Workhorse to test electric vans for new customer in California, Ohio

DETROIT (Reuters) - Electric delivery van maker Workhorse Group Inc WKHS.O said on Tuesday it will test its new lightweight N-Gen electric van in cities in Ohio and California as the race to develop mass-market electric delivery vehicles heats up.

Workhorse's customers already include package delivery groups United Parcel Service Inc UPS.N and FedEx Corp FDX.N.

Chief Executive Officer Steve Burns told Reuters the company has signed up a new customer but said he could not disclose the name. Workhorse will test two versions of the van, including one carrying a drone in the roof for remote deliveries, he added. The company is already testing van-based drone deliveries with UPS.

Burns did not disclose the exact locations for the tests, but said they would take place in several cities in Ohio and California.

Cincinnati-based Workhorse is also in the running for a contract to replace the delivery vans in the United States Postal Service's fleet, in partnership with a unit of Singapore Technologies Engineering Ltd STEG.SI. The N-Gen has a similar frame to the vehicle the USPS is evaluating.

Workhorse said the tests will begin in the first quarter of 2018. The market for medium- and heavy-duty electric trucks is in its infancy and the distance they can travel before recharging is still limited.

They tend to cost more than conventional internal combustion engine vehicles, but as battery costs come down they should become more competitive.

Vehicle manufacturers such as Daimler AG DAIGn.DE and Navistar International Corp NAV.N, as well as Tesla Inc TSLA.O and a host of other new entrants, are racing to overcome the challenges of substituting batteries for diesel engines as regulators crack down on carbon dioxide and soot pollution.

Some manufacturers argue that with their short, largely predictable daily routes, delivery vehicles are a natural market for electrified versions.

Cutting the high cost associated with last-mile delivery as ecommerce has grown has become a major priority for the likes of Amazon Inc AMZN.O, which runs its own delivery service in some cities and has leased cargo planes to reduce expenses.

Daimler said in September that UPS will be the first U.S. commercial customer for its new battery-powered eCanter truck.

U.S. truck leasing and rental company Ryder System Inc R.N is a strategic service partner with Workhorse and last week also ordered 125 all-electric delivery vans from Chanje, a unit of FDG Electric Vehicles Ltd 0729.HK.

Workhorse’s Burns said the N-Gen van has a lightweight carbon frame, weighs 5,500 lbs (2,495 kg) when empty - 5,000 lbs lighter than comparable vehicles - and its load space measures 500 cubic feet (14 cubic meters).

He said Workhorse vans cost more than conventional vehicles, but gas and fuel savings make up the difference in less than three years.

“The premium that we charge is made back very quickly,” he said. “Fleets that look at total cost of ownership understand that and that’s how we sell our vehicles.”

Reporting by Nick Carey; Editing by Jeffrey Benkoe