Startup Series: Forum Mobility
Today's guest is Matt LeDucq, CEO and co-founder of Forum Mobility, which is working on the problem of heavy-duty trucking electrification, starting in California with the drayage sector.
There are essentially two types of trucking. The first is long-haul or "over the road" which transports goods over long distances. If you've ever done a cross-country road-trip, the semi trucks on the interstates you see are long-haul trucks. And then there are drayage trucks. These trucks take large cargo containers from sea ports to distribution centers (and back and forth). Their typically short distances and repeatable patterns make them especially good candidates for electrification. Drayage trucks are relatively densely clustered and predictable, which helps when it comes to planning the EV charging infrastructure that can provide the amount of power these trucks command. It also turns out that California has some aggressive emissions reduction regulations coming online that will dramatically escalate the transition of drayage trucks from diesel to electric.
Matt and Cody have a great conversation about the pending California regulations at play, as well as the history of clean air regulation around trucking. They also talk about the air quality issues surrounding most ports and the environmental justice issues that these regulations are aiming to address. They cover how the vast majority of drayage truck owners are independent operators and the financial burden that these regulations place on them. And, of course, they talk about Forum Mobility's product offering and company history, in addition to Matt's deep background in renewable energy. There are loads to learn about electrifying the trucking industry in this episode. Enjoy!
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Episode recorded on October 18, 2022.
In this episode, we cover:
[3:19] The current regulatory world of decarbonizing the trucking industry in California
[6:59] The role of environmental justice and dangerous emissions around ports
[10:17] Challenges for independent truck owners and small businesses in meeting new regulations
[14:32] Geographic differences in the drayage model
[16:28] Incentive programs that help bridge the financing gap
[18:19] Forum Mobility's solution
[27:21] The company's business model
[30:17] An overview of the charging infrastructure needed for drayage trucks
[33:11] Matt's background in solar, construction, and electrification
[36:41] Where he sees the company growing
[38:18] How policy tailwinds can expand Forum's future business
[42:13] Funding to date and how Matt sees funding moving forward
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Jason Jacobs (00:01):
Hello everyone, this is Jason Jacobs.
Cody Simms (00:04):
And I'm Cody Sims.
Jason Jacobs (00:05):
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Cody Simms (00:15):
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We appreciate you tuning in, sharing this episode, and if you feel like it, leaving us a review to help more people find out about us so they can figure out where they fit in addressing the problem of climate change.
Cody Simms (00:40):
Today's guest is Matt LeDucq, CEO and co-founder of Forum Mobility, which is working on the problem of heavy duty trucking electrification, starting in California with the drayage sector. I didn't know anything about drayage before speaking with Matt, and I don't want to give too much of a spoiler here in my intro, but it turns out that in trucking you have long haul or over the road trucking, which is transporting goods over long distances. If you've ever done a cross country road trip, the semi trucks on the interstates are long haul trucks. And then there are drayage trucks. These trucks take large cargo containers from seaports to distribution centers, and back and forth, and back and forth, and back and forth. These typically short distances and repeatable patterns make them especially good targets for electrification as they're relatively densely clustered, and predictable nature is a good thing when it comes to planning where to build EV charging facilities for them that can provide the amount of power that these trucks command.
(01:37):
It also turns out that California has some aggressive emission's reduction regulations coming online that should dramatically escalate the transition of drayage trucks from diesel to electric. Matt and I have a great conversation about the pending California Air Resources Board regulations at play, as well as the history of clean air regulation around trucking. We talk about the air quality issues surrounding most ports, and the environmental justice issues that these regulations are aiming to address, on top of the climate change in greenhouse gas emission issues. We also talk about how the vast majority of drayage truck owners are independent operators, and the real world financial burden that these regulations place on them. I could literally see the future political talking points playing out during our discussions, and these are very real and very difficult considerations. We talk about Forum Mobility's product offering and company history in addition to Matt's deep background in renewable energy.
(02:28):
I'm grateful to Matt for coming on the show and hope you enjoyed the discussion. Matt, welcome to the show.
Matt LeDucq (02:33):
Thanks, Cody. Good to be here.
Cody Simms (02:35):
So, normally I wouldn't do this with a startup because every startup absolutely is building a business that stands on its own no matter what, but, with Foreign Mobility, it seems like you have some incredible regulatory tailwinds that are starting to blow your way. And from the reading I did on them, it feels like understanding the scope of those regulations actually might help all of us get our heads more around the business that you're building and the opportunity in front of you. So at the expense of jumping straight into wonk, I wonder if you could take a minute here at the outset and describe what's going on as it relates to California and decarbonizing the trucking industry.
Matt LeDucq (03:19):
Yeah, it certainly is a regulatory world that we live in at Forum Mobility. Everybody's probably seen what California has done around mandating the sale of electric vehicles. Furthermore, they've mandated that certain fleets start to convert, and that those fleets are essentially based on their carbon and NOx emissions. There's one particular segment of the fleet that's gotten a lot of attention, and justifiably so, in California, and that's drayage, and that's what we focus on. What California is doing is they're trying to pull the oldest and dirtiest trucks out, and they're trying to pull those out, in the case of drayage, out of communities that have, historically, the worst air.
