Interview Clean Logistics: Hydrogen challenge to Daimler + Co.

First of all, I would like to clarify a term around Clean Logistics: we are not a startup! We are established entrepreneurs who have understood their business for decades. I am a logistics expert myself, and in 2017, as CEO of HARY AG, I asked myself how the logistics industry can position itself to be competitive in the long term. At the time, it quickly became apparent in the wake of the diesel scandal that CO2 neutrality was the key. However, in discussions with representatives of the major truck manufacturers, I realized that it was precisely these large corporations that were not in a position to initiate the necessary changes. Just a few years ago, sales representatives of the major commercial vehicle manufacturers ignored the issue of climate neutrality with an arrogance that, in the light of today's situation, has to be described as negligent. We at Clean Logistics recognized this discrepancy early on and focused on viable hydrogen solutions. We can convert buses and trucks to be completely climate neutral. In doing so, we take a modular and incremental approach. That means we can work with all current vehicle types and respond to new technology and innovation - a product cycle in the auto industry lasts about seven years. You cannot expect the revolution we need today from these companies.

After realizing how ignorant the traditional auto industry is towards new technologies, I decided to solve the problem myself. During this time, I met Dirk Lehmann, who is the co-founder of Clean Logistics SE. Dirk Lehmann is a shareholder in Becker Marine Systems, the leading supplier of energy-efficient rudder systems for ships, supplying almost all major shipping companies worldwide. Dirk Lehmann is a very experienced engineer with a soft spot for alternative propulsion systems and is involved with E-Cap Mobility GmbH, among others, with whom we also work.

After founding Clean Logistics in 2018, we quickly received confirmation that our project was eligible for funding. We subsequently built prototypes, the last model of which is nearing completion in our factory hall. We have intensively studied the technical possibilities surrounding hydrogen and have designed our approach to have the greatest possible flexibility when converting vehicles. The hydrogen bus we delivered to Uckermärkische Verkehrsgesellschaft in the summer shows that this fundamental decision was precisely the right one. The time between order and delivery was less than a year. We adapted the technical equipment of the bus precisely to the requirements - with a range of 300 kilometers, the bus can travel more than required by the line on which it is used. Thanks to this individual approach, we save weight and costs. As little as possible should change for drivers, which is why we proclaimed the motto "Don't touch my cabin" early on. Our conversions can be operated identically to a combustion engine for the user but offer numerous advantages. We plan to start series production in 2022 and already have multiple orders beyond that time.

We are innovation leaders. We are the first Company to import a fully automated Chinese fuel cell to Germany. You have to know that the Chinese are years ahead of us when it comes to hydrogen technology. If we manage to transfer innovations and technical improvements into practice as quickly as possible, we will continue to build the best hydrogen trucks and buses in the future. There is already a great deal of interest in our solutions. You only have to consider the utilization cycle of a truck, which currently covers around four years in its first "life". After that, the vehicle is put on the secondary market and gradually scrapped. With Clean Logistics, these four-year-old trucks get a makeover and immediately become climate-neutral. We completely gut the vehicles, install fuel cells, hydrogen tanks, batteries and a rear axle with wheel hub motors that we developed ourselves. We deliberately use lithium iron phosphate batteries because they offer far better fire protection than other compositions. You can say that almost all moving parts that have to be lubricated and maintained in a classic truck or bus are eliminated. After the vehicles roll out of the yard, they have a minimum service life of ten years with significantly lower maintenance costs and CO2 neutrality. The cost of the conversion after funding from the federal government plus the cost of bringing in the existing vehicle is around EUR 150,000. However, as we are continuously working on improvements, we believe that these costs can further decrease.

Every truck is convertible. But with every new type of truck, there is also a certain amount of development time involved: you have to measure the vehicle, record load diagrams, draw up plans, etc. For this reason, we are focusing on two of the tractor units with the highest registrations. Tractor trucks are in high demand throughout Europe, with 2.3 million vehicles registered in Europe. The two models on which we are focusing represent around 70% of this group. Specifically, we are supporting the DAF XF 106 and the Mercedes Actros MP4. We are thus striking a chord with large fleet operators in particular and believe we have a good chance of success. In addition, we are working on further prototypes. Due to confidentiality agreements, we cannot announce these collaborations until the vehicles are on the road.

