In about 2015 I was working at Tesla, new vehicles were being announced all the time and sales were climbing. The revolution is coming! Now all we have to do is sell cars and this transition is done. I had some early involvement with the electric conversion enthusiasts and had an overwhelming feeling of “why are you bothering, the big industrials have got this one bro”.
As time passed it became clear that this transition wasn’t going to be as smooth as I’d hoped. If I had a dollar for every person who came into Tesla during that period and asked “when will you be releasing a ute/SUV/towing 4WD” I could have built one myself. The Industrials were moving into electric, but slowly, and focused on the largest sectors. If you had any sort of technical, aesthetic or niche requirements you would be waiting a long time.
A short interjection on nomenclature. A “retrofit” in this field is taking a vehicle that has been in service as an ICE vehicle, and converting it to electric. Until quite recently I hadn’t realised that there’s a third class of vehicle which is extremely prevalent in Australia; new, retrofits and new vehicle repowering, which many call a retrofit. This pathway is where Australia gets most of our ambulances, cement trucks and other specialist vehicles. We import vehicles in various stages of manufacturing and complete the build to our needs locally, like a rolling chassis for a bus build, or a truck chassis for the old SEA Electric vehicles. The big difference being that new manufacture doesn’t require the same wear and tear assessment a retrofit requires, you can assume it’s brand new. Repowered vehicles shouldn’t count as retrofits, and aren’t considered here.
If, like me, you already accept that climate change is an urgent problem we need to act quickly to resolve, the economist’s answer to “why convert an existing vehicle to electric” is pretty simple; because there’s enough value in the vehicle to make it worth doing. Everyone who has a vehicle role and wants to fill it with an electric vehicle has a choice; buy one from the big manufacturers, when available, or convert their own. And there are lots of reasons why building your own is the right choice.
Imagine first that you have a 1978 Ford Escort 4-door, in burnt orange (for example), that you love dearly, but the engine is increasingly blowing smoke and you don’t feel good about the emissions. Perhaps Ford will do a re-release? Not likely. Here the value is nostalgia, one of the fastest rising currencies in the world, and it’s irreplaceable. All the guys of a certain age I know have a ready answer for the car they’d convert to electric, which explains to some degree the success of businesses like Jaunt and Electro Gusto. I think if you’re the sort of person who harbours any sort of technological nostalgia, classic retrofits make perfect sense.
But they’re not a commercial proposition for business. No one is converting their fleet of old Camrys to electric. A few years ago my dream Escort build wouldn’t have left much change from $300,000, which seems high for a vehicle I purchased for $500 and a case of beer. Is retrofit ever a commercial option?
As a matter of fact yes, extremely, and it’s due in large part to the remanufacturing process I mentioned above. Imagine now an aircraft refuelling tanker that’s used behind the gate at a busy airport. When first built a naked chassis was imported into Australia and then fitted with a tank and loads of associated safety and pumping equipment. It’s a $2,000,000 custom fit out on a $150,000 chassis, with substantial costs involved in transferring that equipment to another vehicle, if that is even possible. To get an electric one of these presents a choice; wait for an electric naked chassis to be built ($200,000) then add the fuel gear (+$2,000,000 = $2.2m) or, remove the diesel powertrain and convert the existing vehicle to electric ($400,000) and spend nothing further. On this vehicle it’s a $1.8m saving! That’s a no brainer. So there’s a general answer here which we can express in an equation if that’s how you view the world, something like this:
It is worth doing an electric retrofit of an existing vehicle if:
The cost of buying a new electric vehicle and doing the technical conversion
is more than
The cost of converting the existing vehicle.
For an equivalent service life
Then there’s a time component too. For many of these comparisons buying new isn’t an option now and there’s no timeline proposed. I’ve been told the popular Isuzu NPS chassis we use in mining has no prospect of being made electric in the next decade. So should we wait for the big Industrials to solve climate change for us or actually do the work and pull those emissions and cost savings forward?
Once you’ve got that equation you can see there are loads of sensible opportunities to retrofit vehicles that will deliver cost and emissions savings. Transit buses for example typically last 25 years and have a major overhaul at 12 years. A new electric bus costs $900,000 - $1.2m, while a retrofit now can be achieved for about $300,000. So we could have 12 years of zero emissions operation for $300,000 or 25 years for about $1m. There’s clear value there.
There are of course times when a retrofit is a poor choice. Passenger vehicles are rolling off production lines in good numbers now with many use niches adequately filled, so a retrofit would be difficult to justify on cost grounds. Worn vehicles with uncertain or short remaining lives are also a poor choice. The goal is best value electrification per unit time, so these vehicles need time to accrue the benefits. Then there are the normal electrification barriers; there are times when duty cycles and charging availability make the project infeasible as well, like in a remote area without electricity or very long routes. The best retrofit vehicles are typically large (>4.5 tonnes) and deployed in controlled working environments.
For various reports recently I’ve had a shot at the total number of these vehicles in Australia and I think it’s a lot. Roughly 60,000 vehicles, over 4.5 tonnes with significant technical modifications. Including specialist farming equipment doubles that number. That’s mostly mining, heavy freight, resources, utilities, emergency, rail and construction.
Every retrofit reduces our reliance on diesel, which we’ve seen can be very volatile, and is ubiquitous in the Australian economy. When diesel prices rise everything else does too. A huge program of retrofits would spur industry in Australia in key areas and reduce inflationary pressures across the economy. Oh and reduce emissions, which seems less fashionable these days, but remains a flashing red sign for me.
It’s service vehicles, personnel transport and logistics, the bones that make the Australian economy move, and for this reason I think retrofits are an excellent way for governments to make a positive difference in Australia. To date government grants programs have intentionally avoided retrofits, but I think there is a way we can define them to compete on level footing with new build projects. Our overarching policy goal should be cheapest emissions reductions, which can be calculated and compared across projects. The second is bringing forward the emissions reductions, and noting the time value of emissions further strengthens the policy position. Surely it’s better to repower a bus for 12 years now than wait and replace it at the end of its life? What is the cost of 12 years of emissions? Is there a good reason to exclude worthwhile projects just because the vehicle has already been used? I’ve heard the argument that “it doesn’t scale”, but that depends strongly on what It is. What if the bit that scales is our understanding and proficiency at retrofits, and that brings down the cost of emissions reductions across the economy? If we get better at vehicle software, installation and vehicle simulation and lower costs in future retrofits does that scale? If we know that local manufacturing and retrofit of vehicles is going to be a feature for the foreseeable future, shouldn’t we support that with policy and grant funds?