Firm drives into e-truck niche

L.A.-based start-up Chanje will be­gin leas­ing or sell­ing medium-duty ser­vice ve­hi­cles within weeks.

Los Angeles Times - - BUSINESS - By Russ Mitchell

SAN FRAN­CISCO — Chanje’s vi­sion sounds a lot like Tesla’s: elec­tric ve­hi­cles recharged via clean rooftop so­lar power.

But the new com­pany has no in­ter­est in the au­to­mo­bile mar­ket. In­stead, it’s en­ter­ing what it be­lieves to be a lu­cra­tive niche in medium-duty elec­tric trucks.

Few such trucks ex­ist. Most medium-duty elec­tric trucks are in­ter­nal-com­bu­sion ve­hi­cles hand-con­verted to run on elec­tric mo­tors and bat­ter­ies.

Chanje’s trucks are not con­cept ve­hi­cles or pro­to­types. They’re ready for sale, and the Los An­ge­les com­pany plans to be­gin sell­ing or leas­ing them within weeks.

“We de­cided, let’s show up when we’re ready to go to mar­ket,” said Bryan Hansel, founder and chief ex­ec­u­tive.

He wouldn’t get spe­cific on pric­ing, but con­tends that monthly lease amounts will be “at par­ity” with leases for diesel-en­gine com­peti­tors once lower main­te­nance costs and net fuel sav­ings are fig­ured in. He said buy­ers of such trucks con­sider price and fi­nan­cial re­turn above all other con­sid­er­a­tions.

You see medium-duty trucks mak­ing deliveries all over the city: UPS step vans, snack-food de­liv­ery trucks, sketchy ve­hi­cles cov­ered in graf­fiti con­tain­ing who knows what.

There are about 7 mil­lion of them in the United States, and about 500,000 are sold each year, said Antti Lind­strom, an an­a­lyst at IHS Markit.

Chanje in­tends to ride what it sees as the in­creas­ing pop­u­lar­ity of elec­tric pow­er­trains. The big risk for the com­pany, Hansel ac­knowl­edges, is “how fast peo­ple will make that tran­si­tion.”

The com­pany’s fu­ture de­pends not only on the U.S. mar­ket, but the mar­ket for elec­tric trucks in China. Chanje is 49% owned by Hong Kong-based FDG, a maker of bat­tery cells, bat­tery packs and ve­hi­cles in China. Al­ready, FDG has sold a cou­ple of thou­sand Chanje ve­hi­cles in China, Hansel said, un­der the brand name Chang Jiang.

Those ve­hi­cles, built in a 4 mil­lion-square-foot fac­tory in Hangzhou, China, are shut­tle buses. But the un­der­ly­ing plat­form on all Chanje ve­hi­cles was de­signed to be eas­ily length­ened or short­ened to ac­com­mo­date ve­hi­cles of dif­fer­ent lengths and body styles.

The trucks Chanje plans to sell in the U.S. are smaller than the big-rig, semitruck cabs that Tesla in­tends to build. Those trucks, which Tesla is ex­pected to an­nounce next month, will re­port­edly come with some self-driv­ing ca­pa­bil­ity and will en­counter skep­ti­cism in truck­ing cir­cles that bat­ter­ies can ef­fi­ciently power trucks that big.

Tesla Chief Ex­ec­u­tive Elon Musk has also hinted at a pickup truck in Tesla’s fu­ture, but noth­ing about a medium-duty en­try.

The first few hun­dred trucks sold by Chanje will be im­ported from the Hangzhou plant. But the com­pany even­tu­ally plans to im­por­tant kits from China and as­sem­ble them in the U.S., first in the West and, if things go well, then in the Mid­west and the East Coast. Chanje is now comb­ing Western states for a man­u­fac­tur­ing site.

Although a start-up, Chanje’s roots go back to a com­pany called Smith Elec­tric, which be­gan build­ing elec­tric trams in the 1920s. It later sup­plied elec­tric ice cream trucks, elec­tric milk trucks and other de­liv­ery ve­hi­cles, but not in large num­bers.

In 2009, un­der Hansel, the com­pany was con­sol­i­dated and based in Kansas City, where it tried to com­mer­cial­ize medium-size elec­tric trucks. By 2015, it had ceased op­er­a­tions.

“This is a real in­ter­est­ing evolution for this com­pany,” said Mike Ram­sey, auto in­dus­try an­a­lyst at Gart­ner. “They broke into this mar­ket a bit too soon. But they had a model that re­ally makes sense.”

That model is to sell into the de­liv­ery mar­ket, where routes typ­i­cally run 50 to 70 miles a day, well within an elec­tric bat­tery’s range. Range on cur­rent Chanje ve­hi­cles is about 100 miles.

The dif­fer­ence be­tween a few years ago and now, Ram­sey said, is that bat­tery costs have come way down and con­tinue to fall. FDG mak­ing bat­ter­ies in China will help keep costs down, he said, and China sales will spread fixed costs.

“The only way to scale is to have a global prod­uct,” Hansel said.

Even if op­er­at­ing costs are lower (no oil change, brakes last longer, elec­tric­ity is cheaper than diesel) it will be a chal­lenge to per­suade big buy­ers such as United Par­cel Ser­vice or FedEx to make the huge cap­i­tal ex­pen­di­tures needed to trans­form their fleets, Ram­sey said.

But Jo­erg Som­mer, Chanje’s chief op­er­at­ing of­fi­cer, said 70% of medium-size truck buy­ers have fleets of 20 ve­hi­cles or less. And the big­ger buy­ers will be watch­ing those ini­tial pur­chasers to see whether the op­er­at­ing costs jus­tify them mak­ing a switch.

Mean­time, Som­mer said, Chanje is plan­ning to pro­vide en­ergy sys­tems for large fleet buy­ers — the so­lar roofs, for ex­am­ple.

The com­pany is po­si­tioned for rich sub­si­dies from Cal­i­for­nia tax­pay­ers. Right now, buy­ers of medium-sized elec­tric trucks qual­ify for thou­sands of dol­lars in state sub­si­dies.

Sub­si­dies “will help ac­cel­er­ate our ex­pan­sion. But we don’t see it as a long-term strat­egy,” said James Chen, the com­pany’s gen­eral coun­sel. “Any vi­able busi­ness needs to stand on its own.”

Chanje

THE BIG­GER buy­ers of medium-duty trucks, such as UPS, will be watch­ing ini­tial pur­chasers to see whether the op­er­at­ing costs jus­tify a switch to elec­tric.

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