February 22, 2024
Startups with electric vans race to meet demand for zero-emission delivery

By Nick Carey and Lisa Bartlein

LONDON/LOS ANGELES (Reuters) – A group of European and U.S. delivery company startups are racing to serve a growing market by offering zero-emission, electric last-mile delivery to retailers and consumers in cities. Before the big shippers do the same.

Companies such as Germany’s Liefergrün, the UK’s Zedify and Packfleet, and New York-based DutchX are taking advantage of retailers’ need to meet environmental, social and corporate governance (ESG) and emissions-reduction targets. Collectively, zero-emission delivery startups have raised nearly $1 billion to date, according to data compiled by PitchBook and Reuters.

They are expected to gain market share over the long term while industry leaders are still gearing up. For example, FedEx has set a target of 2040 for its zero-emission delivery fleet; Deutsche Post DHL Group says 60% of its delivery fleet will be electric by 2030, the same year Amazon plans to put 100,000 Rivian electric trucks in service. United Parcel Service expects 40% of its delivery vehicles to run on alternative fuels by 2025.

Using their own routing technology for urban and suburban delivery, these small but fast-growing startups must thrive while keeping prices low in a competitive market, which could also make them acquisition targets.

“Nobody wants to overpay for sustainable delivery,” said Niklas Tausch, CEO of Berlin-based Liefergrunn, which delivers to big cities in Germany and Austria and counts fashion retailers H&M and Inditex and Hello Fresh among its customers. Lists.

H&M, the world’s second-largest fashion retailer, said it was pursuing zero-emission delivery initiatives “through a variety of partnerships… with Liefergrün”.

Lifergrun creates package hubs in city centres. It then contracts out deliveries to third parties, giving them access to electric van deals from Mercedes-Benz or China’s Maxus.

Touche said Liefergrunn’s revenue should grow sevenfold from “single-digit million” euros this year in 2022 and reach “triple-digit million” in 2024.

So far Lifegrun has raised 15 million euros ($16 million) and will raise more next year to expand rapidly.

Time is ticking as delivery giants are investing huge sums of money to electrify their own fleets.

In a pilot project, DHL will switch to 100% zero-emission last-mile e-commerce delivery in the Netherlands by the end of this year, Deutsche said, followed by an investment of “double-digit billions” in other markets. Will go. The post DHL’s head of corporate development Yin Zou.

UK startup Packfleet saw its revenue grow tenfold in 2022 and its fleet in London should grow from about 50 to 400 electric vans in 2024 as it adds new customers.

Packfleet will expand to Liverpool, Birmingham and Manchester next year and plans to be in the top 20 UK cities within two years.

“The biggest request from our customers is when can you expand and how quickly can you take on all this volume?” CEO Tristan Thomas said.

‘Unforgiving business’

Europe has so far proven to be more fertile ground for zero-emission package delivery.

But in New York, DutchX is launching a new service to bring small filled containers to Manhattan by ferry, then load them onto Fernhay electric cargo bikes for city delivery, said DutchX co-founder Marcus Hoad. . The company will use the bikes to deliver packages to its customers — including Amazon Fresh and Whole Foods.

“Some customers are working very, very hard to achieve zero-emission delivery as quickly as possible,” Hoedt said.

DutchX’s revenue should increase by more than a third this year to about $40 million. The company will begin operations in Philadelphia this year, with three or four additional US cities following next year.

DHL’s Xu said there is increasing pressure from investors on logistics companies and customers to cut emissions.

Some retailers have set tough targets. For example, IKEA wants 100% zero-emission last-mile delivery by 2025.

The challenge for startups is that it is difficult to grow. Many use smaller vehicles than a typical delivery truck, which reduces profit margins because it is harder to deliver enough packages to offset labor and other costs.

“Last-mile delivery is a very inexact business,” said Sven Etzelsberger, CEO of California-based URB-e, a maker of cargo containers for e-bikes.

Thomas Goldsby, a logistics expert at the University of Tennessee, said that while “big dog” carriers FedEx, UPS and DHL enjoy scale advantages, regional companies can succeed.

“As far as the threat from these startups is concerned, certainly the established carriers will be keeping an eye on these developments,” Goldsby said. “They’re willing to acquire any service provider that’s really doing something good.”

DHL’s Zou said zero-emission delivery startups are not a threat, but added, “We’re always curious to see them form business partnerships or work together.”

UK electric cargo-bike delivery startup Zedify operates in 10 UK cities, with seven more coming in the next six months, and already delivers packages for big companies like FedEx with its growing retailer base.

CEO Rob King said adding more cities coupled with national contracts from retailers will help Zedify’s deliveries double to 2 million packages this year and quadruple to 8 million in 2024.

Within four years, Zedify aims to be in about 50 UK cities with 100,000 or more residents.

“We’ve proven that we make money with volume and we’re really efficient,” King said. “But reaching that scale will be a challenge for anyone.”

($1 = 0.9323 euros)

(Reporting by Nick Carey and Lisa Bartlein; Editing by Ben Kleiman and David Gregorio)


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