The biggest government fleet is about to start turning over — but the replacements aren’t as green as many hoped
The United States Postal Service (USPS) recently revealed a new mail truck, which is good because the current ones are prone to breaking down and catching fire. But a chorus of people — including members of Congress, environmental groups, and even President Joe Biden — are not happy that most of the replacements will be powered by gasoline, not batteries.
Sticking with gas doesn’t make much sense in a world where electric vehicles are growing increasingly popular and governments outside the US are laying out timelines for banning gas vehicles. The short stop-and-go routes that most mail carriers take are well-suited for electric vehicles, even ones without an abundance of range. The USPS doesn’t break out its fleet emissions in its sustainability reports (and it declined to do so when asked), but it’s safe to say switching to electric could help the agency cut way back on fossil fuel usage.
The USPS started the bidding process to replace the current vehicles a half-decade ago, when Tesla’s Model S and the Nissan Leaf were some of the only electric vehicles on the market and legacy automakers had yet to announce multibillion-dollar investments into the technology. There was always a chance the contract would go to a bidder that wasn’t focused on new technology. In fact, by the time the USPS put out the final call to bidders last year, the competition had essentially narrowed to two companies: Workhorse, a startup with a short and sketchy history that was pitching an all-electric mail truck, and Oshkosh, a defense contracting stalwart. (A third, Turkish vehicle manufacturer Karsan, was considered a long-shot contender.)
Oshkosh won the award in February, which could ultimately be worth some $6 billion. And while it says some of the mail trucks it builds may be electric when they hit the road in 2023, neither the company nor the USPS has offered concrete details about how many — or how a defense contractor with no history of making EVs plans to provide them to the largest federal fleet. It took Postmaster General Louis DeJoy getting dragged in front of Congress just to get his estimate that the fleet could be around 10 percent EVs. And even then, he said his agency would need billions more dollars to push that number any higher.
Some members of Congress are willing to do just that provided they get assurances that the mix of EVs is high. But even if DeJoy gets that money, it’s still not clear what exactly can be done, as the whole process played out behind a thick veil of secrecy. (Even email correspondence obtained via the Freedom of Information Act by The Verge between the remaining bidders and the USPS across 2020 was almost entirely redacted.) The contract with Oshkosh is currently stuck behind that veil, too, meaning everyone outside the defense contractor and the USPS has been playing a guessing game as to what it entails.
Rep. Tim Ryan (D-OH) is one member of Congress who has proposed giving more money to the USPS to electrify the fleet. But he told The Verge in an interview that he thinks Congress should scrutinize the whole bidding process and that hearings about the award are on the table.
“This should not be a black box where the Postal Service gets to do this without any eyeballs on it,” he said.
The choice to go with Oshkosh may have been a deliberate move by DeJoy (a Trump-era holdover) to ruin Biden’s push to electrify the government fleet. Or it could just be an unsurprising but suboptimal outcome at the end of a long and tortured government contracting process. After all, competing bidders with hybrid or alternative fuel prototypes dropped out before the final stage, and Oshkosh was arguably the most reasonable choice that remained.
That’s because Workhorse does not have a robust track record. Founded in 1998 as a commercial van manufacturer, the original version of Workhorse made gas and diesel vehicles and was later bought by trucking giant Navistar in 2005. Navistar eventually sold Workhorse to a company that retrofitted combustion engine cars with EV powertrains called AMP Electric Vehicles in 2013, and AMP subsequently took on the Workhorse name.
This new-look Workhorse was able to land some small-scale partnerships with companies like UPS and Ryder for an electric delivery van it had in development, but the company bled money following the combination with AMP. To stay afloat, it leveraged its patents and other assets in exchange for loans from Marathon Asset Management, a hedge fund known for investing in distressed companies.
It wasn’t until Workhorse’s former CEO, Steve Burns, left in 2019 to found a new company called Lordstown Motors that things got less dire. Lordstown Motors bought the recently shuttered Lordstown, Ohio, plant from General Motors — a move praised by then-President Trump — and paid Workhorse millions of dollars to license intellectual property for an electric pickup truck that was in development. Workhorse also got an equity stake, which is now valued at around $200 million after Lordstown Motors went public.
Still, Workhorse has no experience building electric vehicles in high volumes. That may be why it was considering outsourcing the USPS contract. According to filings with the Securities and Exchange Commission (SEC), Workhorse had guaranteed Lordstown Motors the right to bid on manufacturing the mail truck, though it said it would consider other contract manufacturers.
Lordstown Motors has yet to put its pickup truck into production, and there are questions about the progress it’s making. It’s impossible to say whether Workhorse’s inexperience or its plan to outsource manufacturing played into the USPS’s decision to go with Oshkosh. But Rep. Ryan, who has voiced a lot of support for Lordstown Motors, told The Verge he views Workhorse’s relationship with the startup as a potential boon — not a drawback.
“The platform they’ve developed is so far advanced from [where it was at] the beginning of the contract,” Ryan said.
Ryan isn’t the only one applying pressure. Rep. Marcy Kaptur (D-OH) also introduced a resolution in March meant to halt the award until an investigation can be done. And Biden has continued to express his desire for the entire federal fleet to be replaced with electric vehicles as part of his massive infrastructure overhaul.
The best hope for reversing or amending the award may lie in the USPS’s still-secret contract with Oshkosh. If that contract has what is known as a “termination for convenience” clause, the USPS could get out of it for almost any reason, a person who has worked in government contracting told The Verge. The agency would not be subject to claims of breach of contract or damages and would only have to pay termination costs. And since the USPS has so far only publicly committed to funding more of Oshkosh’s design work and scaling up some of its manufacturing, that may not be such a huge bill.