(04:02):
Drayage is the movement of those containers out of the port to the distribution center. If you've been to the Bay Area, or if you're down in LA around the Long Beach LA Port Complex, you'll see all those containers on the backs of those trucks, moving your containers to the Walmart, Amazon, Target, Nike distribution centers, et cetera. What happens there is that around those ports, you have these choke points, where there's 33,000 trucks in California registered to do drayage. Those trucks are going in and out of these terminals at the port. They're going through these really congested areas, and the Air Resource Board, or CARB, or ARB, as it's called a lot in California, has really focused on this. Governor Newsom in California mandated that drayage turn over, 100%, to zero emission by 2035. Moreover, that it starts turning over vehicles starting in 2024 on a mandated basis, so thousands of vehicles will be forced to become zero emission as dictated by the age of the engine.
Cody Simms (05:07):
Do I understand that with drayage, a truck actually has to be registered as a drayage truck to enter into these ports in the first place? So you essentially have a choke point on what trucks can even go in and out of these places, is that correct?
Matt LeDucq (05:20):
That's exactly right, Cody, yeah. If you are Cody Simms Trucking, you would have to register your truck with the Air Resource Board, or ARB, in California. And once you're on that drayage registry, you are allowed to go in and out of ports.
Cody Simms (05:36):
Is that for security reasons? Or what's the underlying rationale for that? Do you have a sense?
Matt LeDucq (05:41):
It started, to the best of my knowledge, around the 2008 Clean Truck Plan. Back in 2008 was the first wave that the ARB started to force older and dirtier trucks. If you remember, when I was a kid in California, the belching stacks of trucks down the 880 freeway in Oakland where I was born, that was really commonplace. What the ARB started, and I don't know when they started the drayage registry, but I know the drayage registry first had the hammer thrown down on old dirty trucks back in 2008, and that's when they said anything that was a 1997 model engine or older had to go, that it couldn't go in the port. That was in direct response to all that particulate matter coming out and going into West Oakland and Wilmington and whatnot.
Cody Simms (06:26):
And so step one was trying to reduce smog, and step two is trying to reduce carbon emissions then, it sounds like is the playbook. I don't know if they've been intentionally following, but where they found themselves today.
Matt LeDucq (06:38):
That's right. And so, starting next year, if you have a 2009 model engine or older, you won't even be able to access the ports. And then, under the proposed Clean Fleet rules, that's one of the ARB's programs, is that starting in 2024, all the trucks that fall off the registry have to be replaced by zero emission trucks.
(06:59):
And again, I'll give you a crazy stat, we had an intern dig up a few stats on air quality and this was the one that stuck out in my mind as being something that really was pretty sad to hear is that if you live in Wilmington, California, which is the community directly next to the Port of LA and Long Beach Complex, you have a 98% higher likelihood of contracting cancer than if you live in the broader LA basin. And that's with 17-20,000 trucks going in and out of that area every day, idling, waiting. And if you've ever gone down to that complex, you'll see the thousands and thousands of trucks just waiting. That's what the ARB and the Governor's Executive Order have been fighting to mitigate is that really bad air quality that happens in and around the ports.
Cody Simms (07:46):
That is absolutely awful, and obviously good to hear that there are changes afoot. It sort of underscores to me the dual role that environmental justice and emissions reduction or climate change often play where they have kind of separate goals. The environmental justice goal herein being let's remove air quality that is poor, locally, meaning the smog has a distribution footprint of it that is causing cancer-causing particulate matter to go into the air. And then the emissions problem is a global problem, right? It doesn't matter if the CO2 or the methane or the NOx is emitted in Long Beach or in Buenos Aires, it's causing a problem no matter what. But it's interesting to hear that this plan is presumably trying to solve both of them. I imagine there are some tensions between those two, as often tends to come up. Is that indeed true?
Matt LeDucq (08:41):
Yeah. This is a really interesting issue, let's put it that way, is that it's absolutely appropriate in every way, shape and form to have clean air no matter where you live in the year 2022. So West Oakland, Wilmington, they are entitled to clean air. The flip side of that is that when you look at that drayage registry, those 33,000 trucks, 80% of those trucks are owner operators. They're independent truckers, and so we have thousands and thousands of small businesses in this state. This holds true for every state. The vast majority of dray operators are very, very small mom and pop shops. And a lot of those mom and pop shops, they saved up, they bought a truck, they went independent, they run their own business, and they like it that way.
Cody Simms (09:29):
How much does a typical tractor trailer cost?
Matt LeDucq (09:32):
Well, until recently, you were looking at 40-50,000, and that's since doubled in advance of some of these regulations that anybody who can get an in-compliance truck, those are running up in value immensely these days.
Cody Simms (09:44):
And what is a zero emissions tractor trailer going to look like it will cost?
Matt LeDucq (09:49):
MSRP, between 350 and $450,000. It's a wide distance between these two trucks. When you think about the mom and pops out there who saved up, they bought a truck, they often bought a truck in response to the last Clean Truck Program in 2008, and so they got themselves maybe a 2009 truck, and they've run a successful business.
