GM’s newest startup aims squarely at the commercial EV market

BrightDrop looks to gobble up delivery and fleet customers

Ford and GM’s century-old battle for market share is no longer restricted to gas- and diesel-powered passenger car, truck and SUV sales. The hottest market in the next decade is commercial and electric.

In this new race, the two companies are taking different strategies as they square off against each other — along with a growing list of EV startups — to win over as many delivery and fleet-vehicle customers as possible.

GM’s weapon is BrightDrop, a new startup incubated and launched at CES 2021 by Chairman and CEO Mary Barra. The venture boasts an ecosystem of EV hardware and logistical software products aimed squarely at fleet and delivery companies. GM’s interest in the space is far from merely exploratory; it anticipates that the market for delivery, including food and parcels in the United States, will be more than $850 billion by 2025.

For fleet managers, it comes down to the numbers on a spreadsheet, and thanks to incentives and lower maintenance costs associated with EVs, vans that run on electrons instead of dead dinosaurs make financial sense.

“Folks on the commercial side don’t really care about the technology — they care about the economics,” Brett Smith, director of technology at research firm CAR, told TechCrunch.

Electric vehicles might be more ecologically sound than traditional gas- or diesel-powered vehicles, but for fleet managers, it comes down to the numbers on a spreadsheet, and thanks to incentives and lower maintenance costs associated with EVs, vans that run on electrons instead of dead dinosaurs make financial sense.

BrightDrop and automaker-adjacent companies like it also benefit from the economies of scale of being aligned with decades-old and deep-pocketed automakers. While BrightDrop is a privately held company that doesn’t share financial information, we do have some inkling of how much capital GM is willing to throw at the effort.

GM has invested $800 million to convert a Canadian factory that currently builds the Chevy Equinox to build the EV600 delivery van. It’s an investment few companies can match. In addition to the access to capital and its ability to quickly build a vehicle, BrightDrop has the benefit of being part of something that’s been around for over 100 years and that’s important to medium and small customers.

“If I’m a small business owner, I would never think to buy from a startup company,” Smith noted, “because it would completely sink my company. If I bought 10 electric vehicles from a startup, and that startup went out of business, I’m toast.”

For BrightDrop, the hardware side also includes its EP1 electric-motor-powered pallet, which, along with the EV600 delivery vans, are being tested by the company’s first partner, FedEx. According to the worldwide shipping service, the use of the EP1 has increased individual package deliveries by 25% per day.

The value of data

For BrightDrop CEO Travis Katz, the data harvested from these vehicles is where the company can build lasting relationships. The logistics system can track the chain of custody, how trucks are traversing routes and how packages are moving to help determine if deliveries are hitting a bottleneck and how a company can eliminate inefficiencies. “Long term, I think we see that’s … the really exciting opportunity. We see ourselves as a solutions provider, but it’s really with software at the core,” Katz said.

GM isn’t alone in its mission to gobble up a share of last-mile delivery, a market that research firm Technavio says will grow by $59.81 billion by 2025. Ford has unveiled both an electric E-Transit van and commercial-targeted variant of the F-150 Lightning electric truck that both have access to Ford’s own logistics system.

“We are doubling down on software and digital services to help our fleet customers grow and more efficiently run their businesses,” Ford CEO Jim Farley said in a statement. Ford also rounded out its future EV commercial business with the acquisition of battery management and fleet monitoring software startup Electriphi. Ford’s acquisition is a strategic move that it’s betting will help it capture more than $1 billion in revenue just from charging by 2030.

Meanwhile, new kid on the block Rivian has secured an impressive amount of funding and delivery van orders (to the tune of 100,000 units) from Amazon by 2030. Of those, 10,000 are set to be delivered as early as 2022. The vans are already being tested in the wild and the companies hope to expand.

For all of these automakers, the delivery vehicle market eventually helps them with their passenger vehicles. For example, as Rivian produces vehicles for Amazon, the economy of scale kicks in, and as time progresses, the cost of building each vehicle falls as the team learns how to build a better EV. That knowledge and savings can be transferred to passenger vehicle production.

Rivian isn’t marketing its passenger vehicles to commercial customers like Ford is with the upcoming F-150 Lightning. But its commercial tie-up with Amazon ultimately serves its consumer sales mission. In other words, an automaker building fleet vehicles could potentially build better and cheaper EVs for the average person. It also helps raise awareness of EVs as they quietly deliver packages throughout neighborhoods.

EV economics

One person who needs no convincing about the economics of EVs is FedEx’s regional president of the Americas, Richard Smith. He’s owned a Tesla Model S for five years and immediately recognized the cost benefits. “The reliability is off the charts for these EVs. There’s really nothing to service. You get your tires rotated and put some water in the washer fluid and everything else is just a software upgrade,” he said.

A BrightDrop spokesperson told TechCrunch that the company will be establishing a dedicated dealer network that, in addition to supporting sales, will provide service and maintenance for the EV600. BrightDrop will also train customers to service their own vehicles, something that large companies like FedEx will likely want to do because shipping is a 24-hour business.

FedEx claims that it will be completely carbon-neutral by 2040, and part of that journey includes that by 2030, 100% of FedEx Express parcel pickup and delivery purchases will be electric. The shipping company believes that pricing parity between EVs and diesel vehicles will occur by then.

Despite Smith’s positive experience with his Tesla, FedEx recognizes that things break down. “The reliability piece is so key and [major original equipment manufacturers] all have the benefit of their existing dealer networks,” he said. “They can provide the service and support like they do for their internal combustion vehicles.”

At this point, there shouldn’t be any doubt about GM’s commitment to electric vehicles. GM announced June 16 it was increasing its investment into electric and autonomous vehicles by 30% to $35 billion by 2025. The company also said it would build two additional battery production plants to supplement the pair being constructed in Ohio and Tennessee.

In the automaker’s fourth-quarter 2020 letter to investors, it anticipated cash flow from BrightDrop: “More growth will come from creating new sources of revenue through businesses like BrightDrop, subscription services like Super Cruise and OnStar Guardian, as well as OnStar Insurance Services.”

While the hype around electrification has been on passenger vehicles, in the next few years, you’ll more likely see an electric delivery van dropping off your packages than an electric car in your neighbor’s driveway. Either way, the automakers like GM, Ford and Rivian that have invested in electric fleet vehicles will reap the benefits of the EV transition from both sides of the market.