startups: Startups with electric vans race to fill demand for zero-emissions delivery

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A clutch of European and U.S. delivery company startups is racing to serve the growing market for offering zero-emission, electric last-mile deliveries in cities to retailers and consumers before giant shippers do the same.

The likes of Germany’s Liefergrun, the UK’s Zedify and Packfleet, and New York-based DutchX are tapping into retailers’ need to hit environmental, social and corporate governance (ESG) and emission-reduction targets. Collectively, zero-emission delivery startups have raised around $1 billion so far, according to Pitchbook and data collected by Reuters.

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They hope to grab market share during the long lead times while industry leaders are still gearing up. For instance, FedEx targets 2040 for its zero-emission delivery fleet; Deutsche Post DHL Group says 60% of its delivery fleet will be electric by 2030, the same year that Amazon plans to have 100,000 Rivian electric trucks in service. United Parcel Service expects 40% of its delivery vehicles to run on alternative fuel by 2025.

Using their own routing technology for urban and suburban deliveries, these small but rapidly growing startups must scale up while also keeping prices low in a competitive market, which could also make them acquisition targets.

“Nobody wants to pay more for sustainable delivery,” said Niklas Tauch, CEO of Berlin-based Liefergrun, which delivers in big cities across Germany and Austria and lists fashion retailers H&M and Inditex, and Hello Fresh among its customers.

H&M, the world’s second-largest fashion retailer, said it is scaling up a number of zero-emission delivery initiatives “through a variety of partnerships like the one… with Liefergrun.”

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Liefergrun builds out package hubs in city centers. It then contracts out deliveries to third parties, providing them with access to electric van deals from Mercedes-Benz or China’s Maxus. Tauch said Leifergrun’s revenue will grow sevenfold this year from “single-digit millions” of euros in 2022 and should hit “triple-digit millions” in 2024.

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

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

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

UK startup Packfleet’s revenue grew tenfold in 2022 and its fleet in London should grow to 400 electric vans in 2024 from around 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 how soon can you take all of this volume?” CEO Tristan Thomas said.

Europe has so far proven more fertile ground for zero-emission package deliveries.

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

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

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

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

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

The challenge for startups is that scaling up is difficult. Many use smaller vehicles than the typical delivery truck, squeezing profit margins because it is hard to deliver enough packages to offset labor and other costs.

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

University of Tennessee logistics expert Thomas Goldsby said while the “big dog” carriers FedEx, UPS and DHL enjoy huge advantages of scale, regional companies can succeed.

“As to the threat these startups present, certainly the established carriers will be keeping an eye on these developments,” Goldsby said. “They are also prone to acquiring any service provider that’s doing something really cool.”

DHL’s Zou said zero-emission delivery startups are not a threat, but added “we are always keen to look at them either for a commercial partnership or working together.”

UK electric cargo-bike delivery startup Zedify operates in 10 UK cities, with seven more coming over the next six months, and already delivers packages for large firms like FedEx alongside its growing retailer base.

Adding 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 in the UK’s nearly 50 cities with 100,000 or more residents.

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



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