Cody Simms (10:14):
The typical life on these is 20 years, give or take?
Matt LeDucq (10:17):
800,000, a million miles or so, so it depends on how much you're driving it, but they get worked a lot and they can be used for a long time. And yeah, these small businesses have gone out, they've built a business, they've been running containers and doing that for a long time, and now they're being forced to convert. And so, what you see now is that when you read about the dray operators who are converting, it's the big well capitalized groups. It's NFI, it's TTSI, and there's these big port trucking operators who have a bunch of analysts, they have capital, they're riding through this transition. And what's going to happen if there isn't a program, an incentive structure, and some well thought out regulatory incentives, is that what happens in a lot of transitions is that the little guy gets left behind.
(11:11):
On one hand you have this environmental justice force of clean air in and around the ports and the collective need to decarbonize, you have that really fighting the economic justice. You have a lot of small businesses who have done a great job building up their book and making a living, and now they're being forced. This isn't an optional conversion at this point, they're being forced. And who do you think has the oldest and dirtier trucks? It's usually the least capitalized. In California, it's a really tricky problem because we need it, the environment needs it, but we also need to do right by the folks who are running the small businesses and moving our goods in supply chain.
Cody Simms (11:49):
Trucks, from an emissions perspective, are a significant amount of tailpipe emissions. So we've got, I think, vehicle tailpipe emissions, something like trucks are less than 5% of total vehicles on the road, but a quarter of the tailpipe emissions broadly, is that right?
Matt LeDucq (12:06):
Yeah, I've seen 25, 30% of emissions are coming out of the heavy duty side of things, so they're, yeah, big contributors.
Cody Simms (12:13):
And then these drayage trucks, which again, are responsible for unloading anything that comes into the country through these ports of call and actually getting it to distribution centers, are doing a lot of miles because they are the front end of any goods that are coming into the United States through the ocean, essentially.
Matt LeDucq (12:30):
They're doing a lot of miles. They're not doing nearly as many miles as those over the road trucks, which is actually why we at Forum Mobility on the battery electric side like them is because they do a lot of hours, let's put it that way. If you're a drayage truck driver, you're doing a lot of hours. You're waiting, you're sitting at the port, you're moving containers, but you're going back and forth a lot. And those lanes are sometimes a couple miles, and sometimes if you're taking goods out to the Inland Empire, they're 60 or 70, but they're not the 3, 4, 500 mile days that some of those over the road truckers need to run every day to make their business work.
Cody Simms (13:04):
And most of them, I presume, are basically traveling just to wherever main distribution centers are, whether it's via air or via rail or via other trucks. Is that the extent of where they go and then they head back? Which again, like you said, from an EV perspective, I presume, makes it easy to anticipate where they're going to need energy and power.
Matt LeDucq (13:24):
Yeah. You can actually, if any of the listeners want to pull up, and you could pull up like Tracy French Camp Manteca, and you could pull up Ontario, and just Google Amazon Distribution Centers and start zeroing in, and you will see the millions and millions of square feet of centralized distribution centers that sit in cities like Lathrup, California or Ontario, California. They're really consolidated, which is good. I mean, that's why a lot of truck drivers like being drayage operators is that it's an opportunity to drive a truck and make a living, but also be home every night, which obviously over the road, truckers don't get to do that, but the dray operators get to go back and forth and be home with their family at night too. It's an appealing way to make a living for a lot of drivers.
Cody Simms (14:11):
Awesome. All right. Thanks for setting that context for those of us who aren't deeply involved in both the trucking industry as well as California regulation. And I assume this model isn't just California, we're talking about California regulation, but this model is anywhere there's a major port in the United States, tends to work according to this drayage model. Is that a correct assumption?
Matt LeDucq (14:32):
Yeah, and all ports have their correlating distribution centers. In California and the West coast, geographically, it's acutely consolidated, you have mountains and freeways that push you towards things. I mean, New York is a little bit more spread out where those containers go out of the Newark ports. The West Coast specifically has a really good back and forth setup, geographically, and from a freeway standpoint as well. But this model holds true everywhere, from Jacksonville to Savannah to Houston to Newark and so on. You have containers that come in, and those distribution centers are somewhere within a half a day's drive, at the most, from those by and large. And the same, the independent operator, the owner operator makeup, is also very similar all over this country, these are not large fleets that move our goods in and out there. They're independent truckers who hook up with logistics firms to get their work.
Cody Simms (15:28):
So we're dealing with a setup here where, at least starting in California, these often independently owned and operated trucks that are doing heavy local miles are going to need to start to swap out these vehicles that they bought, however long ago, could have been a decade ago, that may still have half their life left. They're going to need to start swapping out these vehicles that maybe they were buying for 40, 50, $60,000. Today, if they bought a new one, they may be upward of 80,000, and replacing them with zero emission vehicles, which to me, it means an electric semi truck, which doesn't wholly exist yet today, but this is supposed to be starting to happen in the next year and a half, if I understand correctly. And these trucks are currently going to be retailing for north of $350,000. How in the world does that happen? I assume this is where Forum Mobility starts to come into play. So maybe if I've articulated the problem correctly, maybe then jump in with, okay, well, what are these folks going to do?
