In this episode of the McKinsey on Start-ups podcast, McKinsey senior editor Daniel Eisenberg speaks with Carl-Magnus Norden, the founder and executive chairman of Volta Trucks. An edited transcript of their conversation follows.
Daniel Eisenberg: Hello and welcome to McKinsey on Start-ups, I’m Daniel Eisenberg.
If you have noticed what seems to be even more delivery trucks crowding streets these days, you’re not alone. Ecommerce was already growing at a healthy, rapid clip before the pandemic, but COVID has further fueled society’s shift to online shopping. Whether idling at the curb or slogging through traffic, those commercial trucks are a major source of the emissions and pollutants that contribute to global warming. And while automakers such as Tesla have begun to bring electric cars into the mainstream, that kind of sustainability revolution has yet to take hold in the commercial trucking sector.
Carl-Magnus Norden is one of the people trying to change that. Norden, a serial entrepreneur who has previously worked across Europe in everything from real estate to Internet services, is the founder and executive chairman of Volta Trucks, an electric truck manufacturer and services provider based in Sweden, France and the UK. Over the last few years, Volta has developed its Volta Zero, which it describes as the world’s first purpose-built, full-electric, 16 ton commercial truck, designed specifically for freight distribution in city centers. Norden’s goal isn’t just to improve the sustainability of cities, but also the safety of their streets and the truck drivers themselves.
We are excited to have Carl-Magnus Norden on the podcast today. Carl-Magnus, thanks so much for joining us. What is the problem that you’re trying to solve with Volta Trucks?
Carl-Magnus Norden: We’re building an electric truck with new services, what we call Truck-as-a-Service. The problem that we’re trying to solve is, first of all, CO2 emissions, but also a lot of other pollutants in the cities. NOx, noise, vibrations, and things like that make life in the cities uncomfortable or less safe.
We are also finding that there is a big driver shortage in the industry. We’re trying to make the driver profession and work environment for the driver healthier, safer, and nicer. Also, in many cities around the world, accident rates between trucks and pedestrians and bikers are horribly high.
So in London, 4 percent of the traffic are trucks and they are involved in 78 percent of fatal accidents with bikers. That is horrible. Can we mitigate some of that?
Daniel Eisenberg: Your Volta Zero is focused on the last-mile delivery inside city centers, right? It’s not about long-haul trucking.
Carl-Magnus Norden: Exactly. We’re very focused. We’re only electric. We are only city center distribution. And we’re also only midrange—between 7.5-ton and 19-ton.
Daniel Eisenberg: You talk about the Volta Zero being the first purpose-built, all-electric commercial truck. What is different about your approach to this problem from traditional trucking OEMs that might be looking at the same space?
Carl-Magnus Norden: The big existing manufacturers understand the trend towards electric, and that CO2 reduction is important. But they are obviously more stuck in a legacy design.
The advantage of being small is we have been able to start from a blank sheet of paper with electric drive as the base, which means that we have our motor on the rear axle. We have the batteries within the ladder frame under the box, which means that we had complete freedom to redesign the cab. That’s the big difference from anybody taking a legacy design of the normal truck that you see in the cities, which is based on the combustion engine.
The diesel engine is a big piece of metal. The gearbox is another big piece of metal. You want to maximize the load space so you push this forward, which means that you have this big piece of metal in the middle of the cab. And you basically design the cab around it.
For distribution traffic that is very bad, because drivers have to get out of this truck some 15, 20, even 25 times a day. Most of them of course climb up the ladder, but they typically jump down. So after a few years in the business, many drivers have problems with knees, hips, and joints. It’s also due to this big piece of metal in the middle. Drivers always have to exit the truck into the traffic. We’re taking away this big piece of metal, which means that we can put the driver in the center of the cab, being able to exit on both sides.
If you look at our design, we have maximized the glazing to minimize the blind spots, because the high position in a normal truck creates blind spots in front of the truck, on the curbside of the truck. The best is direct eye contact between the driver and the pedestrian and the biker. And the best eye height of the driver is really the same as a normal pedestrian or biker. So the ideal should be somewhere 170, 180 centimeters off the ground, and that’s where we position our driver.
