“You have to look at how you charge the vehicle, and the downtime of charging the vehicle. Do the electric grids and charging stations in place allow you to complete similar deliveries as to your historical network?”
The regulation emphasizes zero emissions, rather than just lowering emissions, so it pushes the industry toward electric vehicles. To make the shift to zero-emissions trucks, Grant Thornton National Managing Partner for Transportation Russell Norris, highlighted challenges that transportation companies must address:
- Technology: Companies need to determine how to adapt to electric truck technology, which has its own limitations. “For example, they may not have the battery-powered longevity to complete a haul similar to what a current tractor-trailer would be able to accomplish,” Norris said. “You have to look at how you charge the vehicle, and the downtime of charging the vehicle. Do the electric grids and charging stations in place allow you to complete similar deliveries as your historical network?”
- Cost: The transition to electric will come with a cost for companies, and the industry is currently experiencing a cyclical downturn. “It’s not that there’s a lack of motivation to improve emission standards, but the economics of the industry are cyclical, and we just so happen to be in a downturn,” Norris said. “The industry has significant recessionary pressures, and is navigating through a very challenging 2023, so having to suddenly spend on this type of equipment is exceptionally difficult.”
- Time: The regulation requires capital expenditures, often with long lead times, approaching a year. Given the expense associated with both the trucks and the necessary infrastructure, companies will struggle to fund and implement these changes within a short timeline. Smaller carriers could be disproportionately affected.
These issues can be further complicated by another California regulation passed in 2020, the Assembly Bill 5 (AB5) law, or “gig worker” law, that limited how trucking companies can work with independent drivers. “It basically said that independent drivers need to be treated as employees,” Norris said. He explained that some California transport companies have not owned trucks because they relied on independent drivers. However, they are now required to hire those drivers as employees. “Many of these employee drivers don’t have equipment, so the companies are having to invest in equipment now, just to change the employment model,” Norris said.
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