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Build a chair or create a conversion technology to make heavy-duty trucks plug-in hybrid electric? For a mechanical engineering major who liked working on cars, the company-sponsored “Ikea-like” option for a senior project didn’t stand a chance against the entrepreneurship path at N.C. State University.
In their senior year, Micah Ulrich and Flux Hybrids co-founders Cody Biedermann and Clay Dowdey envisioned an aftermarket upgrade that would transition a standard automatic truck into a plug-in hybrid electric vehicle (PHEV), effectively increasing fuel efficiency while reducing both carbon emissions and maintenance costs.
“There’s a huge demand in the market, especially in fleet vehicles. Heavier duty trucks can’t go all-electric because you need the energy density of gasoline to do hard jobs, but they don’t have to be gas engines all the time,” said Ulrich, now the 24-year-old CEO of a tech startup that’s raised over $700,000 and has pilot projects underway with two Fortune 500 companies.
The engineering students graduated in 2019 with patents in hand and funding from their alma mater to build a full-scale prototype.
“Going into 2020, we had a 2008 Ford Ranger, shop space, parts and the design, and we were stoked,” Ulrich said.
Then Covid hit and they could no longer access the planned space. A mechanic in Garner agreed to share his space and tools, but as Covid intensified, they had to move into the parking lot, where they worked for a year to convert the 2008 truck into a plug-in hybrid. When completed, fuel efficiency in the Ford Ranger went from 17 miles per gallon to 34 mpg.
“That was our big “aha” moment, we thought: ‘Now we have proof, people will buy this and it will pay for itself.’ I found out quickly that’s not how business works,” Ulrich said.
At the start of 2021, he transitioned from tinkering under a truck in a parking lot to vying for grants and pitching accelerator programs. Flux Hybrids earned a spot in the spring cohort of the Council for Entrepreneurial Development (CED) GRO incubator and in TechStars 2021 Alabama Energy Tech Accelerator.
“It was pretty clear this was not just a school project; what [these guys] were going to do was the real deal,” said Jay Bigelow, head of entrepreneurship at CED.
He and the GRO coach who worked with Flux Hybrids continue to offer support. “I met with Micah and his coach a couple of weeks ago and we went through their pitch deck … in general, entrepreneurs want to tell everything but in early conversations with investors they have to edit it down to a really clear, coherent story,” he said.
“I tell everybody in GRO that we’re never going to talk about your tech, that’s not the point of our incubator. What we want to know is how the solution will better solve a customer’s pain point. It’s more about the exterior world than the internal workings of the company. Essentially: Can you build a business around this?”
The GRO incubator helped the Flux Hybrids co-founders articulate business metrics and customer discovery. Ulrich said the accelerator programs were like “getting an MBA by fire.” In 2021, he also completed his M.S. in mechanical engineering, but the business coaching has proved invaluable as Flux Hybrids focuses not only on completing the pilot projects, but also raising capital and canvassing North Carolina for potential locations for a production facility – a facility that has to be fully operational by November, in time to deliver 50 converted Ford F-150s in Q1 2024.
Both pilot programs are paid projects with potential to grow into substantial growth vehicles. Global building materials company CRH (NYSE: CRH) has 20,000 vehicles in its corporate fleet and is looking for a March delivery of its pilot truck. That will set the stage for Flux Hybrids’ first order of 50 PHEVs, which is projected to create $750,000 to $1 million in revenue. The second pilot, with Southern Company (NYSE: SO), owner of 13 power and energy-related companies, has potential to expand across numerous fleets. Their first pilot truck is for Alabama Power, which has a fleet of 7,500 trucks.
“We’re starting to scale the business and we’re looking to raise capital through a seed round that will help fund us through those first deliveries, then we’ll do a Series A that will be bigger and a higher valuation,” said Ulrich. “I’m looking at how much we can get through debt and project finance versus how much needs to be equity capital.”
And then there’s figuring out the company footprint. Where to locate the production facility is largely a function of what’s available quickly and affordably. The company has its roots in Raleigh, where business development remains and some R&D employees work remote. They’re open to almost anywhere in the state, although outlying areas around Charlotte or the Triangle are his preference.
“The physical shop space with the trucks – where we’re actually turning wrenches – is outside Charlotte because we had connections to get low-cost space in the area. One of my co-founders and I are from the Charlotte area and we have family connections with machinists and NASCAR teams, so we can tap those resources,” he said.
The ROI for converting a traditional automatic truck to a PHEV is about four years, roughly 80,000 miles, and assuming a gas price of around $3 per gallon. Fleets would get the most savings across the life of a vehicle by doing the after-market upgrade as soon as it comes off the line but the pilot with Southern Company is on a 2015 Ford F-150 with 140,000 miles and the CRH pilot is a 2020 model with 25,000 miles.
“Converting to PHEV will pay for itself as long as the vehicle has four years of life left,” Ulrich said. Historically companies were running F-150s for about eight years, roughly 160,000 miles, but supply chain shortages have pushed some fleets to run trucks up to 10 or 12 years. There’s also added value in mitigating the cost of idling time, a significant factor for some fleets, particularly utility companies – but it’s harder to quantify that data. Ulrich notes that every hour of idling is equivalent to 25 to 33 miles of wear on heavy vehicles.
A critical advantage for Flux Hybrids is that the vast majority of fleets rely on the same standard transmission found in the Ford F-150. “That’s really the key to how we can scale this,” he said. The long-term plan is to take the Flux Hybrids solution to the fleet upfitting industry and train those shops to do the PHEV conversion.
“They already have skilled employees and relationships established with fleets, so they can see an increase in top-line revenue and we get distribution and ongoing maintenance at scale without having to build more locations.”
The focus is on fleet conversions, but more than 2,500 people have signed onto the Flux Hybrid wait list for when the company has bandwidth to begin PHEV conversions for consumers.
Flux Hybrids
Co-founders: Micah Ulrich, CEO; Cody Biedermann; Clay Dowdey
Website: fluxhybrids.com
Email: micah.ulrich@fluxhybrids.com
Launched: 2021 in Raleigh
R&D shop: Charlotte
Employees: 5
Projection: 16 employees by year-end
Money raised: $707,000