this year, demand for diesel outweighed interest in electric trucks at her firm.
“We have some diesel vehicles that are still not subject to the new 2024 requirements, [and] those can’t be sold in California,” she said. “California is definitely the most aggressive of our states that we have jurisdiction in.”
Esparza noted that since TEC has dealerships across the West Coast and Midwest, it has dealerships unaffected by this change.
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