Green Rush: Startups Lead the Charge in Eco-Friendly Deliveries

In a race against time and industry giants, a group of emerging European and U.S. startups are striving to dominate the burgeoning market for zero-emission, electric "last-mile" deliveries in urban areas. These startups are capitalizing on the urgent need of retailers to meet environmental, social, and corporate governance (ESG) and emission-reduction targets.

Companies such as Germany's Liefergrun, the UK's Zedify and Packfleet, and New York's DutchX are at the forefront, having collectively raised approximately $1 billion to date. They are keen to seize a significant market share while industry leaders are still in the preparatory stages of transitioning to green fleets. For instance, FedEx aims to have a zero-emission delivery fleet by 2040, while Deutsche Post DHL Group plans to electrify 60% of its fleet by 2030, a goal shared by Amazon with its ambition to deploy 100,000 Rivian electric trucks.

These startups are not just relying on electric vehicles; they are also developing their own routing technologies for urban and suburban deliveries. Despite the challenges of maintaining low prices in a fiercely competitive market, they are growing rapidly and could potentially become acquisition targets.

Liefergrun and other startups are building package hubs in city centers and collaborating with third parties for deliveries, providing them with electric vans sourced from manufacturers like Mercedes-Benz and China's Maxus. The clock is ticking, however, as delivery behemoths are also investing heavily to electrify their fleets.

In the UK, startup Packfleet has witnessed a tenfold increase in revenue in 2022 and aims to expand its fleet to 400 electric vans by 2024. CEO Tristan Thomas highlighted the pressing demands from customers, asking, "when can you expand and how soon can you take all of this volume?"

Meanwhile, in New York, DutchX is innovating with a new service that uses ferries to transport small loaded containers into Manhattan, which are then loaded onto Fernhay electric cargo bikes for city deliveries. The company, which collaborates with Amazon Fresh and Whole Foods, is experiencing a surge in demand for zero-emission deliveries. "Some customers are pushing very, very hard for as many zero-emission deliveries as possible," said DutchX co-founder Marcus Hoed.

Despite the promising growth, the startups face a tough road ahead, with challenges such as scaling up and operating with smaller vehicles that can carry fewer packages, thereby squeezing profit margins. "Last-mile delivery is a very unforgiving business," remarked Sven Etzelsberger, CEO of California-based URB-E.

As these startups forge ahead, industry experts believe that while established carriers like FedEx, UPS, and DHL have the advantage of scale, regional companies have a fighting chance. Thomas Goldsby, a logistics expert at the University of Tennessee, emphasized that these carriers are closely watching the startups, ready to acquire any service provider that brings something "really cool" to the table.

Despite the competitive landscape, DHL's Yin Zou sees these startups not as threats but as potential partners for commercial collaborations. The journey is indeed challenging, but as Rob King, CEO of UK electric cargo-bike delivery startup Zedify, pointed out, achieving scale is the real test. "We've proven that at volume, we make money and we are really efficient," King said, underscoring the company's goal to double its deliveries to 2 million packages this year and quadruple to 8 million in 2024.

As the race intensifies, these startups are not just chasing profits but are also contributing significantly to the global push for a greener and more sustainable future.