Startups with electric trucks are racing to meet the demand for zero-emission delivery

Written by Nick Carey and Lisa Bertlein

LONDON/LOS ANGELES (Reuters) – A host of European and U.S. delivery startups are racing to serve a growing market to offer emission-free, last-mile electric delivery services in cities to retailers and consumers before shipping giants do the same.

Companies like Germany’s Liefergrun, the UK’s Zedify and Packfleet, and New York-based DutchX are capitalizing on the need for retailers to meet environmental, social and corporate governance (ESG) goals and reduce emissions. Collectively, zero-emissions delivery startups have raised about $1 billion so far, according to Pitchbook and data compiled by Reuters.

They hope to gain market share during the long waits while industry leaders are still preparing. For example, FedEx is targeting 2040 for its zero-emissions delivery fleet; Deutsche Post DHL Group says 60% of its delivery fleet will be electric by 2030, the same year Amazon plans to commission 100,000 Rivian electric trucks. United Parcel Service expects 40% of its delivery vehicles to run on alternative fuels by 2025.

Using their routing technology for deliveries in urban and suburban areas, these small but fast-growing startups must expand while also keeping prices low in a competitive market, which could also make them takeover targets.

“No one wants to pay more for sustainable delivery,” said Niklas Tausch, CEO of Berlin-based Liefergrun, which offers delivery services in major cities across Germany and Austria, and counts fashion retailers H&M, Inditex and Hello Fresh among its clients.

H&M, the world’s second-largest fashion retailer, said it was expanding a number of zero-emission delivery initiatives “through a variety of partnerships such as this one… with Liefergrun.”

Liefergrun builds package centers in city centres. It then contracts out the deliveries to third parties, giving them access to electric truck deals from China’s Mercedes-Benz or Maxus.

Leifergrun’s revenues will grow seven-fold this year from “single-digit millions” of euros in 2022 and should reach “three-digit millions” in 2024, Tausch said.

So far, Liefergrun has raised 15 million euros ($16 million) and will raise more next year to expand rapidly.

The clock is ticking as delivery giants invest huge sums to electrify their own fleets.

In a pilot project, DHL will switch to 100% e-commerce last-mile deliveries in the Netherlands by the end of this year, with other markets to follow with investments of “double-digit billions” of euros, Deutsche said. Post DHL Head of Corporate Development Yin Zou.

UK startup Packfleet’s revenues grew tenfold in 2022, and its London fleet is expected to grow to 400 electric trucks in 2024 from about 50 now as it adds new customers.

Packfleet will expand to Liverpool, Birmingham and Manchester next year and plans to be in the top 20 UK cities within two years.

“The biggest requests from our customers are when can you expand and when can you accommodate all this volume?” CEO Tristan Thomas said.

‘Ruthless work’

Europe has so far proven to be a more fertile ground for zero-emission parcel delivery.

But in New York, DutchX is launching a new service to bring small, loaded containers to Manhattan by ferry, then load them onto Fernhay electric cargo bikes for delivery into the city, said Marcus Hoed, DutchX co-founder. The company will use the bikes to deliver packages to its customers, which include Amazon Fresh and Whole Foods.

“Some customers are pushing hard for as many zero-emission deliveries as possible,” Hoed said.

DutchX’s revenue is expected to rise by more than a third to about $40 million this year. The company will launch operations in Philadelphia this year, with three or four additional US cities next year.

DHL’s Zhou said investor pressure was mounting on logistics companies and customers alike to cut emissions.

Some retailers have set challenging targets. For example, IKEA wants 100% zero-emission last-mile deliveries by 2025.

The challenge for startups is that scaling is difficult. Many of them use smaller vehicles than a typical delivery truck, which puts pressure on profit margins because it’s difficult to deliver enough packages to offset labor and other costs.

“Last-mile delivery is an absolutely unforgiving business,” said Sven Itzelsberger, CEO of California-based URB-E, which makes cargo containers for e-bikes.

While “big” carriers like FedEx, UPS and DHL have huge advantages of scale, regional companies can succeed, said Thomas Goldsby, a logistics expert at the University of Tennessee.

“In terms of the threat these startups pose, established carriers will certainly be watching these developments,” Goldsby said. “They’re also vulnerable to acquiring any service provider that does something really cool.”

DHL’s Zhou said zero-emission delivery startups did not pose a threat, but added: “We are always keen to look at them either for a business partnership or to work together.”

UK electric bike delivery startup Zedify operates in 10 UK cities, with seven more coming over the next six months, and is already offering packages for large companies like FedEx alongside its growing retail store base.

The addition of more cities brings national contracts from retailers, which will double Zedify’s deliveries to 2 million packages this year and quadruple to 8 million in 2024, CEO Rob King said.

Within four years, Zedify aims to be present in approximately 50 UK cities with 100,000 residents or more.

“We’ve proven that we make money with volume and are really efficient,” King said. “But getting to that scale is the challenge anyone will face.”

($1 = 0.9323 euros)

(Reporting by Nick Carey and Lisa Bertlein; Editing by Ben Klayman and David Gregorio)

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