For more than 130 years, the automobile’s internal combustion engine has loudly announced its presence, with vibration and sound that represents a vehicle’s image and function. But that soft and subtle buzz you hear? It’s the sound of electric vehicles (EVs)—no internal combustion engine required—quietly racing to reshape the car and commercial truck manufacturing industries and meet the growing demands of global consumers, businesses and increasing environmental sustainability initiatives.
Part of the race to reshape the industry is influenced by policy. For example, in 2020, California Gov. Gavin Newsom signed an executive order banning the sale of new gas-powered cars in the state by 2035, setting the stage for other government leaders to enact similar legislation for reducing greenhouse gas emissions. At the COP26 climate change summit in Glasgow, 30 countries, including Britain, Canada and India, pledged to phase out gas- and diesel-powered cars by 2040—and by 2035 in “leading markets.” The car industry followed suit, with six of the largest manufacturers—including Ford, General Motors and Volvo — joining the pledge. Many of these automakers are betting on the EV revolution by investing billions to phase out their gas-and diesel-powered vehicles and transition their lineups into fully electric, some starting as early as next year.
Beyond policy and regulations, however, car and truck makers see a commercial incentive to invest in an EV future. As gasoline and diesel costs soar to their highest levels in history, consumers are increasingly looking at EVs and automakers have been reporting bumps in EV sales. New generations of tech-savvy and eco-conscious customers have created increasing consumer demand for EV options. In fact, several U.S. auto manufacturers, including General Motors, Chevrolet and Ford, have online reservation systems for their most popular EVs, many with waiting lists, giving them insight into customer demand.
Reducing the number of combustion vehicles on the road won’t be an easy transition. While some nations are further along than others in EV adoption, none are close to targets. Germany, where EVs represent 12.6% of the automotive market, leads its peers followed by France at 9.5% and China at 5.75%, according to Statista. In the U.S., EVs currently represent less than 1% of cars on the road. By 2030, some experts predict that EVs and hybrids will account for nearly 30% of all U.S. vehicle sales. Getting to net zero means phasing out gas- and diesel-powered vehicles and building the sheer number of EVs to meet demand. Just how many EVs and how quickly? According to the Sierra Club, the U.S. must exchange 10 million conventional gas- and diesel-powered vehicles on the road for EVs by 2025 to make an impact on climate change.
It’s a heavy lift for the automotive industry, but champions of the EV revolution are confident there will be many winners beyond the EV manufacturers. The most obvious one is the environment, where the potential payoff is huge. Even accounting for upstream emissions from charging stations, EVs are cleaner, emitting fewer greenhouse gases than traditional internal combustion engines. More EVs and fewer traditional internal combustion engines translates to less fossil fuel use, lowered carbon emissions and ultimately improved air quality. And the return for consumers is expected to be big, too: a recent Consumer Reports study revealed that the total cost of EV ownership is lower than traditional combustion-powered vehicles, saving $4,700 in the first seven years of ownership on fuel alone.
THE IMPACT OF COMMERCIAL EVS ON COMMERCIAL REAL ESTATE
The increase in demand for online shopping—especially in the U.S.— during the pandemic created a surge for the logistics and supply chain industries. As such, manufacturers of commercial EVs are in a position to play an increasingly bigger role in the logistics sector, knowing that operations across the industrial and supply chain landscape can be dramatically enhanced with clean, electric commercial fleets of trucks and tractors that have the potential to improve efficiency, reduce costs and improve supply chain response to meet an intensified consumer appetite. Given battery ranges and infrastructure limitations in the U.S., current technology favors short-haul and last-mile delivery. Industrial and logistics operators that employ EVs for transporting local freight and parcels can lower their overall carbon footprint and improve efficiency for last-mile delivery.
While the U.S. is a long way from a viable infrastructure for long-haul trucks and electric commercial fleets exclusively running an end-to-end 24/7 EV supply chain, logistics companies and operators are already taking action to reduce reliance on gas- and diesel-powered vehicles. Many are gradually mobilizing eco-friendly electric truck and tractor fleets and equipping their warehouses with electric charging station infrastructure—testing how to deploy EVs to further build out a supply chain for increased speed, responsiveness and productivity.
Last-mile facilities will need to change radically—not only to accommodate the new fleet of commercial EVs, but the charging stations that will power them. Facility owners and developers will increasingly need to consider onsite charging stations that are integrated with a building’s energy management system (BEM), ensuring enough electricity to accommodate the large batteries of electric trucks—a major restructure that won’t happen overnight. And increasingly, facility occupiers— logistics companies, distributors, retailers and more—will need to consider grid capacity when selecting facilities, ensuring they’ll have the energy resources (including back-up generators) to charge their EV fleets.
SETTING COMMERCIAL BUILDINGS UP FOR EV SUCCESS
As EV adoption increases, there is abundant opportunity for investment in charging station infrastructure across the commercial real estate industry, not only to accommodate personal EVs and last mile delivery vehicles but also long-haul semi-trucks that move goods and materials several hundreds of miles at a time. A network of fast-charging stations will need to be built along major transportation routes—and it must be built quickly to meet the vast influx of EVs that will only continue to rise.
The Biden Administration’s $1 trillion infrastructure bill signed into law in November 2021 allocated $5 billion to build a national high-voltage charging network across U.S. highways over five years, with the hope that private investors—across industrial, retail, office and residential—will follow suit and build charging stations of their own. To create the approximately 500,000 public chargers the legislation calls for by 2030 to support ambitions EV sales targets, significant work remains. The country’s existing roughly 100,000 public charging stations pose several challenges, including inconsistent types of plugs and hardware, disconnected or inconsistent data availability, and disparate types of payment systems. For an expanded network of charging infrastructure to succeed, a more consistent approach to implementing industrywide standards is needed.
POISED TO REVOLUTIONIZE THE GLOBAL VEHICLE MARKET
Between exploding consumer demand, mandates on emissions and plans for charging infrastructure backed by government funding and private capital, EVs are poised to help reduce greenhouse gases that contribute to global warming and climate change and play an integral role in creating a net zero economy. After 130 years of predominately fossil-fuel powered transportation, we’re now in a quiet, technological revolution for sustainability, happening in real-time. It’s an opportunity for commercial real estate—especially for agile developers, investors and supply chain leaders eager to be at the epicenter of technology, innovation and sustainability.