With an innovative “EV as a Service” model, 7 Generation Capital aims to seize the relatively untapped market potential of commercial fleets looking for low-risk options to transition to EVs
7 GENERATION CAPITAL, a Vancouver-based specialty start-up offering a one-stop, one-bill, turnkey solution to transition corporate fleets to EVs, just won a big endorsement for its business model: US$20 million in project equity from Spring Lane Capital, a private equity firm based in Boston and Montreal.
“Their endorsement not only shows their faith in us, but also strengthens our belief that there is a huge opportunity ahead of us,” says Frans Tjallingii, 7Gen’s CEO, in an interview with Electric Autonomy Canada. “The capital now available is a step change to enable fleet managers to get EVs on the road and pay those investments back with savings made over the lifetime operation of those cleaner vehicles.”
Founded in early 2020, 7Gen aims to simplify and accelerate the process by which companies can convert their diesel and gasoline-powered fleets to electric by providing four key, integrated services: vehicle leasing; installation, management and financing of charging infrastructure; project feasibility and costing; software to operate the company’s EV ecosystem.
EV as a Service
“They get one monthly bill,” explains Tjallingii. He calls it “EV as a service,” and likens the approach to one common among solar energy developers.
“7Gen’s goal is to provide zero-emissions vehicles at similar monthly costs to what fleet owners are currently paying for combustion engine vehicles. We help develop the projects and then basically are paid a management fee to operate and make sure it remains working. We also bring in financing partners to make it happen.”
That’s where Spring Lane’s project capital comes in.
“We are on the cusp of widespread adoption of electric vehicles by commercial fleets, driven largely by the arrival of new vehicle models and corporate decarbonization targets. This transition represents an
enormous market opportunity and unlocks avenues for new types of institutional capital to enter this dynamic space,” said Nathaniel Lowbeer-Lewis, Spring Lane’s vice-president for Canada, in a statement announcing its investment.
Charging infrastructure a key challenge
Tjallingii says the current state of the market is challenging for a lot of companies looking at fleet electrification. There are huge strategic advantages in moving now, and obvious operational savings in terms of maintenance and energy. But figuring out the best way to make the financing and payback cycles work, especially for charging infrastructure, which grows exponentially more costly with larger fleets and bigger vehicles, is difficult — more so because few traditional financiers are knowledgeable enough to work in this space.
“We only do the medium- and heavy-duty space because we believe that’s going to be highest and best impacts for the future. It’s also much tougher in terms of really solving the infrastructure problem,” says Tjallingii.
Once the financial and technical side of the equation is worked out, 7Gen also manages the installation, permitting and liaison with local utilities. “We basically take all of that work out of our client’s hands,” he adds.
With larger clients, in particular, Tjallingii says his company helps them create a “full electrification roadmap” to prioritize which vehicles in their fleets are the best candidates to start with.
“Very few of our clients want to go all-in straight from the get-go. They want to get some experience under their belt,” he says. “Ultimately, EV is going to be more efficient, it is going to have lower operating costs. Fleet owners that electrify will make more money than those who do not. But timing is tricky part. If you’re too early, you’re going to pay too many costs of learning. And if you’re too late, you’re going to lose out [on savings and strategic advantages]. So, finding a good way to start that journey while managing your risk, I think that’s where we come in.”
When asked for names of specific clients and details of transactions, 7Gen says that while it has both finished contracts and a number of deals in development, it isn’t yet in a position to mention any clients by name. However, Tjallingii does reveal the two areas where the company is seeing the most traction: last-mile delivery and garbage trucks.
“Those are two focus areas where we believe it makes a lot of sense to electrify,” he says. That’s based both on vehicle availability and those applications’ typical patterns of use. “If you’re a fleet operator that can do overnight charging and has a range of, say, around 200 kilometres in daytime, you should be looking at electrifying today.”
Tjallingii says fleet operators can expect both the “carrot and stick” to motivate their transition to EVs.
The stick will come in the form of things like cities restricting the use of diesel vehicles.
“If you’re a last-mile delivery company going to city cores, you have to start thinking what is going to happen down the road. With changes like that, it’s no longer a matter of cost. Then it’s a matter of do you want to exist or not.”
The carrot is the commercial advantage to be gained in moving now, he adds, before it’s compliance-motivated and you are part of the herd.
“Now you can go to a customer — a large box store group or other companies that have set climate goals — and say, ‘Would you give me either a longer contract or slightly better rates or some other deal if I go electric?’ Today you can probably get quite a bit of traction. If you’re trying to do that in two or three years, you’re not going to be able to get anything special because it’s just going to be a requirement.”
This article was originally published on June 24, 2021, on the Electric Autonomy Canada website.