Matt LeDucq (16:28):
Well, the good news is the trucks do exist. They don't exist in the scale and size that we need yet, but we're actually getting our first three trucks delivered next week to a facility in Long Beach, which is really, really exciting for our small startup of a company. We're going to have our first trucks moving goods in and out of the port of Long Beach here very shortly. But how do we bridge this gap? The good news is there's a way to do it, and there's a way to do it economically, that the MSRP of the truck is dramatically assisted by the ARB through a series of programs. The most prominent program is called the HVIP Program. It's the Heavy Duty Voucher Incentive Program, and that pays for about half the capital cost of a truck. So, the 350, $400,000 truck is then brought down to 200, $250,000 or so, which is more in line with a brand new diesel. A brand new diesel is 150, $200,000 as well. We're kind of reeling it back in.
(17:21):
And then you have the cost to operate on the electricity side, is already pretty favorable, especially with diesel at six bucks a gallon. California, also, the ARB has a program called the Low Carbon Fuel Standard Program, or LCFS. And then you start stacking, there are so many programs, Cody. I mean there's 28 different incentive programs from the California Energy Commission, the New Investor Inflation Reduction Act, the IRA, has some transferable charger tax credits. There's just a whole bunch of incentives that are not exactly easy to get, but when you start stacking them up and you pool these things together, you can deliver a truck that is fueled, with maintenance in a secure lot, for less, in many cases, than a diesel truck today. So that MSRP tag, as big of as a gap as it is, when you look at it on a total cost of ownership and you bring in third party capital, it starts to work quite well.
Cody Simms (18:19):
And so is this Forum Mobility's role? At least I kind of understand it in two parts, which is one, you help these truck operators secure access to these new vehicles and manage all of these government programs for financing and rebates and this, that and the other. And secondly, you then actually have created the charge point infrastructure as they're going from A to B, to A to B, to A to B, that helps them power their trucks and have a relationship with you where they know they can come in and get their trucks charged. Am I horribly butchering what your business is?
Matt LeDucq (18:52):
No, you got it pretty close there. At our core, is that we are building a network of charging infrastructure, and that charging infrastructure, we are building it for a specific market. And so there's a reasonably good analogy here to kind of contextualize what we do is that we are building a network, just like Verizon has built networks, and oftentimes Verizon gives you an iPhone to use on their network. Verizon wants the network, and at the end of the day, that network is the core to that business, and that subscription to that network is the core of that business, and that phone is a vehicle into that network. Our phone, in our case, is a class eight vehicle. We provide that vehicle in many of these early cases. In some cases, there are companies who want to go out and buy their own vehicles, which we think is great. And there's OEMs who have their own leasing functions, which is the right source of capital for that.
(19:42):
At the very end of the day, our job as a company is to make this transition accessible to anybody. However, if they have pride of ownership in the truck, great, we'll help you figure out how to do that. There are additional programs where you can swap an old dirty truck for a new clean truck and get an exorbitant amount of money. We can help with that. And so, at our core, we want to build that network that you can go with your containers between those ports and those distribution centers.
Cody Simms (20:10):
We're going to take a short break right now so our partner Yin can share more about the MCJ membership option.
Yin Lu (20:17):
Hey folks, Yin here, our partner at MCJ Collective. Want to take a quick minute to tell you about our MCJ membership community, which was born out of a collective thirst for peer-to-peer learning and doing that goes beyond just listening to the podcast.
(20:28):
We started in 2019, have since then grown to 2000 members globally. Each week, we're inspired by people who join with differing backgrounds and perspectives, and while those perspectives are different, what we all share in common is a deep curiosity to learn and bias to action around ways to accelerate solutions to climate change. Some awesome initiatives have come out of the community. A number of founding teams I've met, nonprofits have been established, a bunch of hiring has been done, many early stage investments have been made, as well as ongoing events and programming like monthly Women in Climate meetups, idea jam sessions for early stage founders, climate book club, art workshops, and more.
(21:06):
So whether you've been in climate for a while, or just embarking on your journey, having a community to support you is important. If you want to learn more, head over to mcjcollective.com, and click on the members tab at the top. Thanks and enjoy the rest of the show.
Cody Simms (21:19):
All right, back to the show.
(21:21):
If I'm an owner operator, and I've got three diesel trucks to my business right now, and I am going to move over to this model, I want to understand who the early adopters are that are moving into this model. But it sounded like it's if your trucks are maybe hitting retirement age, you're going to be forced to go to this model. If they're not, I guess you may want to sell them quickly because they're going to rapidly depreciate, or at least that may be the assumption that my diesel powered truck is going to start to lose value, definitely in the drayage space in California, but maybe even over the road over the next decade or so. I don't know if people are necessarily thinking that far ahead yet on the value of the truck side of things. Curious to hear your thoughts on that. I'll be quiet with my speculation. I'll let you jump in and answer, I guess that.
