Corporate clients could provide a lower-cost path to electric vehicles

Carmakers are compelled to introduce electric vehicles to meet rising emissions standards, but the transition is expensive and fraught with risk, and consumers aren't yet on board.

The state of play: There's another potentially faster and cheaper path to electric vehicle adoption: electric delivery fleets. They could catch on faster, especially with new approaches to design and production, and provide a large-scale proof of concept for consumers.

Driving the news: This week a 5-year-old startup named Arrival emerged with a $440 million order in hand for 10,000 electric UPS trucks.

• Its business model is radically less expensive — and lower-risk.
• The U.K.-based company is focused only on commercial vehicles, which often have fixed routes and can be charged at a central location.
• Priced about the same as a diesel truck, they're cheaper to operate because they run on electrons not fuel, are made of lightweight composites and are built on a customizable, modular EV skateboard.
• And they would be built in inexpensive micro-factories that Arrival says can be up and running in just six months.

Between the lines: Arrival is putting much less capital at risk to produce small batches of purpose-built EVs for customers like UPS, says Mike Ableson, the former GM executive who is now Arrival's North American chief.

• 10,000 customized trucks are difficult for a legacy auto manufacturer to produce because their business model depends on economies of scale for 200,000 vehicles or more.
• "Our whole system is set up to deliver bespoke vehicles in smaller volumes," said Ableson. "It's the perfect match between what UPS needs and what we can develop."
• UPS said it is a minority investor in the company, two weeks after Hyundai and Kia invested $110 million for a 3.3% stake. At the time, JPMorgan valued Arrival at $3.3 billion.
• Prior to that deal, it had been mostly self-funded by founder Denis Sverdlov, a Russian-born entrepreneur now living in London.

The other side: GM just committed billions of dollars to mass-produce electric pickups, SUVs and a shared robo-taxi at a plant in Detroit that it had planned to mothball.

• The $2.2 billion factory overhaul doesn't include another $800 million GM will invest in supplier equipment to support EV production or the $2.3 billion a GM joint venture is investing in a new battery cell manufacturing plant in Ohio.
• GM president Mark Reuss acknowledges there's still buyer reluctance. "The customer will tell us" when they're ready to buy EVs.

My thought bubble: Both GM and Arrival are placing big bets on electrification, albeit at a different scale.

• But while GM has to wait for consumers to come around to EVs and robotaxis, there's a ready-made market for commercial EVs that's already getting a corporate boost.

Go deeper: UPS to buy 10,000 electric trucks from U.K. startup Arrival