The Economics of Delivery: Why EV Makes Sense for Delivery Partners 

Post-pandemic, we have seen a massive shift in the buying behaviour of customers and doorstep delivery played a crucial role in meeting their demands. From the convenience of e-commerce to the ever-growing need for quick deliveries which we call quick e-commerce, the demand for efficient and sustainable last-mile delivery solutions is at an all-time high. In this blog post, we delve into the economics of delivery and explore why Electric Vehicles (EV) make perfect sense for delivery partners and their employers from business and environmental standpoints.  

The Rise of Last-Mile Delivery

Before we delve into the economic aspects, let’s understand the significance and growth of last mile delivery. This final leg of the delivery journey involves transporting goods from a distribution center and fulfillment hubs to the end user, often within urban and suburban areas. Last-mile delivery is not only the most critical but also the most expensive part of the supply chain, accounting for up to 50% of the total delivery cost. Post-pandemic, this segment saw exponential growth in the entire supply chain and became an opportunity to create business opportunities and also bring a shift in the way we deliver. This segment was dominated by ICE-based vehicles, i.e. petrol/ gasoline based vehicles and later getting replaced by Electric vehicles.

The Cost Challenge in Traditional Delivery

Traditional last-mile delivery often relies on gasoline or diesel-powered vehicles, typically scooters or small vans. While these vehicles have served their purpose well, they come with a significant financial burden:

1. Fuel Costs: The volatile nature of fuel prices can wreak havoc on a delivery company’s budget. With fuel expenses being a substantial portion of the operating cost, even slight price fluctuations can have a significant impact on profitability.
2. Maintenance: Internal combustion engine vehicles require regular maintenance, which adds up over time. The wear and tear associated with constant stop-and-go city driving can be especially hard on traditional delivery vehicles.
3. Emissions and Environmental Regulations: Many cities are tightening emissions regulations to combat air pollution. Non-compliance can lead to fines and even bans on operating certain vehicles within city limits.
4. Noise Pollution: In densely populated urban areas, the constant noise of gas-powered delivery vehicles can lead to noise complaints and potential fines.

Why EVs Make Economic Sense for Delivery Partners

Now, let’s explore why Electric Vehicles (EVs) are a game-changer in the economics of last-mile delivery jobs:

1. NO Fuel Costs: The most immediate benefit of EVs is the dramatic elimination of fuel costs. Charging an EV is significantly cheaper than filling up a gas tank. Delivery companies can see substantial savings in this area alone.
2. Better Adoption: Financial institutions coming forward to provide easy loans and incentives to own Electric Vehicles, companies like Zypp Electric also started providing easily and waivers on rentals to delivery partners to own an EV.
3. Lower Maintenance Costs: EVs have fewer moving parts and don’t require oil changes or regular maintenance of exhaust systems. This means less time and money spent on repairs and maintenance.
4. Government Incentives: Many governments and municipalities offer incentives to switch to electric vehicles. These incentives can include tax breaks, grants, and access to HOV lanes, further lowering the total cost of ownership.
5. Improved Efficiency: EVs have instant torque, making them ideal for city driving. They can navigate congested streets more efficiently, resulting in faster deliveries and improved productivity.
6. Environmental Benefits: Beyond cost savings, EVs align with growing consumer preferences for eco-friendly practices. Companies that embrace sustainability often enjoy enhanced brand reputation and customer loyalty.
7. Long-Term Savings: While the upfront cost of EVs can be higher, the long-term savings in fuel and maintenance expenses often outweigh the initial investment. As the EV market continues to grow, prices are likely to become more competitive.

Real-World Success Stories

Several delivery companies have already made the switch to electric vehicles and are reaping the economic benefits. Let’s look at a couple of real-world examples:

1. Amazon: As one of the largest e-commerce giants, Amazon is committed to sustainability. The company has invested heavily in electric delivery vans and plans to have 100,000 electric delivery vehicles on the road by 2030. This massive shift toward EVs not only reduces Amazon’s carbon footprint but also lowers its operating costs.
2. DHL: DHL, a global logistics company, has integrated electric bikes into its delivery fleet in congested urban areas. These e-bikes are not only efficient for navigating traffic but also cost-effective, reducing delivery times and expenses.
3. Zomato: Zomato has aggressively focused on the electrification of their vehicles and partnered last mile EV-as-a-Service providers like Zypp to boost their shift in last-mile deliveries of their Zomato partners, they have committed 1 lakh E2W by 2024 in their partnership.
4. Uber and Rapido: Similarly to other business categories, last-mile ride-sharing apps like Rapido and Uber have also focused on the electrification of their fleet with the help of Zypp Electric and hence committed a significant rise in their fleet electrification.   

Conclusion: A Win-Win for Delivery Partners and Businesses

In the economics of last-mile delivery, the shift to Electric Vehicles represents a win-win scenario. Delivery partners and their employers stand to gain significantly from reduced fuel and maintenance costs, government incentives, and improved operational efficiency. Moreover, embracing EVs aligns with the growing demand for eco-friendly and sustainable delivery practices, further enhancing a company’s image and market position.

The economic argument for electric delivery vehicles is compelling, and as technology advances and infrastructure improves, EVs will continue to gain traction in the last-mile delivery industry. As more delivery riders make the switch to EVs, they not only contribute to a cleaner environment but also secure a more cost-effective and sustainable future for their businesses. It’s not just the delivery of goods that’s evolving; it’s the way we deliver them that’s transforming the world of delivery economics.

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FAQs

Why is last-mile delivery considered the most critical and expensive part of the supply chain?

Last-mile delivery involves transporting goods from a distribution center to the end user, often in urban areas, making it critical for timely deliveries. It’s also the most expensive, accounting for up to 50% of the total delivery cost due to various factors.

What financial challenges do traditional delivery methods (gasoline or diesel-powered vehicles) pose for delivery companies?

Traditional delivery methods come with significant financial burdens, including volatile fuel costs, regular maintenance requirements, potential fines for emissions non-compliance, and noise complaints in densely populated urban areas.

How do Electric Vehicles (EV) contribute to reducing the economic challenges faced by delivery companies?

EVs provide a solution by offering reduced fuel costs, lower maintenance expenses, potential government incentives, improved efficiency in city driving, and alignment with eco-friendly practices, resulting in long-term cost savings for delivery companies.

Can you provide examples of successful implementation of Electric Vehicles in last-mile delivery by major companies?

Yes, companies like Amazon and DHL have successfully integrated electric delivery vehicles into their fleets. Amazon, as part of its sustainability commitment, plans to have 100,000 electric delivery vehicles by 2030, reducing both carbon footprint and operating costs. DHL uses electric bikes in congested urban areas for efficient and cost-effective deliveries.

What are the long-term benefits for delivery riders and businesses in adopting Electric Vehicles for last-mile delivery?

The long-term benefits include substantial savings in fuel and maintenance costs, access to government incentives, improved operational efficiency, and alignment with eco-friendly practices. Embracing EVs not only contributes to a cleaner environment but also enhances a company’s image and market position in the evolving landscape of delivery economics.