The Road to EV Adoption With Merchants Fleet 

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Transcript

Elena: Hari is here from Merchants Fleet and I am so excited for you to join me on this conversation today. Hari, how are you this afternoon?

Hari: I’m doing excellent Elena thanks for asking, how are you?

Elena: I’m great. Now that you’re here, we’re gonna get this conversation going about fleet and electrification and I would love to get your perspective on all things fleet and EVs. But before we get into that, I would love to learn more about your background, your journey in the automotive space and how you got to where you are today at Merchants.

Hari: An interesting journey over many years. So I’m really not a fleet person by training. I happen to enter a fleet about three years ago now, but prior to that, over the last say 20 years, it’s been moving from batteries to systems to energy storage and conversion of vehicles and so on and so forth. So is it fair for me to say that, you know, I kind of fell in love with batteries and the potential that the batteries had, and it’s taken you know about 20 years of my life to see batteries from being kind of the underdog in the consumer world to becoming the mainstream thing that nearly everybody is talking about, or paying attention to these days, right. So it’s been an enormous transformation. along that journey, I had the privilege of working with many different organizations got into automotive area, my prior job or when I’m at engineering at Excel fleet, did some crazy and innovative things there. And opportunity came up to you know, lead electrification here at Merchants and now talking to you today.

Elena: And here we are today. I love it. Yeah, it’s always great to see someone’s background and how they were either accidentally into automotive or on purpose. So I’m one of the folks that were the accidental automotive career track there. But so let’s talk a little bit more about Merchants and EV fleet electrification. Talk a little bit more about how you and your team Hari are supporting this transition?

Hari: So most of you know our agenda is to become one of the fastest to be the fastest growing company. Which we are and also eventually become the leader in electrification space, which we are already well ahead of most of the competition. Now, this comes from you know, we can help transform the transportation space. We’ve just been kind of stuck in, you know, incremental improvements over the many many years Right. I mean, you look at OEMs are newer vehicles coming out, but the underlying technology has remained fairly constant and worth the cost both of significant transformation, which will be both beneficial and also disruptive in the industry. The beneficial side of that comes from you know, potentially, cost of ownership production. better for the environment better for local and regional economies. The challenge has come from the side of law practice don’t know how to navigate that transition right to going from a very well understood technology to something that is very, very new. And that is the point where where myself and my team intersects our clients, we work with clients of all shapes and sizes. We help them understand okay, here’s where you are today. Here’s where the industry is headed tomorrow. And here’s how you can start that journey. This happens in multiple different levels across your organization and across the technology spectrum across the equal spectrum and also across the charging spectrum. So when you ask how does mountains help other clients transform their journey? It really starts with understanding who they are, what their fleet composition is, what their utilization is, and then from there coming up with a very in depth consultative approach of what types of vehicles can work. What types of vehicles are that you are aspiring to go to, but don’t exist in the market today. We hear a lot, what type of vehicles have you tried and failed and whatever vehicles would you want to try? Right? And when I say try, and this is where we become very innovative, we can come up with very clever options to get people’s into zero emissions assets. You don’t have to sign into a long term or might be nice with margins. We can rent something we can do a rental and and credit you back and we can play all kinds of financing. I wouldn’t call it games but creativity we can apply that so that folks can actually transition from the legacy technology to what is coming with as little financial risk as possible. Because let’s be let’s be very clear about right trade industry is based on total cost of ownership. Climbing that number down is the primary objective. If you look at the pricing of EVs, they are not just incrementally more expensive than include a nice counterpart. They’re significantly more expensive than its counterpart. So unless someone is doing that TCO analysis and then inserting people in the right place, you’re not going to have a good financial return. Right? And that’s also an area where we really excel it to to kind of right size the application to the vehicle, right size the vehicle to the charger, and then right size, the whole program to a TCO.

Elena: I love what you said though, too about the customization really taking a consultative approach to the strategy like working with fleets because like you said one size does not fit all there are there are a ton of use cases for various different fleets. And that might look different across different fleet managers. And also geographies to do geographies play a little bit of a role here as well?

Hari: Absolutely. It’s very difficult to decouple geographic route based, and even you know, climactic considerations when you’re inserting new technologies, especially in EVs, because when you look at the higher classes of vehicles, right, batteries aren’t the energy density that aren’t batteries are not where it is to have an equivalent brain that you will get our lives counterpart. Because of that if you are operating in areas that are predominantly cold, you have to size your vehicles and the batteries appropriately so that you get the range that you want and then factoring the payloads which may not be as much of a concern in some of the southern tier states, but there are other calendars there for summer months to be running air conditioning and so on right. So, so yes, we are a please play a role strictly looking from that climatic standpoint. But you always also play a role in terrain and you know, all the different variation now how much should we play? Are you hauling cargo every single day? And if you’re coming down, all of that has a significant impact on how you select vehicles.

