Frito-Lay/PepsiCo Cashes in On Electric Truck Subsidies

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Frito Lay Electric Truck

Last week Frito-Lay, the $12 billion snack foods division of PepsiCo, boasted it would add 10 all-electric delivery trucks in Orlando, Fla., as part of its plan to deploy 176 such vehicles in the U.S. and Canada by the end of year.

As is custom with corporate announcements that proclaim their eco-accomplishments, so as to pacify persistent climate alarmists, Frito-Lay said the vehicles would emit “zero” pollutants from tailpipes and release 75 percent fewer greenhouse gases than diesel. The ETs (electric trucks) can allegedly run 100 miles on a single charge, and Frito-Lay says the groundbreaking new haulers provide “a long-term economically viable solution” – apparently to solve global warming.

Regular readers of NLPC should know the Chevy Volt sticker price, before the $7,500 tax credit, is $41,000, and for the Nissan Leaf it’s $35,200. So the cost for an electric delivery truck must be somewhat higher, right? And you’d think that Frito-Lay, and any other company that undertakes an electric truck program to meet its distribution needs, would go to great expense for a much heavier and larger electric transporter than the Volt and Leaf, correct? 

Not so fast, Sparky. 

While it is certainly true the electric trucks (ETs) are more expensive, that doesn’t mean Frito-Lay is footing the bill for them. Yes, astute NLPC reader, you’ve figured out who's covering the bill: taxpayers. 

Yesterday NLPC reported the story of Kansas City-based Smith Electric Vehicles Corp., which was launched in the U.S. after a British company by the same name fell upon hard times. Smith Electric-U.K. was part of The Tanfield Group, whose cash evaporation led the company to lose 97 percent of its value in 2008 and prompted investigations by the London Stock Exchange and by the U.K. Accountancy and Actuarial Discipline Board. As Tanfield floundered, Smith Electric-U.S. launched in early 2009, and despite its youth, inexperience, and no revenues, won a $10 million grant from the U.S. Department of Energy for its ET demonstration project. Less than nine months later, DOE gave Smith Electric another $22 million. The boost from U.S. taxpayers – which aided Smith-U.S. efforts to raise private funds – enabled the company to purchase its British counterpart, thus easing the burden of investors in Tanfield over their massive losses.

Now Smith-U.S. has moved forward with its ET program. Other than Frito-Lay, recognizable companies also using their trucks include Coca-Cola, DHL, and Staples, plus a few U.K. businesses. Despite the multi-billion dollar resources of those corporations, taxpayers have been called upon to subsidize their electric truck experiments.

Since April 2010 Smith-U.S. has filed six quarterly reports that are viewable at the Recovery.gov Web site. The company reported that through September 30 it had placed 240 trucks into service under the program, and had received $14.7 million from Recovery Act funds. Of that, Smith reimbursed its customer companies nearly $13.7 million for taking the ETs off its hands. That averages out to just over $57,000 per vehicle. How much each truck specifically costs – or is subsidized – is unknown, as neither Smith Electric nor Frito-Lay answered inquiries by NLPC about the program. But the New York Times reported – based upon information it received from a company representative – that the trucks range in price from $100,000 to $150,000, depending on battery pack size. 

As for financial offsets, Smith’s Web site reveals other clues about how much its clients benefit from government program subsidies. Among the incentives Frito-Lay and others can enjoy are:

·      Alternative Fuel Infrastructure Tax Credit – up to 30 percent of the cost, not to exceed $30,000, for equipment placed into service in 2011 (the credit was 50 percent and $50,000 in 2009 and 2010)

·      Qualified Plug-In Electric Drive Motor Vehicle Tax Credit – between $2,500 and $7,500 per truck, based upon battery capacity and gross vehicle weight rating

·      EPA Diesel Emissions Reduction Act (DERA) Grant – Incremental cost of a replacement vehicle up to 25 percent of the total cost of the vehicle

·      Clean Cities Grant – Varies across U.S. cities, up to 50 percent total cost of the vehicle

·      Congestion, Mitigation and Air Quality Funds – Varies, federal money disbursed to states, which is then distributed to localities based upon air quality

And those are just the goodies that flow down from the feds. The individual states also have their giveaways and rebates, which Smith also keeps track of for prospective customers. For example, New York has five different programs that electric truck owners can benefit from. And considering that New York City is as appropriate an urban setting as any for Smith’s sales pitch, the company capitalized on $6 million in state and city incentives for itself, to build an assembly facility in the South Bronx.

Despite the probable minimal cost (and possible net profit) for its participation in the electric truck program, that didn’t stop Frito-Lay from boasting about its altruistic dedication to ecological responsibility.

“The electric vehicle program builds on a long-standing commitment by Frito-Lay North America and its parent company PepsiCo to environmental sustainability,” said Mike O'Connell, senior director of fleet for Frito-Lay North America. “With the seventh largest privately owned fleet in the U.S., we have set a goal of becoming the most fuel efficient fleet in the country, and these vehicles give us an opportunity to use the latest advances in transportation technology as a significant way to reduce our environmental impact.”

Easy to say when you have a large percentage of the cost of your 176 trucks paid for by taxpayers. Still, Smith Electric feels like it needs to make the case that electric vehicles deliver a “lower cost of ownership” and “less expensive to deploy and maintain” for corporate fleet managers. CEO Bryan Hansel and his fellow executives push the trucks for urban delivery routes, which presumably fall far short of the 100-mile range of the company’s Smith Newton modelAccording to the company Web site, “Smith’s vehicles are designed for predictable route, depot based operations.” That means, if your drivers follow the same path every day, and your warehouse is centrally located within the core of an urban center, then the Newton is ideal. But they still need an eight-hour overnight recharge to make it through the next day, and make sure drivers don’t leave them idling for long!

And Smith Electric utilizes the battery technology of another heavily subsidized Recovery Act recipient, A123 Systems. NLPC reported last week about that company’s recent layoffs, despite having received $415 million in state (Michigan) and federal grants for its projects.

But as observers of the Recovery Act disbursements should realize by now, the intention of President Obama’s clean energy programs is to create thousands of “Green” jobs. Outside of the $13.7 million Smith Electric has rebated its customers for their purchases, the company says it has received $1.26 million from the Department of Energy for “development.” Based upon its Recovery Act reporting, Smith claims it has created 5.19 jobs that are attributable to public support. That’s $242,774 per job.

So there’s plenty of electrified Christmas joy to go around, thanks to U.S. taxpayers. A fledgling company with an economically unviable technology is hatched in the Midwest (Smith Electric-U.S.). Investors in that company’s failed British counterpart (Tanfield Group/Smith Electric-U.K.) receive financial relief as a result. Other unproven new companies get government-subsidized customers for their inefficient products (A123 Systems). And multi-billion dollar conglomerates that don’t need the help get free delivery trucks (Frito-Lay/PepsiCo). 

Kinda criminal, isn't it?

 

Paul Chesser is an associate fellow for the National Legal and Policy Center.