Daniel Eisenberg: I’ve watched some of the videos of the prototypes and it’s really quite a stunning, futuristic-looking vehicle.
Let’s talk briefly about your past experiences and how they led you to founding Volta. Obviously, you’ve worked before in the electric vehicle space.
Carl-Magnus Norden: I’ve been a serial entrepreneur for more than 30 years. Some of the ventures have been quite successful, and some less so. But the important thing is you learn something from everything you try.
From my point of view, if you want to launch something new you have to see some new trend or something changing in the market, and that’s where you should start. In this case the starting point was really when Elon Musk launched the Model 3, which was the 1st of April 2016, and we all know what happened, with hundreds of thousands of orders in a few weeks’ time.
The whole car industry came to the car show in Paris in September of the same year and said, “We should do something with electric cars.” So the car industry started to listen and move. Now we see more and more of these coming to the market with the normal four or five-year development cycle. On the truck side, much less has happened. And I think the more I learn about the industry, the more I understand why it’s taking time.
Basically, I would say that we all have this globe together. And obviously with climate change, it is not going in the right direction. I think nobody is doubting that CO2 emissions have an impact on this.
When you listen to politicians, they often say, “We should do something.” But they talk about 2030 or 2045 or, something like that. I think there is an opportunity to do something much faster.
Our thinking is, come to the market as quickly as possible, have an impact as quickly as possible. Every truck that we replace, we make a little bit of a contribution. If you go from one to ten, it’s ten times more. If you go to 100, it’s 100 times more. And hopefully in the thousands.
Start small and try to make an impact—that has been our mantra from the beginning. And that is leading us to our development methods. We are not a research project. We are not something that maybe in ten years’ time will work or will not work.
We try to use technology that is best-in-class, but existing and proven so we could come to the market as quickly as possible. Over time of course we can develop this much more.
But short term, the idea is to get trucks in the depots of customers as soon as possible. Then of course as an entrepreneur you have to see whether this can make sense from a business point of view. That is something we have tried to test with customers from very early. And I think we have got a very good reception. So we’re quite confident that this will be a sustainable and good business.
Daniel Eisenberg: When you look at the wider e-truck space evolving, do you feel that the traditional players are moving fast enough given what we’ve just talked about regarding climate change?
Carl-Magnus Norden: No, definitely not. So far nobody in this industry has kickstarted or built a catalyst for change. But I hope that every one of the big OEMs, our competitors so to speak, will go into electrification much quicker than they’re doing.
Electric vehicles are obviously something that they don’t know very well. And they are not very good at producing at the moment. Also any e-truck that they are selling is cannibalizing a diesel truck, and so on. So I think I understand very well why they go slow.
It’s also a fact that for most of them the biggest part of their business is long-haul, which I think is still less viable with electric. Also, as you probably know, a lot of their revenue and their profit is from after-sale services, such as service and maintenance and spare parts. Since electric has much less moving parts, there will be less need for all of that service. In that sense as well, selling an e-truck is cannibalizing a very good profit stream for them.
So they need to rethink a lot of their business model. Obviously they also have to rethink and retool their engine or motor factories, and figure out retraining personnel, the sales organization, the service organization, et cetera. All of that creates an opportunity for us. But I hope, as I said, that they will follow as quickly as possible.
Daniel Eisenberg: In terms of Tesla and electric cars, how does the e-truck space differ from the general electric vehicle market?
Carl-Magnus Norden: You read the statistics that a normal car is only used 3 or 4 percent of the time. Trucks, however, are a working tool. They need to work every day, 300 days a year or something. If your Tesla or electric car or any car is not working one day, in some cases you have a second car. You can take the bus. You can take the metro. You can take a taxi. But if a truck is not working, that is lost revenue from the first minute. The stakes are higher for the customers than for a car buyer.
That accounts for some of the reluctance to move away from a technology that most fleet operators know very well, from a diesel fleet, to an electric fleet with quite a lot of unknowns—battery capacity, charging time, battery lifetime and all these things. So there is a natural reluctance to take that perceived risk. And that is what we try to mitigate with our Truck-as-a-Service concept.