Elena: Maybe you can speak to this, about the public infrastructure that’s available maybe in these geographies as well is does that also play a role in how you’re selecting maybe a BEV versus PHEV? Walk me through maybe some of that thinking that you and your team do.

Hari: Public infrastructure and going this route the value of and be very candid about it, at least in the United States, right? It’s not where one would expect it to be multiple, multiple reasons for the very vast country, very long distances. And we always can compare to Europe, but let’s also be the candidate that some of the European countries will fit inside some of the states in the United States, right. So so large scale in terms of geography is pretty large. That said, the public charging has had issues where there hasn’t been one coherent standard. Now that problem was going away with everybody gravitating towards the NAICS which will happen late 2024 integrating 25 Very, very promising and will become much more of a tale to better public charging. However, we don’t prescribe public charging as the go to solution for fleet operations. Because if you look at all the public charging stations that are available today, right, how many of them can actually accommodate a class? Three, four are about equal majority of them cannot. They’re not designed for that purpose. They’re not laid out for those types of applications. So if you are predominantly operating smaller vehicles class one or consumer type vehicles, yes, public charging today and in the future can become a viable option. But not your primary option. I would always say my public charging should be a secondary role as a fallback position, right. We encourage players to consider investment in their own depots or on their own premises for charging infrastructure. If that doesn’t work, then we can come up with other creative options. We can give you temporary solutions when the infrastructure catches up. If that doesn’t work, then maybe we can look at third party locations where you can actually safely park your vehicles that have been charged coming in and for you, those are all the different buckets in which we look at expired, exclusively lying on public charging, not recommended for all kinds of reasons because you know, you can show up but let’s say the product department is about 20 miles from where I am, and you probably have to wait for two three hours to get one charging port. And even then, you also need an ounce of luck to make sure that charging doesn’t doesn’t really support fleet fleet operations. From that perspective. We have, however, successfully guided clients to deploy joining infrastructure on their own premises. And it has a lot of until they do a lot of analysis, a lot of sheer electrical work and construction activities. But once they have that infrastructure and they are in command of their own methodology methodologies to charge it does opens up the possibilities for them to try and multiple vehicles trying different routes trying different payloads, a switch drivers in and out, get the experience going. And we’ve successfully done that for multiple clients across the country. So investing in Europe public charging, makes sense from a program structure standpoint, but it has to be always waiting as to what you’re going to do in terms of the cost structure. Exclusively relying on public charging only. Not a great idea today.

Elena: Oh not a great idea for anyone let’s be real about that. So yeah, like you said, there’s a little bit more than an ounce of luck that goes into making sure that you that you are adequately charged. So let’s talk about challenges a little bit. We’d love to understand your perspective. Hari on some of the electrification and even sustainability challenges that you and your team have faced, and how are you helping your clients resolve some of those challenges that come up?

Hari: So interesting, because you brought sustainability to the electrification projects and I always get asked that sustainability electrification on electrification leads the tangibility which one is pulling, or which one is pushing? For a lot of fleets that operate larger quantities of vehicles, one of the pathways to become a sustainably minded organization, maybe just converting a small portion of their fleets to zero emissions vehicles. That might be the shortest pathway that they can get there without considerable retooling of their inherent business processes, which costs a ton of money cost a lot of a lot of time variation, and still may not put them on the sustainability pathway that they want to be. But if you look at transportation amounts to a significant percentage of emissions gases, so even if you take a smaller percentage of your fleet and convert them to zaps zero emissions vehicles, that is aligning yourself in the direction of going towards a sustainable business operation. Now when we look at balancing sustainability with electrification, there are numerous numerous challenges. The number one, the simplest to understand is, okay, I need a box truck that can go up to 200 miles of range, you know, 7000 pounds of payload. A vehicle that can do that in the Eevee space doesn’t really exist from a technology standpoint, right? So you have to have some trade offs. The second trade off is Okay, now let’s assume that the vehicle exists. It’s not in PowerPoint, somebody’s actually building it and somebody has a price for that. And then we have it on the market. Then. The reality is, you probably are going to be waiting for six 812 months before the beacon even shows up. So there are supply chains there. This applies not just to watch trucks but applies to pretty much any vehicle that you have the space and the timeline for getting access to vehicles are elongated or backfill but today afternoon and they close today afternoon so unless you have the time right you probably won’t even get your foot in the door. There are exceptions in the consumer vehicle space, but that’s not where our focus is. I’m not going to go there. That’s one set of challenges that you have to navigate the second set of chapters it comes down to okay now I have a firm grasp on when I’m going to get my legal. How do you make sure that your charging infrastructure is timely available when the vehicle shows up? There was no point of having charging infrastructure waiting for a vehicle that’s not going to show up for six months. There was also no point in having a vehicle waiting to have the charging infrastructure set up so you have to converge the we call it the activation of your charging stations to the arrival of the vehicles getting fairly close time domain proximity. If you don’t do that, right, there’s money being spent that is not being put to work as a way I see it. Those those challenges. The second the third challenge is is is really lack of understanding of the space electrification in new terms, new ideas, you know, you’re not talking miles per gallon anymore. You’re talking watt hours per mile and last and what is your start there? You’re using a whole different fuel previously, to be pumped into your tank. There’s no more package going into battery and it’s like Metro City, right? It is considered to be ubiquitous. But when you approach a utility, they may tell you to come back after two years. How do you how do you navigate those challenges? So it’s a combination of many things. And and this is where we always encourage fleets you know, even that are private fleets that are looking at currently and we’ve done things internally reach out to experts. The construction is dark new construction has been going on for many, many, many decades. Ever since Matt started, you’re living in blue hawks, we’ve been building links. So there are experts who can help you navigate the construction site. There are experts out there to get the vehicle selection. So don’t try to do it all by yourself and your partner with entities who can help you handle the risk associated with these challenges so that you have a better outcome. The rest of it comes down to you know, the financing options, the money the capital that needs to go. Those are not easy to solve. But there are solutions that can be implemented within the timeframes that you want to achieve. There are certain timeframes where either you or us northern EMF control. Battery Supply is pretty limited. battery supply is limited but only so many vehicles that they can build. So unless you are either number one or number 10 In life, you may actually find you so power present they get all of that which puts you two years out from where you want to be. If you’re operating in a sustainability centric geographies you have reporting obligations or forbid you’re operating in separate territories where the penalties you’re now directly at a higher risk.