Matt LeDucq (22:03):
If you're sitting on a 2010 truck today, at Cody's Trucking, you're going to make a decision whether you want to quickly get into a compliance diesel. You have about 14 months left to do this, under the proposed rules from the ARB that are forthcoming. Do you want to go get yourself a 2016 diesel and buy yourself a few years? That's an option that a lot of people are taking. Alternatively, do you want to jump into the zero emission world and test out a model like ours?
(22:31):
And if you do that, you have two options with that truck. What happened during the last clean truck transition in 2008 is a lot of those trucks went to other states that don't have the rules that California has. A lot of California diesels ended up in Nevada, Arizona, Texas, New Mexico, places like that. That's likely what will happen to a lot of the non-compliance trucks, they're going to make their way into another state that doesn't have our restrictions. But yeah, that's what you'd be facing right now if you were sitting on some 2009, 10, 11 trucks is, am I going to give the zero emission thing a try? Or am I going to get into a compliance diesel and sell my truck down in Texas?
Cody Simms (23:08):
So because these are small businesses, they're not making this trade off based on some net zero commitment they've made, whatever, it's a mom and pop shop. They're making it, sounds like, mostly based on a combination of total cost of ownership, of what's the residual value of this thing, this asset I have right now, versus the future, and trading that off with the cash flow of the economics of diesel fuel versus the economics of paying you or another charge point operator to help me continue to charge these vehicles, assuming I can finance them at an appropriate rate, and maybe take the cash flow from the sale of the vehicle and put it toward this program. Am I loosely understanding the economic trade offs people are making?
Matt LeDucq (23:47):
Yeah, and I think there's something called the beneficial cargo owner that plays an important role. I mean, this is another thing that we really focus on as a company. And so the BCO, the Beneficial Cargo Owner is the Walmart, the Amazon, the Target, the Nike. Those are the ones that own that cargo, and they have a lot of ESG goals. They have a lot of published goals, and this is scope three, and this is something that is kind of the next frontier. And so, equally to creating awareness about our value proposition in the trucker market, we need to be collectively, as a community, spreading the news to those cargo owners, because they have a hand in this too.
(24:27):
There is a point when a large cargo owner out there is going to put out an RFP and say, "Oh, by the way, we have a strong preference towards zero emission," or "We will break all the ties for zero emission," or "We will give you 10 points on this 100 point selection scale if you are zero emission." And as those cargo owners start to show up in support of this market, I think it'll help the small businesses, who are appropriately skeptical, that they feel comfortable jumping in. That's a big piece of this too.
Cody Simms (24:58):
Some of these companies you mentioned are as big as governments, and net zero claiming for them is very real, it affects their stock price and like in many cases. Do you see them starting to offer incentives to their small business partners who need economic support to continue to make the transition?
Matt LeDucq (25:18):
I see them trying to figure out how they're going to start creating incentives. I think everybody is, one of our board members was telling me, I think there was 48 class eight electric trucks in the United States at the beginning of the year in total. And so I think a lot of these large cargo owners are wanting to see a validation, which we're all going to have. We've already started to see that these are performing well, that the drivers do like them. Anybody who's bought a zero emission truck that we've talked to is thoroughly enjoying it.
(25:48):
But justifiably so, if you're moving 500 containers a week out of the port, you want to make sure that you are mandating something that is going to work. And that's going to happen, and I think it's one of those things that has become more in this case, and that as more trucks move containers, and as the cargo owners and the trucking operators and the outfits start to see the success of this, it's going to make people feel a little bit more comfortable saying, "I want all these shipments done zero emission," or "I have a strong bias towards that."
(26:18):
I think we're starting to see it as more and more trucks, as we get our first trucks, as a few folks who work similar to us get their first few trucks. And I think it's on us to also make sure that we spread the gospel about the success of those trucks in that we get our operators out there talking about how it's been going with moving goods in a battery electric truck, because I think that gives everybody a little bit more comfort. Everybody is justifiably a little bit nervous about this right now.
Cody Simms (26:45):
Yeah, imagine the first retailer who can legitimately claim that this good has been delivered to you with zero emissions. That doesn't feel particularly close yet, but I guess it's getting closer every day.
Matt LeDucq (26:57):
Yeah, there's a lot. You have ships that go across the Pacific Ocean, you have trucks that move goods out of the ports, you have trains that move goods out of the port, you have the yard trucks that move the containers around the yard at the distribution. There's just so much to do in that scope three world, still yet to happen, but it's coming and it's going to be measured, and it's a really, really important metric for everybody to start getting a handle on.
Cody Simms (27:21):
And so then back to your business at Forum Mobility, so the business model itself is that these trucking companies are paying you, then, a subscription fee, if I'm understanding correctly? For access to charging? Are they actually getting a tractor trailer from you as part of that? What's the overall package tend to look like?
Matt LeDucq (27:43):
Yeah, I mean, again, if you're Cody's Trucking, one of the things I would go to you and say is, what lanes are you running and how much are you running freight? And there's a right truck for that, there's trucks that can go a couple hundred miles a day, and a lot of drayage operators need that. And there's trucks that go a hundred miles a day and they have a smaller battery and therefore they're less expensive. And so, putting you in the right truck, and then our model is that we deliver a truck with maintenance in a secure yard that is fully fueled every single morning or evening, whenever you choose to pick that truck up, for a fixed price.