Daniel Eisenberg: You talked about the OEMs generally being somewhat tradition-bound. I’m wondering if that applies also to the folks who do the trucking, the fleets or the operators, and if that makes it at all hard to break into with a fundamentally different approach?
Carl-Magnus Norden: That is one of the most positive parts of the experience launching this business. I have launched several businesses and I have never had this level of support from customers. Many of them really want to help.
The starting point for that is we have a common goal. We will bring down the CO2 emissions, and hopefully we can make a dent in global warming. Then of course we have to explain why this is good for them, what the advantages are, how we can mitigate the risks. But I think we have developed quite a holistic view.
Something I’ve learned over 30 years of being an entrepreneur is to try to go out and talk to the customers as early as possible in the process. So when I had this idea the first thing I did in Sweden was go talk to the major fleet operators and get their input. And that’s how I learned about the driver shortage, how I learned about the after-sales service and uptime questions.
Then when we started to focus on the bigger cities in Europe, like Paris and London, I did the same talking. And even when we developed the design we had customers coming in to give feedback and of course be engaged from an early stage. That is something we’re trying to pursue all the time.
Now we are looking forward. We’re going to do a test series and beta versions and so on. Because the key is getting the product into customers’ hands as quickly as possible for them to learn, but of course for us to get feedback for our process, to learn how can we improve. There are probably lots of improvements we can do over time, but we want to do them together with the customers.
Daniel Eisenberg: I would assume that there’s also a push coming from the retail customers that they deal with whose interest in sustainability is growing. To what extent are trends in regulation around emissions and sustainability fueling your journey, especially of late?
Carl-Magnus Norden: Well, it is definitely important. In Europe, Paris has a diesel ban as of the 1st of January 2024. That is definitely making them more alert to alternatives.
Paris has largely gone the route of banning diesel vehicles, while London is leaning more toward the route of making it more expensive to drive them. And right now, it appears that the ban has more impact. If that is short-term or long-term, I don’t know. Of course, there are also subsidies from governments. All of that helps, no doubt.
But especially over the last year, I’m meeting more and more customers who are saying, “We have made our own internal targets.” You know, “By 2025 we should have reduced so-and-so much, or we should have replaced our fleet.” It’s not only the customers’ customers, the retail chains, et cetera. It’s even the operators themselves. And then of course in the end, it comes from the public, putting some pressure on the retail chains who put some pressure on upstream. In the end, luckily enough, it helps us.
Daniel Eisenberg: What about the increase in online shopping and corresponding package deliveries? I would assume this continuing shift is an additional driver?
Carl-Magnus Norden: Of course overall e-commerce is good, it’s more convenient for people. In the short-term, it is increasing the number of deliveries, especially with smaller trucks.
In Europe, there is a dividing line at 3.5-ton. Below that, you can drive on a B license like any car driver, and above that is a truck license. As there is a shortage of these truck drivers, the easy way out is to buy two or three smaller trucks and simply have more people driving around, which creates more congestion.
We are seeing more and more customers and cities coming to us and saying, “Okay, how do we change this pattern? Can we drive with a 16-ton truck or something to a point in the city, where a cargo bike transports for the last mile or kilometer?”
Over a few years’ time I think it will stabilize, and we will have a fewer total trucks going into the cities, but each may be a little bigger.
Daniel Eisenberg: Let’s talk about the economics briefly, the total cost of ownership (TCO). Are we close to a point where you won’t pay a premium for electric trucks? And how is that changing? Is it more advanced, lower-cost materials to balance the relatively high battery costs? What else is driving that equation?
Carl-Magnus Norden: As you say, battery prices are of course a big factor. If you look at the last few years, battery prices have come down quite significantly.
So the capital cost in the beginning is higher. But obviously electricity is cheaper than diesel, and there is less maintenance. We will have a fully connected truck, so we think we also can get lower insurance premiums. We will have driver training. With a skilled driver driving the electric truck, you can save 25 percent, 30 percent on your energy bill. So there is quite a lot of improvements to do.