Elena: What are some of the biggest objections or reservations that lead managers are coming to you and your team and say, when you’re introducing an electric five league partially electrified fleet, what are some of the main concerns that you’re hearing from clients that are interested in diversifying their portfolio but again, they’re going to you and the expert for some help.

Hari: There are many, many EV companies that probably didn’t exist three years ago, four years ago. And all of a sudden they’re out on the market. They’re raising capital they’re putting in bids. So we still phenomenally great on PowerPoint or marketing brochures and whatnot. But fleets that are that exist because they have to do a job and do that job repetitively so that they can make money and run their business. They’re apprehensive about trying, what we call as emerging. These are not established, logical VMs. So that will defeat some of them on options. So how do you how do you place a bet on an emerging and make sure that one, there will be around two years, five years from now to the assets of the vehicles that they’re putting out can actually do the job? Three, the assets that we use on the job that means support and service that can be handled and for more dramatically? And how can the costs of the vehicle align as opposed to the conventional vehicles are complete, so all of this becomes mind bogglingly complex for a fleet manager to completely comprehend. Again, reach out to an expert at subject matter people can help navigate this maze for him. At least separate fact from the second set of challenges. As Megan mentioned before, refueling is completely different. It’s the whole set of charges for chargers, did not charge me that way. And then all of a sudden, you know, you have companies or don’t worry about any of this stuff will optimize your route based on data and telematics and we think back is together very applicable, but maybe not applicable on day one. So you got to navigate those challenges where my team and I saw where we come in, as you know when when our Salesforce talks to clients who are interested in that observation, because previously ours is more of a consultative approach. We try to really understand what what are you what are you after, are you being driven to electrification by a sea level mandate? Are you are you going to application because of regulatory pressure? Are you doing this because of the sustainability angle? Are you doing it because your competition is doing it and I have no option to stay relevant, but we need to understand what’s the driver? Right. Once we know what that driver is, that’s when we look at our portfolio vehicles and we have access to the portfolio vehicles that that we have vetted and that we’re confident will do the job right. That’s what we would bring to you first, as a, which amongst these do you think works? The next step may be we put together your approximate pricing model? That’s right. So it’s kind of like a multi step process where there is an education component. There was a learning component with the consulting component, there was an alignment component. There was a piloting component, and then finally, that pilot becomes a long term adoption.

Elena: Hari, thank you for walking me through that because I think it’s important for the entire ecosystem that we’re in here. For electrification to understand what fleet managers are thinking about and considering hiring because we are well over time here, but we could keep talking about this topic all day long. But where can folks reach out to you if they have additional questions, they want to learn more. Where’s the best place for people to do that?

Hari: I’m fairly active on LinkedIn. So that’s an easy way to find me directly if you want to reach out, but you can always come to you know, but since we’ve dot com, and there is enough links there that can point us to either to my team or you can ask questions, and then somebody from our group will definitely get back to you on those. So those are the two easiest ways.

Elena: Perfect. I’ll make sure that those are in the show notes so you guys can easily access it. Hari, this has been a great conversation again, I learned so much from you today. This was a very good primer in fleet, electrification and all the steps that go into it. So Hari, thank you so much for your time.

Hari: Thank you for having me on, good talk. Good luck.