Cody Simms (28:15):
And is that truck titled to you? Or is it titled to Cody's Trucking?
Matt LeDucq (28:19):
It's titled to Cody's Trucking. We're going to provide that truck and then you have to title it, you have to insure that truck, you have to have your DOT and a bunch of registration numbers associated with it. But we can provide the truck and the service at a fixed price and give you some certainty, what's your next three or five years look like in terms of your operating expenses to plan your business around.
Cody Simms (28:38):
And how did you decide in that regard to be the service provider for trucks, as opposed to trying to be a giant fleet operator in this world yourselves? It feels like that was a conscious business decision that you all made.
Matt LeDucq (28:51):
I think that at the end of the day, we have to figure out what we're good at as a company, and what our customers are good at. Our customers are good at scheduling freight and working with beneficial cargo owners, and working with brokers, and optimizing their truck routes, and hiring either drivers or operators. That's what they're really good at. We're really good at building infrastructure. The team has collectively built over $20 billion worth of infrastructure that we have. We've EPC'd it, developed it, we've constructed it, we've engineered it, procured it, EPC, we've developed it, we've financed it. That's what we're good at, and I think that's what this needs. When you think about a partnership, you think about putting people who have complimentary skills together. In our case, we're not good truckers, and we don't plan on being particularly good truckers, but we do plan on being extremely good asset operators and optimizers. I think that's a really good niche for us to fill.
Cody Simms (29:48):
And then I would assume large fleets, like owners who have a dozen or more trucks, may be contemplating buying their own charging facilities at their storage yards for their trucks. I don't know if that's the correct assumption, but your answer is, yeah, but if you have one or two or three trucks, then you're not going to pay to manage your own charging station, nor is that what you want to spend your time dealing with. Is that also a correct way to think about the problem and the overall set of solutions that you're providing?
Matt LeDucq (30:17):
Yeah, I think that as this all starts and really gets going over the next couple years, I ran distributed generation at NextEra for quite a while, and I can tell you what we talked about at the very beginning of every, we were investing about 500 million a year in distributed generation assets. And without fail, real estate was always the killer of a project in credit. And so, if you're trying to put chargers at your facility, you're probably on a lease, you might not be on more than a five or 10 year lease. You're trying to amortize this equipment, you're trying to get a contract with the utility to probably upgrade your service. People don't really appreciate what 450 KW chargers means in terms of, that's a lot of power.
Cody Simms (31:03):
You're basically building a power plant on your property, aren't you?
Matt LeDucq (31:06):
Yeah. And we've seen it already where a lot of trucks are actually available today, a lot of battery electric trucks, because they were sold to people who wanted to do what's called behind the fence charging. They went out to go explore behind the fence charging, they figured out what a mess it was, and those trucks were then canceled. It's just hard. It's hard to build that. It's hard to get the real estate rights. It's hard to monetize incentives.
(31:31):
Again, I think there's a huge role for behind the fence, and especially at the beginning if you're a small trucking outfit and you have the right real estate rights and you have the right setup. Knock out the low hanging fruit, because that might be the lowest hanging fruit if you have the culmination of easy ways to transact there. But really quick after that, it's going to have to go to third party depots.
(31:52):
I'll just give you a quick stat. Of those 33,000 trucks, you need about two and a half gigawatts of charging infrastructure to be built if all of the drayage structure are going to go battery electric over the next dozen years or so. And Diablo Canyon was just extended in California as a lifesaver at 2.2 gigawatts. And so, the immense amount of charging infrastructure that is going to have to get built for just drayage, and that doesn't count all the box trucks.
Cody Simms (32:18):
Just drayage in just California? Just to make sure I understand.
Matt LeDucq (32:21):
Yeah, it's insane how big the charging infrastructure world's going to have to be. And like I said, that doesn't count all your Uber fleets, and your box truck fleets, and your beer distributor fleets, and your municipal fleets, and all the fleets that are going to convert.
Cody Simms (32:36):
And the residential consumer vehicles that are going to convert as well.
Matt LeDucq (32:40):
Well. Yeah, it's going to be a big couple decades for our friendly utilities in California to get out ahead of a few things.
Cody Simms (32:48):
You've mentioned your background at NextEra. Let's talk about you, let's talk about your team, how did you get into this business in the first place? We usually start with the founder journey, but again, I wanted to really start with the stage setting here, but you've been in the solar world for, gosh, almost two decades I think, and now we're in the trucking and electrification world. So maybe help us understand how that journey got you to where you are.
Matt LeDucq (33:11):
I started off in 2003, at a company called Power Light. I was an Installation Supervisor, and was up on the roof putting panels in, and spent most of the first half of my career on the construction side. Before that, I had been a construction worker.
Cody Simms (33:25):
Who is installing solar panels in 2003? I'm curious who your customers were.
