Rating: High school and post-secondary
Summary: Markham interviews Sam Abuelsamid, EV analyst for Guidehouse Research, about Amazon’s Oct. 8, 2020 announcement that it will buy 10,000 custom-designed Rivian electric delivery vans, with deployment starting in just two years. Combined with other technical and process innovations, the e-van will be “the future of last-mile delivery,” says Amazon.
This interview has been lightly edited.
Markham Hislop: Welcome to another episode of Energi Talks, the podcast where we discuss global energy issues and trends with experts from around the world. My guest today is Sam Abuelsamid, the EV analyst for Guidehouse Research based in Detroit.
We’re going to be talking about the October 8th announcement by Amazon, that it’s going to have 10,000 electric delivery vans on the road by 2022. This is part of a bigger promise to have a hundred thousand of these vans on the road by 2030, and Amazon wants to be net zero emissions by 2040.
But the line that really caught my attention in Amazon’s blog post was that Amazon sees these vans as the future of last-mile delivery. Other transportation experts tell me that the first mile and last mile are really difficult technical challenges. I found it very interesting that Amazon has devised this model of last-mile delivery. They’re using e-cargo bikes in New York City and over in some of the European cities. It seems to me that Amazon is building this electric transportation network that will be flexible and it will have all sorts of different pieces to it that they can mix and match to bring efficiency and low costs to their delivery. Have I got it right?
Sam Abuelsamid: Yeah. It’s been interesting to watch Amazon over the last six or seven years in particular from a transportation perspective because when they started off, they relied heavily on third-party providers for deliveries, companies like UPS and FedEx and DHL and the postal service. And they’ve gradually been bringing more and more of that in-house, taking more control over the whole logistics process, all the way to the customer.
That’s involved building up a fleet of freighter aircraft, but also building out a fleet of delivery vans and other delivery vehicles. And now transitioning that existing fleet over to electric, trying to decarbonize the whole process. And that includes everything. As you mentioned from delivery bikes, cargo bikes to these vans that they’re getting from Rivian. Plus they also in August of this year placed a separate order with Mercedes-Benz for a couple of thousand electric vans to use in their European operations.
And what’s interesting about this, Amazon has ordered 100,000 delivery vans from Rivian and they’ve made a total investment of close to $1.5 billion over a couple of different financing rounds in Rivian.
For comparison, as of the end of 2019, Amazon’s entire delivery fleet was 30,000 vehicles. And by 2030, they expect to have 100,000 of these Rivian vans in their fleet. So not only are they decarbonizing the fleet, they’re making it much, much larger.
And when you look at the use case, the way these vans are being utilized, it actually makes a lot of sense to go electric. This is actually a use case that works really well for electrification, because of several factors, including the number of miles that they drive daily and annually for these types of vans.
These delivery vans are typically staying somewhere within 30 to 40 miles of their home base and they return to base every night. So they’re always coming back to a known location, unlike a consumer vehicle, an individually-owned vehicle, that could be literally going anywhere. These tend to stay within a limited geographic area, which actually makes it easier in a lot of ways to manage an electric fleet like that because you don’t have to worry quite as much about range and range anxiety. It’s much more predictable. I think it can work out really well.
Markham Hislop: One of the points that Amazon made was that it has a very sophisticated logistics system, and these vans are going to be custom-designed to work with that logistics system. What kind of efficiencies, what kind of benefits will that provide to Amazon?
Sam Abuelsamid: One of the top things, is like other delivery companies, Amazon has adopted things like eco-routing for their delivery vehicles. So they will sequence the deliveries in such a way that you have the minimum number of deadhead miles so that your final deliveries are closest to your endpoint, your depot.
But also along the way, things like avoiding lefthand turns. This was something that UPS pioneered back in the late 2000s – doing predominantly all right-hand turns. When you think about it, over the course of a day, the number of turns that these vehicles make that actually saves a lot of fuel. And it’s also better from a safety perspective. So things like eco-routing are a big part of that understanding, where the pickup or where the drop-off points are going to be along the way, and managing all of that. There’s a lot of optimization that can be done in there. And with the experience that Amazon’s gained, they can put that to work, to get the most out of every kilowatt hour of energy they put into the batteries in these vans.
Markham Hislop: My wife is a loves Amazon, and we use it frequently, particularly since the pandemic kicked in because nobody wants to go shopping down at the mall these days. And one of the things that we’ve noticed is that a lot of times, we get one box from an Amazon delivery and then we’ll get another box later in the day and maybe even a third box later in the day. It seems like that’s a very inefficient system, but I suspect from what you’re telling me that actually Amazon is pretty good at maximizing efficiencies. And that’s one of the things that struck me when I looked at the long list of safety and other technologies that are designed into these vans. These are pretty high tech vans.