In our business case, we want to be fully TCO competitive by 2025. In some cases, such as where there are subsidies in the cities, we can already beat the diesel TCO today. Also since diesel prices are higher in Europe than in the U.S. because of taxes, we will become cost competitive a little bit earlier here. So there are many factors. And of course as we grow we should be able to reduce prices and costs because of economies of scale.
Daniel Eisenberg: How much a challenge is charging stations long-term? I think your model is that one charge should suffice for a day or a certain amount of the day’s deliveries. But is that an issue that you have to plan for longer-term? And how do you plan to address it?
Carl-Magnus Norden: Our concept is back to base. Basically the truck is coming back to the depot or the base in the evening. It’s then loaded during the night or the early morning hours, and then the driver is making his tour during the day.
So the charging infrastructure should be in the depot. Right now in most markets, the trucks are standing still for eight hours, up to ten hours, a night. For that reason, slow charging, 22 kilowatts an hour, is good enough. In some cities like Stockholm, you’re not allowed to drive distribution traffic between 10:00 in the evening and 6:00 in the morning. You have to be standing still.
Of course with lower noise levels from trucks like the Volta Zero, maybe that could change and operators could have a night shift as well. In principle, that would be better for the cities in terms of congestion. Some of our customers have done studies of distributing during the night. And they say they can increase the efficiency by as much as 70 percent.
That would of course require faster charging, but right now the norm is slow charging and the infrastructure in the depot. In our business case I don’t see any shortage of charging infrastructure, I don’t think it will have a big impact.
Daniel Eisenberg: Let’s talk a little bit about what you guys call the Truck-as-a-Service model or TaaS. Tell us how you think this will help fleet customers and how this asset-light strategy helps Volta Trucks in terms of competing in the e-truck space.
Carl-Magnus Norden: It all comes out of my initial research, because the first question I got was really the price. And the second question following very quickly was, “How is your aftersales service?” As I said before, uptime is key for these customers.
So we are saying, “Okay, what parts of a service offering already exist?” The insurance is of course a market already. Financing is a market already. Even when it comes to tire changing or glass changing and things like that, that’s an existing industry. We don’t have to create an industry there. We can work with very good partners.
But when it comes to the drivetrain, the batteries, the motor, et cetera, that’s new. We think there is nobody else out there that is as professional at that. That is what want to do ourselves.
How do we do it? First, we have to set up our own service centers. And setting up pan-European or global or pan-U.S. service networks is obviously a very big job.
But the beauty for us is that the distribution traffic, say in Paris, is very predictable and concentrated. The trucks are driving more or less the same route every day, year in, year out, and the industry in the bigger cities is quite clustered.
Northwest of Paris, for instance, you have a center of logistics companies in a place called Gennevilliers, and in the south you have the food industry around the food market. So to be close to our customers we can set up two service centers.
It’s not that one of these trucks are going to take off to Lyon or to Marseilles or something so we have to service them there. That is a benefit of the structure of the industry, which means that we can be the closest to our customers. And our ambition is definitely to have the highest service level in the industry.
Daniel Eisenberg: Does this model enable Volta to tap into new small or medium enterprise (SME) customer bases by supporting them in their electrification journey?
Carl-Magnus Norden: Yes, sure. The ambition with the financing part of TaaS is that customers pay a monthly fee over a long-term period, not a big capital purchase day one and then amortization or depreciation of the asset. We’re looking at a seven-year contract period, but a predictable monthly charge. And that of course offloads some of the risk for the smaller companies that don’t have quite as strong balance sheets.
Daniel Eisenberg: Earlier this year, you completed a Series B funding round. What do you think was key for achieving this milestone? And what does it mean for Volta Trucks going forward?
Carl-Magnus Norden: Well we have to say that we have quite strong tailwinds when it comes to global warming. But also quite a lot of the investment community is starting to see that ESG investments, more sustainable investments, have a future. It’s not a “nice to have,” it’s almost a “must have.”