Matt LeDucq (33:29):
I will tell you. Walmart was one of my very first customers. We did a whopping 40 KW system in Aurora, Colorado. We did Sony and Disney Picture Studios. I did the County of Alameda. My very first project was the Moscone Center in downtown San Francisco. It was way back when, which by the way, at that time, and the reason why this electrification transition is so exciting for us, is that when I was hearing about how the funding for those projects were coming together, it's very akin to what's happening now, is that there was some CEC money over here, there was some PGE money over here, there was some county of San Francisco money over here. There was all these forcing functions to help make something economic and you had to grab a pot of money kind of left, right, and center to make these things work and synthesize that together. And it's not too dissimilar today in electrification.
(34:22):
You have all these disparate incentive pools, and that's what was happening back in 2003, 4, and 5, when I was schlepping solar panels around Northern California. I worked my way through in construction. I ended up at NextEra about 10 years ago at this point, and spent a long time there, and just, I think it's probably the single best run company I've ever been a part of or been around, and I loved the time there. I got into the development and investing side there. It was about three years ago when I saw this electrification space and it just felt a lot like when I started in solar, and I felt like I, maybe arguably, had enough competency to take advantage of it myself. And as an opportunity, I have a couple partners, Topher Wood, Tom Dotson, and Bobby Batista, who are incredibly more competent than I am, and we thought this was a really fun opportunity to stand something up.
(35:16):
We hired Rob Kelly who runs our sales organization, he was a co-founder of Amply. We hired Kim Oster, who is a former head of Latin America and Chief Strategy Officer for Cypress Creek. And we've continued to add a lot of folks. Ron Hunt is heading up our Southern Cal, he's a drayage guy. We've put together a really, really cool team, a mighty team of eight, so far, and we're going to double that in the next year or so.
(35:43):
Yeah, we just felt compelled. I will just say that there's a time that you know that if you don't do something, it's going to stick with you for the rest of your life. It was about a year and a half ago that Topher Wood and I were sitting around having that exact conversation. We need to do something. What the hell are we going to do? What the hell does drayage mean? And then a year and a half later, Forum Mobility is this now.
Cody Simms (36:05):
I know that feeling, for sure. It feels almost unfair to ask what's next because there's so much blocking and tackling in, sounds like, such a incredible opportunity, just in following this California drayage path over the next five plus years. But where do you see Forum Mobility growing? Assuming you get that to a point where it's operationally cranking, and we are replacing diesel vehicles with battery electric zero emission vehicles on a daily basis, where do you see the business expanding into over time?
Matt LeDucq (36:41):
In the near term, our job is to execute, this is kind of a cliche, but I mean, we just have to build good assets and operate them over the next couple years. But, there's nothing about our business model that is specific to drayage. We're focusing on drayage because we can focus on the regulatory, we can focus on the incentives, and we can focus on the customer base that we think has a big impact. But there is absolutely nothing about our business model that can't be replicated in other areas of electrification.
(37:05):
And so, taking the playbook from NextEra, is follow the policy ,and that's what we will do. We will continue to lean in on the policy side of things and we'll figure out where there's going to be a market where we can create value. Because at the end of the day, we will go where we can create value for our customers. We think that that's the only way to scale a business and operate a good business is if we can put people into a vehicle that's going to put money in their pocket, and so that's where we're going to go. And whether it looks like Forum Marine or Forum Waste, or Forum, whatever it is, that's where we will take the business after we get this thing right here.
Cody Simms (37:41):
Follow the policy feels to me like such the opposite of advice you hear people give startups. Maybe not really, maybe the advice that they tell people not to follow is don't look at startups that are dependent on policy happening. But I think what I'm hearing from you is, there is already so much policy tailwinds here that you're building a moat for yourself and you can be one step ready for each next new domino that falls in policy to keep expanding and growing the business. I'm curious, you said this is the NextEra Playbook, maybe unpack that a little bit for me. I'm really interested to hear more about that.
Matt LeDucq (38:18):
Well, I think anything to do with energy starts at the policy level, and that, in this case, happens at the state level. Again, I mean, we look for scale of policy and we look for scale of programs, and then we look for those programs to create an environment where we can create an economic value.
(38:36):
Again, I'll use an analogy of Sunrun, before they showed up with a PPA, it was just a bunch of solar panels that cost 15 grand, and somebody had to explain how that was going to make money. And then Sunrun came, and they sold 14 cent PPAs, where there was 18 cent avoided costs, and that made a lot of sense at that point. Follow the policy is a playbook from NextEra, and it was really just you, as we know, the states often drive energy policy, whether it's a renewable portfolio standard or in our case like the Low Carbon Fuel Standard program.
(39:08):
And so for us, I mean, I don't think we're the typical startup. We are more akin to a renewable developer in terms of the way we're going. And so, if you see a shifting market, if ERCOT is going to restructure itself in a way that makes standalone storage good, so go get the best sites and the interconnects before that happens. It's not too dissimilar from the way we think about our business and whether it's ISO design or it's state policy, it's knowing what's going to happen and where you think the tailwinds are going to occur and then trying to get there before everybody else gets there.
(39:41):
And so when I say the NextEra playbook is, make sure you spend your time on that stuff, make sure that you understand that stuff, because at some point you're going to need to make a bet, and if you're going to make that bet by the time the policy is in place, you're probably too late. And so, that's what I meant by policy.