Sam Abuelsamid: They’re equipping them with a full suite of driver assistance systems to help minimize the potential for crashes. Sometimes getting multiple deliveries over the course of a day when you’ve ordered multiple items, but they don’t all show up at the same time – part of that is they’re not necessarily all coming from the same origin point. Sometimes, depending on where you live, there may be multiple Amazon distribution centres or warehouses within reach of your destination. And so they may be coming from different places. And so rather than shipping them from one warehouse to another and consolidating those, they’ll just ship them directly from the nearest distribution point. And, you know, each one of those individual vehicles will be packed up to an optimal number of packages that they can carry over the course of one trip and optimize the routes for those to minimize energy use.
Markham Hislop: I’m not familiar with Rivian, but I have talked a number of times about other companies. GM and their Ultium platform particularly come to mind. And I remember you saying that once you’ve got a common platform that can be used for all sorts of vehicle configurations, that that really leads to efficiencies and lower costs and, and all sorts of benefits. And I wonder is that what we’re looking at with Rivian and is that one of the reasons why Amazon would invest in it is because there’s a common platform that they can be figured to whatever they might need – what they might need in an LA might be different than what they need in Seattle. And so you can efficiently build these more customizable vans. Am I on the right track?
Sam Abuelsamid: Absolutely. One of the interesting trends, as we look at modern electric vehicles, purpose-built electric vehicles, is in a way we’ve almost kind of taken a step back in terms of vehicle architecture. It used to be that vehicles were always body on frame. You’d have some sort of metal ladder frame you’d mount an engine in there and drive train, attach the suspension and then put the body on top of that. And then we went to unibody designs where the whole body and structure is one piece. And you install the engine and pieces in that.
Now with EVs, we’re kind of going back to that body on frame, with the skateboard concept that most modern EVs have because the battery is such a large portion of the vehicle that makes up the bulk of the structure in the middle of the vehicle, then you attach the motors and the suspension at each end of that.
The beauty of, electrification with both batteries and motors is it’s actually much easier to scale that to different sizes for different use cases. With the batteries, you can make a longer battery or a smaller battery with different numbers of modules in it, depending on the size of the vehicle and the application. So you can shorten it and make it longer, make it wider to stack them on top of each other, like GMs done with Ultium.
Then similarly with the motors, you can have one motor or two motors. The motor, some cells are relatively easy to scale, you just change the length of the motor. If you need help for a larger vehicle, it needs more power and torque, and just make the motor a little bit longer.
So that all feeds into having a basic common design core design that scales up and down and then can be used for a wide range of applications.
I think previously we talked about Amazon’s acquisition of Zoox. Zoox was developing its own autonomous robo-taxi. And I think what we’re ultimately going to see happen probably is rather than take what Zoox was developing as a purpose-built vehicle is they’ll probably adopt a lot of Rivians’ hardware to that type of vehicle and make that smaller size of the vehicle relative to the delivery vans. And so once you’ve developed the core components, the cells, the modules, and the motors and the electronics, you can apply it to a lot of different use cases.
Markham Hislop: I guess this begs the question once Amazon starts down this road, will we see at some point in the future autonomous electric vans?
Sam Abuelsamid: I think that’s a distinct possibility. I think what the first stage will be because Amazon’s got a couple of different autonomous programs going on in addition to their acquisition of Zoox. They also are an investor in Aurora, another company that’s run by Chris Urmson and Sterling Anderson. Aurora is now focusing more on long haul trucking.
I think what we’ll see is a mix of using Zoox’s technology, perhaps for smaller local urban delivery vehicles, basically putting an Amazon locker on wheels and using that for contactless deliveries. The Aurora technology on the long haul trucks, the middle mile stuff to get from manufacturers to Amazon distribution centres and between distribution centres. And then, maybe longer term, putting some of the automation technology from one or both of those companies into these larger delivery vans that they’re getting from Rivian.
And perhaps even combining that with some of the drone technology that Amazon has been working on. One of these delivery vans, an electric delivery van, where instead of a driver sitting up front, you have somebody sitting in the back and you have say 10 drones sitting on the roof of this thing and the van drives itself into a neighbourhood. And while it’s going from one point to another, the person in the back is loading up 10 drones. The van comes to a stop, the drones disperse drop off 10 packages at 10 people’s doorsteps and then return. And then the person in the back is loading them up for the next delivery while it’s driving on to the next destination, next neighbourhood.
Markham Hislop: I’m not sure if that’s a dystopian future or a utopian future? I’ve often wondered when I’ve heard the discussion around Amazon and its potential drone delivery, how that would work. And this is the first description of a model that might work. When do you think that a model like that might be rolled out, are we talking post-2030, or will it be this decade?
Sam Abuelsamid: I can see them at least piloting it by the middle of this decade, you know, maybe in the 2025-26 timeframe. I think we’ll definitely see them testing things like that maybe even sooner than that. But probably towards the middle of the decade.