With timing, you have to launch a venture early but not too early. I think over the last year or year and a half during COVID a lot of people’s mindset has changed. They understand better that sustainability is something that we have to work on all together.
Daniel Eisenberg: Was it particularly challenging to do your fundraising during the pandemic? I wondered if perhaps some investors would like to have an up-close view of a prototype or the technology, and that might have been impossible to pull off.
Carl-Magnus Norden: That is correct. We launched our prototype or running demo in September of last year. And we could show it in the U.K. because it’s built in the U.K.
But we couldn’t take it over to the continent. So in March of this year, we said, “We have to show it around.” Since then, we have been to Paris, to Madrid, Barcelona, Milan, and up to Germany, Frankfurt and Munich.
And it was kind of a game-changer when people actually could sit in the truck, see what we talked about. It meant more on the customer side than on the investor side, but definitely that has been very important for us.
Daniel Eisenberg: Just to clarify, what is the timeline and delivery schedule for actually getting the Zero out in the market?
Carl-Magnus Norden: By the end of this year we will have built 25 vehicles; eight of them are actually going to customers, and the others are for internal testing. The first eight are not going to go into regular operations right away. It’s much more about getting the customers to see it, the drivers to drive it, and of course for us to get a lot of customer feedback.
That is the first step. Then by the fourth quarter of next year we should start serial production, and by the end of next year, our planning is to have about 100 trucks with customers in operation. Then we will be scaling from there; by 2023, our ambition is to have about 5,000 trucks out on the road.
Daniel Eisenberg: Are you targeting specific cities in Europe? Or is it fairly broad? And is the U.S. or parts of Asia in your longer-term plans?
Carl-Magnus Norden: As I said, in the beginning we want to build our own service centers. Also, from an impact point of view, the bigger the cities, the bigger the problems they have. We also want to have a diesel critical mass in each city where we set up. So we start with London and Paris. We have now already decided to go to Madrid, Milan, the Rhine-Ruhr area in Germany, and the Flemish Diamond, so Amsterdam and Rotterdam.
We want to be operational there by 2023. Then 2024, 2025, we’re looking at the U.S., where there are obviously some very big cities. As for Asia, we have not focused that much on it yet.
Daniel Eisenberg: Yeah, those should be more than enough to keep you busy. As a lifelong New Yorker I would say that the city is particularly ripe for this kind of product. Since the pandemic started, we have experienced growth in deliveries and truck traffic and subsequent safety problems, such as pedestrian and bicyclist deaths.
Just reflecting a little bit on your journey so far, Carl-Magnus, what have been the biggest challenges to scaling that you’ve had to overcome?
Carl-Magnus Norden: Well of course if you have customers wanting your products you have to produce.
So the next question is obviously where should we produce our trucks? We are now in the final stages of selecting a partner. But similar to when I talked about the supply chain generally, there are other people that have done this for a long time. They’re probably even better than we would be. Particularly when you take into account time to market, it is clear that we should go with a contract manufacturer, somebody that already has produced vehicles, done the installations, and has the necessary buildings.
Daniel Eisenberg: As an early-stage entrepreneur experienced with trying to disrupt big players in a long-established industry, do you have any advice for other entrepreneurs attempting something similar?
Carl-Magnus Norden: Well, coming back to what I said before, I think there should be an underlying change taking place. I mean, if 15 years ago, I had wanted to start a new diesel truck company, I honestly think that even with the best ambitions I would not have been very successful.
The big ones have big machinery, and as long as the road is relatively straight, the machinery works well. They are very good at fine-tuning that machinery. The diesel engines have been improved over the years and years and years, with lots of very good engineers doing incremental improvements. But the more they know about it, the more resistant they are to change.
And they simply aren’t as good at the big shift, when it comes to really big change in the environment. So it’s this change of the industry that is the embryo to be able to sneak in there and make an impact.
Daniel Eisenberg: Right. You need an external shift to help with your own disruption really, something seriously shaking up the playing field, so to speak.
Carl-Magnus Norden: Yeah. And also, when I started this it had to have a potential impact big enough to get me excited, if you see what I mean. This is an all-in. But if we are successful, we can also have an enormous impact. And that is challenging and hopefully rewarding.
