Why last-mile delivery EVs are big business for car and retail firms

The growth of online shopping and food deliveries, combined with moves to improve air quality in cities and businesses seeking to cut costs, has sparked a huge growth in the last-mile delivery market. How big is harder to quantify. Straits Research valued the global last-mile delivery market at £33.6 billion in 2021, predicting it would grow to £102.6bn by 2030. But Precedence Research valued it as £149.3bn, with a predicted 2030 valuation of £352.1bn. Those wildly different estimates reflect different definitions of what constitutes last-mile delivery. While manufacturers have enjoyed success with electric variants of traditional vans (think the Ford E-Transit or Citroën ë-Dispatch), there’s increasing emphasis on the wider delivery ecosystem. Electrification presents huge opportunity to reduce last-mile delivery costs, which some estimates suggest account for up to 28% of the total shipment cost. It’s a shift to multi-modal solutions that presents both challenge and opportunity to the commercial vehicle (CV) divisions of traditional manufacturers – who are racing to develop bespoke vehicles and solutions to meet that growing demand. Kia, for example, has plans for a full range of Purpose Built Vehicles (PBVs), with the aim to sell millions by 2030. In a race against time as various regions introduce stricter regulatory measures, manufacturers face competition from new rivals, including both ambitious EV start-ups such as Arrival or Canoo and some of the key last-mile delivery firms themselves. In the US and Europe, arguably the most significant player in the last-mile delivery space is internet retail giant Amazon. Having long relied on third-party carriers such as the Royal Mail, Fedex and UPS, it has built up its own formidable delivery operation in the subscription-based Amazon Prime. According to reports based on internal Amazon documents in The New York Times, the firm had around 175,000 vans on the road by the end of last year, the vast majority diesel-engined and sourced from automotive firms. As it pivots to EVs, Amazon is still buying from car firms – including Mercedes-Benz in Europe, Ram in the US and Mahindra in India. But just as Amazon has cut out delivery firms with Prime, it has now turned to effectively creating its own delivery vans. Amazon invested in US EV start-up Rivian, in a deal that involved an order for 100,000 electric vans designed to Amazon’s specifications. The first Amazon-branded Rivian machines have just rolled off the production line and are due to go into operation in 100 American cities by the end of this year. Fellow US retail giant Walmart also has similar ambitions for its last-mile delivery operations and has ordered for 4500 electric Lifestyle Delivery Vehicles from start-up Canoo – with an option to purchase up to 10,000. British start-up Arrival has also attracted similar interest from delivery firms for its vans. For Amazon and Walmart, the decision to place their largest orders with start-ups rather than established automotive firms is about control: they can have vehicles built to their specifications, rather than having to adapt a more universal design. In response, several manufacturers are taking a fresh approach to the last-mile delivery space. General Motors, for example, has created a new brand, Brightdrop, which is developing a range of last-mile delivery solutions, ranging from vans down to a pallet crate with a built-in electric motor that can be used for the final delivery stage. GM has given Brightdrop significant autonomy, allowing it to operate with a speed closer to a start-up than a legacy manufacturers. The Zevo 600 van was developed in just 20 months. Brightdrop has already delivered Zevo 600 – built on GM’s Ultium platform shared with the Hummer EV – to Fedex, a deal likely to grow in the future, given the delivery firm’s commitment to eventually operating a fully electric fleet of around 250,000 vans. Walmart also has 5000 reservations with Brightdrop. But vans aren’t the only solution for last-mile deliveries: there are larger and smaller options, too. Swedish start-up Volta Trucks is conducting final validation testing of the Zero, a 16-tonne truck designed for inner-city use. With no diesel engine the cab is set lower, with a fully glass surround and central driving position giving improved visibility in urban areas. Volta intends the Zero to be used for consolidated last-mile deliveries. In London, it will be trialled by the Crown Estate in Regent Street. All packages due for delivery to the estate’s central London properties will be consolidated on the outskirts of London and complete the journey in a Zero, replacing multiple van journeys. Volta, as with many delivery van firms, is also offering a full service solution that includes charging provision and servicing – a revenue source for manufacturers beyond the sale of the vehicle. There’s also huge demand for smaller delivery vehicles, which can make deliveries in places that lorries and vans can’t reach. That’s why Citroën has developed a cargo version of the Ami quadricycle and why there’s a huge growth in the electric motorbike and cargo e-bike market. Cargo e-bikes, which can have a storage capacity to rival many car boots, are especially attractive, given their low running costs, small footprint and ability to operate in areas where motorised vehicles can’t reach. Amazon is also aiming to be a key player at this end of the market: it has opened a micromobility hub in Hackney, London, using a fleet of third-party cargo bikes to make local deliveries more quickly than a van could. A growing number of firms are also specialising in the food delivery market. Australian start-up Zoomo has developed a delivery rider-focused e-bike, while British firm Eskuta offers the SX-250, a machine that matches the size and cargo capacity of a moped but qualifies as an e-bike through having pedals that must be turned to engage the motor. That makes it cheaper to run and removes the need for riders to take motorbike training. It seems likely that last-mile delivery firms will settle on multiple solutions, with no single type of vehicle dominating in the way vans and mopeds previously have. That gives significant opportunity for manufacturers – but only if they can adapt to new product types and work with new players and rivals. Legislation driving uptake in cities Major European cities are leading the charge in driving last-mile delivery uptake. Diesel-engined commercial vehicles aren't currently allowed to drive in certain low-emission zones in central Paris on weekdays – and they will be banned outright from the French capital in the run-up to the 2024 Olympic Games. That commitment is why Volta has placed an early emphasis on Paris to launch its first electric trucks. London has yet to ban diesel vehicles outright, but they must meet low-emission zone standards. The UK is pushing for an outright ban on the sale of new non-zero-emissions vans by 2035. Cities such as Bristol and Oxford are also planning similar measures, and it’s having an impact on the roll-out of delivery vehicles: the Royal Mail has switched 70 of its delivery offices to electric-only fleets, mostly in areas with LEZs in place or planned.