Markham Hislop: Now another comment that Amazon made in its blog post really caught my eye. And let me read it for you. Amazon says that it hopes to create a sense of urgency in the industry to think big. Now the one hand that’s kind of an aspirational feel-good message, but I also saw it as a bit of a shot across the bow at some of its competitors – catch me if you can.
Sam Abuelsamid: There’s certainly a bit of that, but I think that they’re also thinking not just about their competitors, but the other companies that are part of the transportation ecosystem. So that’s companies that are providing charging equipment, that’s utilities, grid operators, because if you’re going to deploy, for Amazon alone, a hundred thousand of these vehicles, most likely, you’ll see UPS and FedEx and everybody else, everyone with large fleets, moving in this direction over the coming decade.
That’s going to require a lot of upgrades in a lot of areas. You need to have the power delivery capacity to these depots from the grid or installing local distributed energy resources (renewables like wind and solar), at those depots. In order to have the capacity to charge those vehicles, you need the equipment, the charging equipment to handle these vehicles.
Are you going to DC fast charge them or slow charge them? Are you perhaps going to shift to a battery swap module model, have vehicles that are designed for swappable batteries, where now you can, especially with a fleet, you charge those batteries slower because a fleet knows the history of those batteries. It’s going to be easier for them than for consumers to adopt that. If you’ve got a rack of batteries that are slow charging in a depot during the course of a day while the vans are out delivering those could also be used as stationary storage for grid support.
There’s a lot of interesting potential ways that the larger ecosystem. And I think this is what Amazon’s trying to jumpstart thinking more broadly about the overall energy ecosystem.
Markham Hislop: That’s a very good point, Sam, because I’ve been doing a lot of interviews lately around the evolving electrical utility model business model. Particularly in the US there’s a bit of angst amongst investor-owned utilities in particular that are wondering how they’re going to handle distributed energy. Are they going to depart from the traditional utility cost of service model, the old Thomas Edison business model that’s still in use today by many utilities? How will those utilities handle all this increased demand for electricity? It’s a really, really complex problem.
I can see why Amazon is challenging some of these players, some of the stakeholders in this ecosystem, because this is not a simple design problem. I imagine it’s probably a decade or two of design and trial and error to get it right.
Sam Abuelsamid: A lot of this work is going on already. They’ve been researching and trying, there’ve been a variety of pilot projects to look at how to do this and how to manage the power delivery and distribution as you go towards more electrification especially for these larger vehicles. They’re obviously going to use more power than a smaller vehicle but I think it is an issue that that can be overcome. There are technologies that need to be developed to coordinate everything, to manage the charging. This is an area that my company works a lot on with both utilities and with fleet operators. And a lot of other companies is, you know, how to implement some of these sorts of things. And it’s a challenge that can be overcome, but, it will take a significant amount of investment over the coming years.
Markham Hislop: Yes, the experts that I’ve interviewed, some of them have included your colleagues on the utility side. And I want to follow up for the last question, Sam, on your comment about integrating the batteries from these commercial vehicles into the grid. Because I’ve talked to some of the experts who say doing it with residential, privately owned vehicles and people’s garages be very difficult. There’s a lot of infrastructure and a lot of technical issues. But if you have a central location, you know, like a delivery van depot, it strikes me that that might be in fact, the solution for jurisdictions like California that needs a lot of storage right away. And that’s gotta be part of the discussion already, I would think.
Sam Abuelsamid: It absolutely is. And this is a big part of why there’s been a significant growing interest in moving towards electrification for fleet operators. It’s one of many factors, but it’s certainly an important one to consider because as I mentioned earlier, there’s more predictability to the way these vehicles are being used, when they’re being used, how they’re being utilized. And so, that’s a part of trying to manage the system.
If you have an idea of how many vehicles are going to be parked at any one time, if you were to use a swappable battery architecture, then you know how many batteries are going to be available, at various times of the day, then you can plan around that. And, that’s the key to all of this because the investments required for a utility or for the grid are substantial. I mean, there’s a lot of money involved and this is why, for example, we have demand charges for commercial users, for power delivery, because you have to plan ahead for what the peak demand is going to be. So if it’s anything that helps to make it more predictable, we’ll make it more appealing to everybody within the ecosystem.
Markham Hislop: Well, Sam, thank you very much for this. I find this discussion fascinating because a lot of the attention around electrification of transportation centres on the personal vehicle, the light-duty cars and trucks – that’s the sexy stuff where Elon Musk gets up on a stage and introduces the cyber truck, that sort of thing. But I think the real impact is going to be on the commercial side, just like these delivery vans for Amazon. I think that’s going to have the bigger effect on business models, on utility business models, on manufacturing. I think at the end of the day, we’ll look back and see that medium to heavy-duty applications for commercial EVs were really the bread and butter, the thing that changed the industry and basically played a big role in the transformation of transportation.