Daniel Eisenberg: Speaking of impact, do you have a longer-term vision for where you see Volta Trucks, say five, ten years from now, what you’ve achieved by then?
Carl-Magnus Norden: In our space, as I said, we are quite niche. But I think in our niche we have definitely the possibility to be become a global leader. And we hope to be a little bit of a catalyst for the rest of the industry to go in a more environmentally-friendly direction.
Hopefully then we should still be close to our customers. We should try to find solutions and make products and services that service our customers as well as we can. And I think if we have that focus, we will continue to be successful and continue producing trucks more and more and saving the environment at the same time.
Daniel Eisenberg: Are there different kinds of innovations, technical or otherwise, that you can foresee down the road in the electric vehicle space, the e-truck space, or specifically for Volta? I don’t know how long it will take for medium- to long-haul trucking to shift to some kind of electrical base, for instance.
Carl-Magnus Norden: I think right now the technology, the battery technology, is good enough for short range or short-medium. We’re talking about up to 200 kilometers a day, which is more than enough for most of our customers.
If you then go to the medium-range, I think the only way that that can be serviced is with the battery technology improving. I do think we will see an enormous development of battery technology over the next few years. I compare it a little bit to semiconductors. We know what has happened with that over the years. The market has grown. Prices have gone down. And technology has developed. So I expect something similar with the battery technology. And that is obviously the base for longer and longer distances. Personally, I don’t believe in electric roads or in-motion charging or things like that.
I think we’re trying to build in in three phases. The first one is really what you have seen, the design, the comfort for the drivers and the safety for everybody around it. That takes us a couple of years down the road. After that comes the development of our service model, like a lot of other as-a-service products, and I think the market will see that this is much better than what they are used to.
Sometimes I compare this with when I was into internet services 20 years ago. When you launched an internet service, you didn’t know if you would have one user the day after or 100,000. So the big question was how many services should we buy. Today that’s obviously not an issue anymore. And I think it’s the same thing with what we are doing. So I think the service model, when the customers really see how much better it is for them, will be a big strength for us.
In the third phase, I think the data that we are generating can mean a lot of improvements for our customers. I mean, Tesla has a fantastic database. But they have mainly from home to the office to the gym to the shop and home, basically. If we have 100 trucks or 200 trucks in London, we will have the specific data for distributing to every shop. So we have a unique dataset for distribution traffic in the bigger cities. And our trucks will be basically a running data generator. We will have data from cameras and sensors outside of the truck, into the truck, the driver behavior, into the box, and of course the machinery of the truck for preventive maintenance. So with that data correctly matched with the weather data or seasonal data, et cetera, I think we can improve the distribution in our cities enormously for the benefit of our customers.
Daniel Eisenberg: Yeah, I could envision that data being a major source of innovation not just for yourself but really for logistics and the delivery business generally, for customers and retailers in terms of how to become more efficient in all sorts of different ways.
Carl-Magnus Norden: Even having a big impact on food waste, for example. I mean, the food industry obviously accounts for a big amount of distribution traffic for cities. And for frozen food, the cold chain is very important. You cannot have a pallet of hamburgers standing on the loading bay for half an hour in the sun in the summer. By giving the data between the shop and the truck much more precisely, we can shorten these intervals and improve the efficiency, the economy, and also reduce waste.
Daniel Eisenberg: Well, Carl-Magnus, I’ve taken up much more time than we had originally said we would. I want to thank you for speaking in such depth about your business, about Volta Trucks, the Volta Zero.
It’s a fascinating space, which I think is going to impact all of us over the years.
Carl-Magnus Norden: Okay, very happy to talk to you, and thanks for your good questions and your time.
Daniel Eisenberg: Well, that’s our podcast episode. I want to thank our great McKinsey on Start-ups production team—Molly Karlan, Polly Noah, Sid Ramtri, Myron Shurgan, and Katie Znameroski. And finally, I want to thank you, our audience, for listening. We hope you’ll return for future episodes.