Tevva’s decision to merge its operations with little-known US company ElectraMeccanica has underlined the challenges the new start-up manufacturers face as they seek to gain a foothold in the ultra-competitive global truck market. 

tevva motors

Only time will tell if the Tevva merger with ElectraMeccanica secures the long-term future for the UK-based truck builder. The deal certainly throws the business a lifeline boosting its cash reserves and giving it a much-needed boost to accelerate its growth. It’s clearly a step in the right direction.

Tevva announced it had secured full series type approval earlier this year, though we understand money has been tight since and you can count the number of vehicles it has delivered to customers on the digits of two hands. There is clearly much work to do be done, and for ElectraMeccanica, you would hope, much potential to be unlocked. The long-term plan looks promising with a five-year plan to build a business turning over up to $1.5 billion, which would indicate sales volumes of approximately 6,000 trucks per year by 2028.

The merger announcement, which was issued last week, confirms Tevva’s focus on delivering trucks for UK customers, before a market development to Europe and the US. ElectraMeccanica has recently opened a new facility, double the size of Tevva’s plant at Tilbury, in Arizona and you’d have to expect a big chunk of that planned sales volume will come from unlocking the market in the US.

Tevva’s decision to merge, underlines the precarious nature of the start-up truck builder – you need volume, scale and plenty of money. Despite the best pump-priming efforts of governments throughout the world to give markets a boost, particularly in the US, zero emission (at the tailpipe) truck sales throughout the world (with the exception of China) are tiny. More worryingly, judging by the forward order books announced by Volvo, Renault and Scania recently, the appetite for battery electric vehicles is softening in Europe, at least.

Obviously, given the complete market transition ahead, this is a short-term effect, indicating the initial burst of trial vehicle orders are now in service and the next wave of sales uplift is a couple of years away. At which time fleets will be starting fleet replacement cycles in advance of the end of sale dates for diesel vehicles in 2035 and 2040.

Establishing a foothold in the world truck market is a very costly business, causing the new entrants to burn cash at an alarming rate, and it’s clear the legacy players aren’t going to stand aside and warmly welcome the new entrants into the market.

In its latest earning update Nikola, for instance, explained it has reduced its quarterly cash burn to $140 million in the second quarter of the year, down from $150m. Tevva’s burn rate will be a tiny fraction of that, but when you are spending more than you are earning, you need trusting (and wealthy) shareholders to keep the dream alive.

Furthermore, establishing a market position requires a reliable product capable of challenging the legacy truck builders, this isn’t easy. Earlier this month Nikola announced a recall of its battery electric vehicles, following a truck fire at its headquarters in Arizona, further underlining the challenges of bringing a new truck to market.

By the way, according to Iveco, the batteries Nikola has used in the US are different from the ones used in the European versions, so there is no recall required of the handful of Iveco battery electric tractor units currently doing the demonstration rounds.

In the grand scheme of things vehicle recalls are nothing new, many new truck (van and car too, for that matter) launches run into a few snags, requiring the manufacturer to issue an alert for owners to bring the vehicles back to the dealer for an update. But it is costly and does impact on the reputation of the vehicle. When you don’t have a running business to rely on for cash flow, it’s a further drain on reserves.

Establishing yourself from scratch as a volume truck builder is going to be a long-haul and, as we’ve said before, investors will need to be patient and the management teams resilient – we’re only at the start of the journey. In the short term, there’s probably more money in the niches, and we’ve been very impressed with the progress at UK truck assembled Electra, quietly building a strong reputation for high value bespoke applications. Whether this is sustainable for the long-term is a matter of opinion, but it’s one to keep your eye on…

Stay abreast of all the latest carbon zero truck developments by registering to view our Carbon Zero Vehicle Index

Get involved in the decarbonisation conversation and comment below (scroll to the bottom of the page). We are keen to hear your thoughts and feedback

Andy Salter has spent most of his 30-year working life in and around the commercial vehicle and road freight sector building up a depth of knowledge and expertise. A former editor of TRUCK and Commercial Motor magazines, Andy is a previous Chair of the International Truck of the Year jury and is now managing director of DVV Media International the owner of Freight Carbon Zero. He is passionate about helping the industry prepare for a carbon zero future.View full Profile

More from Andy Salter.