Industry partners in place for propane to penetrate step van market

When the propane industry gathered in Atlanta earlier this year for its largest trade show, talk centered on a growing opportunity in the step van market.

UPS had just energized the industry with a March announcement that it would invest $70 million in 1,000 propane-fueled package delivery vehicles and refueling infrastructure. And if a brand like UPS can choose propane, why not others?

Industry ties to engine and chassis manufacturers have allowed propane to make a significant push into the school bus market, but those same ties are allowing it to make inroads with companies utilizing step vans. And that means propane industry partners can pursue entire industries and sell them on the fuel’s clean-burning, low-cost benefits.

“There are two markets now where we can almost say we have 100 percent penetration in terms of chassis and engines,” says Tucker Perkins, chief business development officer for the Propane Education & Research Council (PERC). “That’s school buses and step van chassis.”

According to PERC estimates, 300,000 step vans are in operation today in the United States, and 10,000 to 15,000 new vehicles are sold each year. The industry would like to capture about 25 percent of that new-vehicle market share annually, Perkins says.

Industries putting step vans on the road include multi-stop package delivery service, such as UPS, but also secondary industries equally large, such as bakery, textile, linen, medical services, and food and beverage companies.

Like other propane-fueled fleets, companies in these step van industries have one central location where vehicles are garaged, maintained and refueled. They often have a propane tank and refueling dispenser onsite.

“A key attribute we’re looking for is do these vehicles return to a central base every night?” Perkins says.

In addition, propane offers fleets the range needed to reach their destinations while costing companies about half of gasoline’s per-gallon price.

“Most of these guys are seeing a cut in their fuel expenses of 30 to 40 percent,” Perkins says. “That’s just huge to these guys, not to mention the environmental benefits and how they can talk about their commitment to the communities they’re serving.”

PERC President and CEO Roy Willis called the opportunity with UPS “a major milestone for the propane industry.”

The Atlanta-based logistics giant placed its order with Freightliner Custom Chassis Corp. and plans to replace gasoline and diesel units in Louisiana, Oklahoma and California. It also planned to install an initial 50 fueling stations at company locations, with financial support from PERC funding low-emissions nozzle testing on the dispensers.

UPS says the vehicles running these rural routes can travel up to 200 miles on a tank of propane. The new propane fleet is expected to travel more than 25 million miles and displace about 3.5 million gallons of conventional gasoline and diesel per year, according to the company.

“A lot of people will follow UPS because UPS has done their homework,” Perkins says. “We anticipate more success with them and more success with their competitors.”

Vehicle options
Ford and Freightliner own much of the OEM market share for step van chassis, with Roush CleanTech and CleanFuel USA supplying their propane fuel systems, respectively. The Freightliner chassis built for UPS uses a General Motors (GM) engine.

These companies offer vehicle options in what Ford calls the stripped chassis segment and Freightliner refers to as the walk-in van chassis family.

Ford has developed the F-53, F-59 and the E-450 stripped chassis, on which Roush CleanTech can equip a propane autogas fuel system. The units are built on a 2013 model year or newer chassis with a 6.8-liter, V10 engine. The F-53 and F-59 feature a 65-usable-gallon autogas fuel tank, while the E-450 comes equipped with a 41-usable-gallon fuel tank.

Freightliner offers the MT-45 and MT-55. In October 2013, PERC approved $385,000 for the development of these two chassis, with a 6.0-liter, V8 GM engine provided by Powertrain Integration, directed toward delivery fleets. The UPS project, in fact, is built on the MT-45, with a 48-usable-gallon propane tank. Freightliner says the chassis integrates seamlessly into the existing UPS chassis platform and truck structure.

“We’re in a situation now where it doesn’t matter if you want to buy new or used, there’s a propane option for you, and we like that because we can now begin to target industries,” says Perkins, noting how engines for this application are also readied in the aftermarket.

Online grocer Peapod launched a pilot program with engine supplier Power Solutions International (PSI) in 2012. In the first phase, four delivery trucks with 4.8-liter engines were converted to run on propane and natural gas. PSI delivered fully integrated, drop-in powertrain solutions customized to Peapod’s trucks, with transmission, fuel tanks and recommended fueling strategy. The companies then unveiled a 6.0-liter delivery truck last year at the Alternative Clean Transportation Expo.

Perkins says Peapod is now running about 25 vehicles on propane.

“With more than 23 million grocery orders delivered across 24 U.S. markets, we are committed to making our fleet as ecofriendly as possible,” said Andrew Parkinson, Peapod president and general manager, in a press release soon after the project launched.

With OEM and aftermarket options in place for the step van market, the propane industry can turn its focus to selling customers on the benefits of propane over other fuels, Perkins says. That involves appearing and speaking at other industry shows and conferences.

But Perkins adds that the propane industry and PERC have a responsibility to educate marketers on how to call on these new types of customers.

“In the step van case, we really want to make sure propane marketers understand what we’re doing and why it works, and we want to make sure the step van industry is understanding it,” he says.