A groundbreaking investment in electrified local freight delivery is just the first step in an ambitious strategy by Vancity Community Investment Bank (VCIB) to tap into one of the biggest opportunities on the road to a decarbonized future.
VCIB’s $3.2-million loan has paved the way for Vancouver-based Seven Generation Capital (7Gen) to acquire ten electric trucks and the required EV fast chargers that it will then lease to GoBolt, a growth logistics firm that offers secure storage and e-commerce fulfillment to big retailers.
Until recently, trucking was seen as one of the biggest challenges in the effort to reduce the fossil fuel use that drives climate change, for one very basic reason: while electric motors and batteries made sense for cars and light trucks, they couldn’t deliver enough distance or power to haul freight.
But now, a new generation of batteries offers better range at lower cost. That leaves an emerging electric freight industry with just two remaining hurdles: showing freight logistics companies that the technology is ready for prime time, and creating a turnkey business model that allows them to save money on electric trucking from the first day of a new lease.
Financing Makes the Difference
VCIB’s project finance deal with 7Gen is one of the first of its kind in Canada, says David Berliner, the bank’s Head of Clean Energy Deal Structuring. But it won’t be the last. The country has set some “very ambitious electric vehicle targets” as part of its wider climate strategy, and it’s going to take “a whole ecosystem of actors” to get the job done.
That includes financial institutions like VCIB, part of the Vancity Group, which has led the effort to fund clean energy projects by covering the buyer’s initial investment out of longer-term cost savings—and has a tried-and-true business model to bring to the freight sector.
“Companies that want to make the transition from traditional fossil-fueled trucks to electric vehicles will face higher up-front capital costs, but then they won’t pay for fuel and their maintenance costs will be lower.” It’s an opportunity that Berliner says is directly analogous to the residential and commercial solar market.
In the solar sector, a shift occurred more than a decade ago from trying to sell companies solar panel equipment to offering ‘zero money down, solar-as-a-service’, and in the process bringing in a separate financing partner.
“Solar energy was offered to the customer for a fixed price. This was compelling, especially in an era of famously volatile fossil fuel prices,” he recalls. “Project financing was what allowed solar to go from a niche industry to an industry with hundreds of billions of dollars and gigawatts deployed.”
In the freight sector, “A company like 7Gen can put that together into one package and become a one-stop shop for electrification, creating a very compelling business model that makes it a lot easier for more customers to make the switch,” he adds. “And financing is the fuel that is required for those business models to work.”
Seeing Is Believing
Some bigger institutions will be able to plan, manage, and finance the EV transition unassisted, Berliner says. “But for the majority, there will have to be a concierge or a project developer that helps companies navigate all the different aspects and benefits of a project.”
7Gen is building that model from the ground up.
“We were one of the first companies out there that looked at this from a customer perspective,” says 7Gen CEO, Frans Tjallingii. “As a freight operator, what do you need to do to get into EVs? You need a lot of different elements to all fall into place and work together, which is not always a given” if a company tries to juggle the vehicles, chargers, and financing unassisted.
Until 7Gen came along, “there was no one to really integrate vehicle and charger selection, interoperability and financing in an end-to-end, turnkey package that supported the fleet operators in moving toward electrifying their operations,” he adds. “Ultimately, our goal is to make it a lot easier and de-risk the journey. We know what it means to adopt an EV strategy, and we’re here to help, while our clients focus on their core business”.
One aspect of that journey is to help freight operators align the transition with their existing vehicle acquisition plans. Technologies are evolving, battery densities are improving rapidly, and potential customers are worried about choosing the wrong option. So 7Gen works with customers as a trusted advisor, developing tailored, step-by-step transition plans to shift their fleets over time.
“We go through their current operations, look at which vehicles they’re replacing anyway, compare new diesel with electric vehicles, and talk about what makes most sense for those vehicles and those routes,” he says. “Usually, under 300 to 350 kilometres and with some time for charging, it’s worth looking at electrics.”
There’s a “commercial benefit in being zero-emission, and a niche in being values-driven and on the forefront of that wave,” he adds. With the right turnkey package, “you can also save money from day one, get some commercial value, be more efficient, and gain a learning advantage over competitors that are waiting longer to get in.”
Only the Beginning
7Gen never encourages anyone to switch a whole fleet at once. “Start with one, two, five, 10, depending on your plans for fleet renewal,” Tjallingii advises. “The next year, we do the analysis for you, and if it makes dollars and cents, we see what’s available and look at the next generation of vehicles.”
The direct climate benefit from 7Gen’s leasing agreement with GoBolt is deceptively small, a reduction of just 4,140 tonnes of carbon dioxide equivalent over seven years. But it’s proof of concept for an electric commercial vehicle market that is primed for take-off across Canada and around the world.
“Most forward-thinking corporate actors like the 7Gens and Vancitys of the world are pushing those ecosystems forward,” Berliner says. “And demand side of that ecosystem is increasing the call for logistics companies like GoBolt. Alongside that is the lower total cost of ownership, so those two things go hand in hand.”
But in the end, all of that potential comes back to having the right financial partner.
“There’s a well-established leasing market in Canada,” Berliner says, but that market depends on fossil-fueled vehicles. “We were willing and able to sit alongside a partner, roll up our sleeves, and do more work. This is a first, smaller transaction, and smaller transactions are often harder to get done.” But given the urgency to electrify transportation, “we wanted to be a good partner and find a good partner to work with.”
“To make these projects work, we need a lender who’s pragmatic and willing to work with us to figure out the details,” Tjallingii says. “VCIB was very interested in this project from the get-go because it’s zero emission and really fits with their values. So we were very glad to be able to work with them.”