7Gen, a Montreal-based company that leases electric vehicles (EVs) and charging infrastructure to commercial clients, plans to add hundreds of new vehicles to its fleet with $48 million in debt financing from U.K.-based Zenobē.

The startup will aim to roll out 400 to 500 delivery vans, trucks and buses that will be bundled with charging solutions and software across Canada, servicing clients in industries such as last-mile delivery.

Its customers include FedEx, DHL, Staples and Toronto-based GoBolt, and businesses that work for third-party logistics providers that are contracted by Amazon.

7Gen’s mission is to overcome the barrier of financing electric fleets, Frans Tjallingii, CEO of 7Gen, said in an interview with Sustainable Biz Canada. Rather than purchase the EVs upfront, the company offers an alternative: a lease-to-own platform that covers the vehicles, charging infrastructure and fleet management software for a monthly fee.

The model, called EV-as-a-Service, paves a smooth path to electrification by cutting operational costs, he said.

“It all goes back to the total cost of operating. We really serve those segments where it’s most economical to go electric.”

7Gen's EV-as-a-Service

7Gen starts by working with a client to determine the ideal pathway for adopting an electric fleet, determining the chargers and vehicles that meet their needs. Next, it draws up a plan under a lease-to-own model, organizing the payments and rebates that could be accessed.

The company then oversees the design and installation of the charging infrastructure, with software for fleet management and monetizing carbon credits.

Tjallingii said EVs are more expensive upfront currently compared to gas-powered cars, but he points out EVs can lead to costs savings. Depending on the incentives, products and vehicle use, he has seen 7Gen clients save between 10 to 50 per cent on monthly operating costs.

The company’s model is particularly well-suited for last-mile logistics and the trades, Tjallingii said, plus school bus operators, regional distribution and shipping container transportation called drayage.

“Anyone who can do overnight charging, so your investment in charging infrastructure is a bit lower than if you had to do top-up charging, and who does up to about 250 kilometres per day.”

7Gen has several hundred vehicles in its fleet, Tjallingii said, from automakers such as General Motors, Ford, Mercedes, Volvo and various school bus makers.

'Ambitious but grounded' growth

The $48-million funding, which will also be used to refinance some of its current fleet, was prompted because 7Gen now has the scale for Zenobē to support the next phase of deployment, Tjallingii said.

Its latest funding round will be geared toward last-mile delivery, the trades and school buses, primarily in Quebec, and some large trucks for drayage. Tjallingii expects the latest additions to the fleet will be mostly delivery vans.

The newest EVs will be deployed over the next three to four quarters.

“7Gen's EV-as-a-Service approach is very aligned with our own, and we're excited to see them grow this model in Canada,” Tim Boothman, global director of EV fleet at Zenobē, told Sustainable Biz Canada in an email exchange.

The company's growth plans “are ambitious but grounded” by targeting sectors such as last-mile delivery where electrification can have “outsized impacts,” he added.

The Zenobe financing is a signal that “innovative, de-risked financing models are viable and vital for the decarbonization of transportation,” Boothman said.

7Gen raised $8 million in 2022 in a Series A co-led by Fonds de solidarité FTQ and Siemens Financial Services. The year prior, it received $20 million from Spring Lane Capital.

EV story remains strong, CEO said

For its next act, 7Gen will prioritize growth in Canada, particularly Quebec. The low price of electricity in the province, government support for decarbonization and the company’s headquarters being located in Montreal are the main factors, Tjallingii explained. It will also focus on B.C., Ontario and Alberta.

7Gen is looking to establish its first U.S. projects this year, “primarily focused on the California and New York, New Jersey markets,” he said.

Another goal is to further develop its software to provide more value to customers for small- and medium-sized enterprises.

The uncertainty of the macroeconomic environment is brewing up some difficulties, but the “EV story has never been stronger”, Tjallingii said, because EVs can diminish operating costs. He also forecasts the price of making EVs to go down in the long-run.

“For fleets that are in regular fleet renewal cycles, it just makes double sense, provided it fits within a positive total cost of operating framework, which we can provide. You should be looking at an EV because you’re gonna save money today.”