It’s possible the contract instead has what’s known as a “liquidated damages clause,” which typically lays out how either side can get out of the deal, this person says. (There could be language that says the USPS has to pay certain amounts depending on how many days’ notice it gives Oshkosh that it’s canceling the deal, for example.) This isn’t as standard as the termination for convenience clause, but it has shown up in postal contracts past.
Another possibility is that the USPS’s board of governors may still hold sway over the contract. The board approves all of the postal service’s large capital investments, and while it may have already made some approvals that allowed the USPS to move forward with Oshkosh, there could be more approvals waiting — especially since the full award doesn’t seem to have been granted.
The board of governors is also the sole entity with the power to remove DeJoy, though right now, that board is not operating at its full nine-member capacity. Biden has nominated three new members that would fill it back out and give it — on paper at least — a 5-4 Democratic majority. But it’s not certain that they would replace the Trump-era holdover, and at least one of the nominees has pledged to try to work with DeJoy.
(The USPS declined to go into specifics on the Oshkosh contract. “The Postal Service recognizes that powertrain technology may change significantly over the available 20-year life of the [new vehicle], and as such, the USPS selected a flexible design platform that can accommodate advancements in technology,” a spokesperson said in a statement.)
There’s also the possibility that Workhorse will formally challenge the contract, either through the USPS’s own internal appeals process or with a more public contest — similar to how Blue Origin is fighting NASA’s recent lunar lander award to SpaceX or how Amazon challenged Microsoft’s cloud computing contract with the Department of Defense.
A reversal may not be needed, though. The USPS has only committed to investing $482 million so far, which Oshkosh is supposed to use to “finalize the production design” of the vehicle. Oshkosh has agreed to make between 50,000 and 165,000 trucks over 10 years. The USPS has also been careful to say that the current fleet will be replaced with not only the new mail truck, but also what it refers to as “commercial off the shelf” vehicles (which are typically the larger USPS-branded vans and trucks you may see in your neighborhood).
“That does suggest there’s a lot of latitude and optionality, and that’s pretty common with these types of contracts,” Ben Prochazka, the national director of nonprofit Electrification Coalition, told The Verge.
Jimmy O’Dea, a senior vehicles analyst at the Union of Concerned Scientists, agrees. It’s relatively early on in the sense that the contract was just awarded,” he said in an interview. “What strikes me is the first part of the award is a $500 million component just to finish designing the vehicle. I guess that part gives me hope that things aren’t so baked they can’t be undone.”
In November 2020, Oshkosh warned investors in a filing with the SEC that it “may not have the expertise or resources” to compete in a world that is increasingly reliant on electric vehicles.
“While we are continuing to explore options to offer more propulsion choices in our products, such as electric-powered vehicles or mobile equipment, with lower emissions, this may require us to spend additional funds on product research and development and implementation costs and subject us to the risk that our competitors may respond to these pressures in a manner that gives them a competitive advantage,” the company wrote.
While these so-called risk factors are included to make sure shareholders and potential investors are aware of the worst-case scenarios a company faces, that language still represents an admission that Oshkosh makes its bones on internal combustion engines.
In fact, through most of the bidding process, Oshkosh was assumed to only be working on an internal combustion option based on Ford’s Transit van. The most recent spy shots of that prototype showed a much bulkier vehicle than what’s in the computer-generated images released in February when the award was announced. (Ford has repeatedly declined to comment on whether it remains involved with Oshkosh.)
How Oshkosh’s bid changed so dramatically in the closing months is yet another mystery. The company has crucially failed to explain how it plans to make its mail truck convertible to electric power, or what those conversions will cost, or who will foot the bill. And it hasn’t backed up its claim that the gas versions will “fuel-efficient low-emission” with any actual numbers.
Still, CEO John Pfeifer defended the contract on a recent investor call.
“I emphasize that we won this program. It was a five-year process, and we won this fairly,” he said. “We know how to compete for government programs. It’s one of the things we know how to do. We won it fairly, and we won it because we have the best solution.”
Pfeifer also said he believes Congress does not want to change the contract. Rather, he said the conversation in Congress has “been about increasing the rate of introduction of electric vehicles. It’s about how quickly [the Postal Service] can get the infrastructure up and running to recharge electric vehicles. But that will not delay this program.”
Oshkosh’s mail truck has a lot of sorely needed improvements, like advanced safety features, better visibility for the driver, and air conditioning. They will also — hopefully — be less likely to catch fire. Still, the USPS stands to benefit from increasing its reliance on electric mail trucks, regardless of who makes them.
Electric vehicles require less maintenance, which means it costs less to keep them running. The USPS is currently spending some $700 million per year on maintenance alone. Switching to electric mail trucks could therefore theoretically save money and keep the trucks running longer.
“For an institution that prides itself on working through rain or snow, this is an opportunity to say, also, ‘without mechanical failure,’” Prochazka said. He also said electric mail trucks could help the USPS’s bottom line because the price of electricity tends to be far more stable than the price of oil. “You have a lot more opportunity to insulate against price shocks.”
The USPS needs every last dollar it can save, too, in order to compete in an ever-crowding industry for package deliveries. And those competitors? They’re all going electric. FedEx and UPS have made big claims about turning over their fleets to electric vans and trucks, and Amazon has ordered 100,000 electric vans from Rivian and is now a part-owner of the EV startup.
“The more and more people hear about this, the more ridiculous it sounds,” Ryan said. “It confirms what people’s view is of the stereotype of government: ‘let’s double down on the past.’ Governments need to be about the future, so we want to continue to generate public support for this.”