Cody Simms (39:58):
How do you stay on top of it as a small startup? Do you have a policy lead on the team?
Matt LeDucq (40:04):
We have eight policy leads, and actually we all think about it a lot. It's really, really important. We've been fortunate enough to have Adam Browning join us, an independent board member and policy consultant.
Cody Simms (40:14):
Adam is who put you and I in touch together, so that's fantastic.
Matt LeDucq (40:16):
He's like a 19th degree black belt in renewable policy and just an incredible person. Kim Oster, we've also brought Will Mitchell on to run origination for us. He spent about seven years at Recurrent heading up policy. He's since moved into development, and origination role. All of us had some background in it, and it's just really important that we track it. It's really important that we work with agencies like CALSTART, or groups like CALSTART, which is kind of like the [inaudible 00:40:45] of electric trucks, and leverage whatever resources we possibly can to stay on top of it. But it's too much for us to handle at this stage going, so we're really focused on a couple states in addition to California, but there's no way we can stay on top of everything right now.
Cody Simms (40:59):
Well, thanks for sharing all of that with us, and I think that's an interesting takeaway for any founders who are listening to this who maybe don't have the depth of background and experience that you bring to this space. Not necessarily the trucking space, but the energy space, is just to think about how you bring that skill set into your toolkit as a founder in terms of being really on top of where the policy winds are shifting. Especially what we've seen happen, I think, in Federal policy with the Inflation Reduction Act is just the tip of the iceberg, proverbially, because continued state and local policy is only going to be in all of our futures. At least that's the hope, and seemingly reality right now.
(41:41):
Well, Matt, you all raised a seed round, or you announced a seed round fairly recently, led by Obvious Ventures and Homecoming Capital. You had a few other participants in there, like Edison International and Overture Ventures. Maybe share a little bit about how, you mentioned, hey, we don't really necessarily look like a typical startup, we're almost more like an energy development company. How do you think about achieving scale in a way that drives venture type of returns? And do you see venture capital being a continued lever for the business as you grow?
Matt LeDucq (42:13):
Venture was a great place to start and we needed to do that for some very specific reasons, and we wanted to do it with somebody like BB, who I've known for going on 15 plus years. I mean, just having him as a partner in the business, and Pat and Cody at Homecoming have been incredibly helpful investors. So just bringing them into this was just, in general, a great thing to do.
(42:34):
Going forward, Venture isn't going to be the way the business is funded. There's going to have to be a couple different types of financings. We're in the midst of those as we speak right now, and I think we are really fortunate to be in a place where we have a lot of excited capital both on the private equity and infrastructure side and on the corporate equity side. And so, I think that with the IRA, the Inflation Reduction Act, and state policies, there's a lot of capital going towards this. I think the terra watts announcement with a billion dollars with Vision Ridge was great for the segment. EQT backing Fulterer is great for the segment. There's plenty of capital, Macquarie going into inspiration mobility. There's some really good capital and investors pushing more infrastructure and private equity capital into the space. And so, jumping on some permutation of that is where we will be next. And it's pretty exciting time because I think people see this transition being renewables 2.0.
Cody Simms (43:34):
Well, Matt, I super appreciate you coming on today and sharing your story with us and with the audience here. Anything I should have asked that I didn't? As well as, any asks for help that you have for people who are listening who might be interested in what you're working on?
Matt LeDucq (43:47):
I can just tell you one thing, that I am so invigorated to be not out of renewables, but into electrification in this space, and I think that there's going to be an awesome opportunity for talent to make its way over into this. I hope that any of your listeners that are curious about that jump in this space hit me up at LinkedIn and whatnot. I think it's just going to be a pretty amazing next couple decades. I'll just go back to this environmental versus economic justice friction that is happening here, is that, I think, the more minds we have thinking about these policies and these programs, the better we're going to be, because this is the exact moment where people can get left behind. We're really concerned about that at Forum, but I think we need more people working and concerned about that, because these transitions, as great as they are, there are unintended consequences and we're on the cusp of one of those now.
Cody Simms (44:44):
Thanks so much for your time and for that parting thought. I think that's a really good thing for people to leave today's conversation thinking about, and thinking about how they might be able to get involved. So Matt, thanks for sharing what you're up to Forum Mobility with us.
Matt LeDucq (44:57):
My pleasure. Thanks for having me, Cody.
Jason Jacobs (45:00):
Thanks again for joining us on the My Climate Journey podcast.
Cody Simms (45:03):
At MCJ Collective, we're all about powering collective innovation for climate solutions by breaking down silos and unleashing problem solving capacity. To do this, we focus on three main pillars, content, like this podcast and our weekly newsletter, capital, to fund companies that are working to address climate change, and our member community, to bring people together as Yin described earlier.
Jason Jacobs (45:25):
If you'd like to learn more about MCJ Collective, visit us at www.mcjcollective.com. And if you have guest suggestions, feel free to let us know on Twitter @mcjpod.
Cody Simms (45:40):
Thanks, and see you next episode.