Traditional manufacturers of commercial vehicles do not want to bring the fuel cell/hydrogen issue onto the road until the second half of the 2020s. Due to the long development cycles, it cannot be assumed that these vehicles - if they do come - will also meet the latest technical possibilities. We are already implementing processes that allow us to make adjustments step by step. This speed is also urgently needed: A major truck manufacturer in southern Germany recently announced that it plans to have delivered 5,000 to 10,000 fuel cell trucks by 2030. However, to achieve the climate targets, which call for us to save 48% of CO2 in the mobility sector by 2030, we need to put between 220,000 and 250,000 vehicles over 7.5 tons on the road with zero emissions in freight transport. Currently, only 10 such vehicles are registered in Germany. Clean Logistics is our way of closing this gap between aspiration and reality. Beyond the facts and figures, the advantages of our approach are obvious, as we work with existing vehicles and give them an additional climate-neutral life cycle. The emissions associated with building a new body are therefore eliminated.

We are planning very carefully. The figure you mentioned may rise to as many as 1,000 vehicles, as we have partners who can support us with the conversion work. We are currently in planning and talks. Specifically, this involves expanding our capacities and working even more intensively with companies that can carry out the work according to our instructions. There are numerous workshops connected to larger vehicle fleets for which the conversion of classic combustion engines to hydrogen vehicles could be a new promising business field. We aim to work with a maximum of five such partners and make sure that they have the necessary size and capacity to drive our growth story forward. Even if we have had to put off one or two customers in recent months, we are confident that we will soon meet the high demand.

That depends on the registration figures. In Germany, there are around 80,000 buses registered for public transport, which are relevant for our business model. By 2025, 45% of these buses in municipal transport operations must be alternatively powered. That creates enormous political pressure on the respective fleet operators. The situation is similar for classic logistics companies or in-house fleets, such as those of large retail chains. Here, CO2 certificates ensure that emissions have to be cut. Rising prices for CO2 and fuels are making conversions increasingly urgent. Consequently, there is great potential for us here as well. A possible third area of activity for us is heavy construction equipment. Here, too, emissions are playing an increasingly important role.

Our business model is currently in the scaling phase. That means that the number of units is still relatively low, and the unit costs are correspondingly high. Due to the great potential of regenerative drives, the German government has decided to provide 80% funding. In other words, for investments in infrastructure, new vehicles and the conversion of vehicles with conventional combustion engines, the federal government will assume 80% of the differential costs incurred compared with the procurement of a traditional combustion vehicle, up to a total amount of EUR 2.8 billion. The commitment to vehicle conversion is essential, as new vehicles cannot meet the demand for climate-friendly vehicles, and conversion offers further advantages from a sustainable point of view. A conversion costs around EUR 500,000, of which the customer pays around EUR 150,000.

Our industry is currently seeing a reverse movement in cost items. The more vehicles we convert, the cheaper we can buy the respective components. This trend will continue over the next few years and significantly improve the situation on the CAPEX side. The situation is somewhat different in terms of operating costs. Here, diesel is currently still considerably cheaper. However, we expect the diesel price to reach EUR 2 in the medium term. At the same time, some advantages for alternative drives have been decided, such as exemption from toll costs. A truck that covers 120,000 kilometers a year currently incurs around EUR 20,000 in toll costs. Since the EU recently decided to increase toll rates by around 12%, this positive discrepancy increases even further. Added to this are rising CO2 prices and lower maintenance costs for our vehicles. We, therefore, believe that the break-even point of our business model can be reached in a few years, even without government subsidies. The key to this is increasing volumes and better components, which we can implement quickly depending on availability to our flexible processes. In this way, we are already succeeding in drawing the attention of fleet operators to our forward-looking solutions.