The Financial Viability and Sustainability Benefits of Using Cargo Trikes Instead of Vans for ‘Last-Mile’ Logistics in London in the Age of Online Shopping

Abstract

Up to 10,000 people die every year in London because of air pollution, a growing proportion of which is caused by emissions from diesel vans delivering goods ordered online. Local authorities have the power to solve the problem but most of them are not acting quickly enough to introduce measures that restrict and reduce access by commercial vehicles to town and city centers. Until they do so, morbidity and premature deaths from air pollution will continue to rise in step with the increase in van registrations and the inexorable rise in online shopping. The aim of this study was to determine if replacing vans with electric cargo trikes (ECTs) is feasible for deliveries in the “last-mile”, the final segment of the delivery chain. My main research question asked if the economic, environmental and social benefits of using ECTs instead of vans are sufficient to induce local authority policy-makers to promote their adoption and use, even if the financial benefits do not accrue to the local authority itself. I hypothesized that a cost-benefit analysis (CBA) model would show that ECTs are more financially viable than vans, particularly if the cost of providing a centrally-located transfer hub is subsidized by a third party. Data to address the research question were obtained by contacting companies, individuals, government departments, trade associations and others. Additionally, interviews were conducted at conferences in London, Oxford and Vienna. The data were input to a CBA spreadsheet that linked operational, environmental and social costs to a set of independent and derived variables. The model was set up using a full-cost accounting framework to calculate key financial appraisals and valuations of health and environmental impacts of one ECT and one diesel van operating in London over a seven period (2018 – 2024). The model was run to calculate changes in gross profit and net present value (NPV) under different operating conditions. A total of 11 different scenarios were modeled by varying the values in the independent variables sub-set. The financial, environmental and social impact of changes in average fee receivable per package delivered, changes in package size, changes in speed of travel caused by traffic congestion, and changes in delivery address density were among the metrics examined. Sensitivity analysis for variations of +/- 25% on baseline values was conducted in order to establish which variables had the greatest impact on gross profit and NPV. Results showed that riding/driving time, package drops per stop, and vehicle days per year were among the most critical for profitability. The baseline scenario, using best estimates for independent and derived variables, showed that ECTs are on average 3.1 times more profitable than diesel vans, that they reduce environmental costs by a factor of 19.4, and reduce health and social costs by a factor of 11.8. The main implication of the thesis is that premature deaths from exposure to diesel emissions from vans could be reduced by 91.5% if local authorities were to introduce measures that lead to the replacement of the van fleet with ECTs in the last mile.