Hybrid Musings

"You can't buy what you can't buy."

Who said that? Samuel Goldwyn? Yogi Berra? It’s a good line. Actually, neither said it. But it does pertain to FedEx’s efforts to buy hybrid electric commercial vehicles in significant volumes. But, first some background.

In 2000 FedEx and Environmental Defense Fund collaborated on the leadership to bring commercial hybrid electric vehicles to use in business. FedEx intended to act as a launch customer and provide motivation for manufacturers to produce environmentally-clean, fuel-efficient vehicles. We said we had approximately 30,000 vehicles in applications for which hybrids could work - primarily urban, stop-and-go operations. And, we said we would like to buy hybrids on a normal purchasing schedule as one of our normal vehicle options.  But we realized that this relatively small number of vehicles for manufacturers was not large enough to motivate them for long term production. In order to do so, the technology would have to be non-proprietary – in other words, other companies with fleet vehicles could buy them, even our competitors. And, by our usage in revenue service, we could demonstrate the reliability of the technology that other companies would recognize (remember that FedEx has a money back guarantee on our services; so for us, the trucks have to work if we are going to use them).

And, we went even further. In early 2007 FedEx went to Congress and asked the United States Senate to pass legislation that would require commercial vehicles to improve in fuel economy (http://news.van.fedex.com/node/881). Incredibly at that time, no fuel efficiency standards existed for commercial trucks. Our reasoning was this would result in regulations that would both create a market for, and require the production of these fuel-efficient, environmentally-clean trucks. At the time, we were the only transportation company calling for these fuel economy standards. And, I can tell you that we surprised a few senators with the request. Subsequently, Congress did pass legislation in late 2007 that will ultimately result in fuel economy standards for commercial trucks – a first-ever requirement for energy efficiency improvements in these vehicles that travel the nation’s roads each and every day. I’m encouraged by that.

So, all of this worked to a degree. FedEx alone has put four different designs of hybrids in service from some great manufacturers, accumulating two million miles of revenue service by the spring of 2008 on three different continents using more than 170 hybrids – North America, Europe and Asia. In fact, our two million miles of service were used as justification for other orders in a May 2008 press release by one of the existing manufacturers. Now, more than 70 companies are testing, or plan to test, hybrids – utilities, beverage companies, transportation companies and others. But, to date, no manufacturer is yet producing hybrids in volumes that are considered full production and are cost competitive. The reality right now is that the numbers are slowly increasing, but prices remain too high for rapid market penetration.

But there is a solution. In April 2008, FedEx called upon the industry to produce clean, affordable and widely available hybrid electric vehicles (http://news.van.fedex.com/node/9811). FedEx alone cannot subsidize development and commercialization costs because we don’t own or have sole usage of the technology, as mentioned previously. Doing so would not be a responsible use of our shareowner’s investments. So, this commercialization has to be a collaborative effort as we and Environmental Defense Fund originally envisioned – manufacturers, operators and the federal government - through development, incentives and regulation – working together to transform transportation.

One other point - since 2002, when we were first able to test a hybrid, we have had to replace more than 18,000 vehicles – many of which could have been, and we would have liked to have been hybrids. What a lost opportunity.

So, I started out this posting with a statement. Now, let me end it with a question:

“Why can’t we buy what we want to buy?”

Think about it…