Shifting gears: First Priority Group is branching out from emergency vehicles to school buses

By Tom Bergeron
Flanders | Jul 6, 2018 at 6:30 am
From our print edition

Here’s what you need to know about First Priority Group, the Flanders-based manufacturing company that jumped into the spotlight last month when it delivered five electric school buses to the White Plains (New York) Board of Education — the first electric school buses delivered on the East Coast.

The company, which is privately owned, has delivered more electric school buses in the past two years than all of its competitors combined.

The company, which also has a base in California, has positioned itself to be the leader in the growth of all commercial electric trucks throughout the country.

The company, which has two locations in New Jersey, is ready and eager to bring the technology to the Garden State, but needs a greater willingness by state government and a small change in state law to do so.

And then there’s this: First Priority Group does a whole lot more than just electric buses.

Owner, Chairman and CEO Alex Cherepakhov said his Green Fleet division generates only about a third of the company’s multimillion-dollar revenues.

First Priority Group, which started as a small shop in Asbury Park in 1998, has grown into a 150-person company with locations in three states.

It specializes in converting assembly-line cars and trucks into emergency service vehicles for municipalities (think specially equipped fire chief cars and mobile command centers), sells and manufactures ambulances to hospital groups and private care companies, and sells and distributes firetrucks.

It operates in two dozen states.

Cherepakhov, a former Wall Street trader and executive who joined the company in the summer of 2014 with a 50 percent stake and took complete control following the death of its founder at the end of 2016, wouldn’t have it any other way.

“From a risk perspective, I’m an old capital market guy,” he said. “I think about risk. If you put all your eggs in one basket and that basket doesn’t go, then everybody goes home.”

Cherepakhov said he is betting on this business for the only reason that matters in economics.

“I’m a supply-and-demand guy,” he said. “I’ve taught my kids that since the first day they could walk and talk.

Vehicles, above, in different stages of conversion in the warehouse.

“And I knew the demand for someone to help produce emergency vehicles for municipalities was going to continue. Cities were going to need more — more police cars, more emergency vehicles, more command centers. Whatever was needed was going to be needed more.

“And it’s not going to be overtaken by somebody who can create a program half a world away and do it for 10 cents an hour.”

Cherepakhov, who just opened a 30,000-square-foot manufacturing and service facility that more than doubled the size of his company’s capacity in Flanders, said he’s happy to employ approximately 100 people in New Jersey and always is looking for more.

Finding qualified candidates is a struggle, he said. Getting employees to embrace the company is not.

“This is a good, old-fashioned American manufacturing company,” he said. “We have lots of paramedics, firemen and cops who work here.

“We serve the people who help people in their time of need, so there’s a huge buy-in in wanting to help the company do well. There are a lot of people here who really care about the customer.”

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As he walks through a plant that is bustling with activity over two shifts over 15 hours a day, Cherepakhov talks about the growth of commercial electric vehicles. And how the sector still needs government support.

“At the end of the day, as much as we hear about the electrification of vehicles — and they’re coming — there’s still a pretty good-size curve of getting the business cost-efficient,” he said.

An electric bus school can save a district more than $12,000 a year in operating expenses, while providing a clean energy alternative for the environment.

The buses, he said, can go 75-100 miles on a charge (depending on the size of the battery) and cost about $1,500 a year to run. They have proven their effectiveness elsewhere.

There’s just one hurdle: The initial cost.

It still costs approximately $325,000 a year to build an electric bus, far more than the $100,000 it takes to buy the traditional diesel model.

“If you’re going to save $12,000 a year in operating and you spend $60,000 more to do it, then over five years you make money,” Cherepakhov said “But, we’re not there yet. So, it’s got to be government subsidized. 

“You have to convince legislatures to appropriate the funding, so the school can get that electric bus for roughly the price of diesel. And then it gets the benefit of clean air. And the money they save from operating it every year goes back into the textbooks and education.

“There’s a huge demand for it in California. They live that concept.”

Cherepakhov makes it clear, First Priority Group is not the sole original equipment manufacturer of the school buses — that’s the job of its partners, including Quebec-based Lion Bus, which built the buses that ultimately made their way to White Plains and has helped First Priority Group deliver approximately four dozen more from its main Stockton location in California.

“We’re not the brain surgeons and rocket scientists who are building the next propulsion engine,” he joked. “We’re not smart enough for that. We don’t have 27 Ph.D.s running around here.

“We do final-stage manufacturing and assembly of electric vehicles.”

He’d like to do that for New Jersey, but bringing electric buses to the state would require the Legislature to appropriate money for the cause.

Cherepakhov, who said California allots $1 billion a year, said he is hopeful that the state will use some of the money it earned in a settlement with Volkswagen to start funding such a program. He also needs the Legislature to make a small change regarding electric buses.

“New Jersey is now the only state in the country that says the maximum width of school buses is 96 inches, which is the width of a commercial vehicle,” he said. “These buses we just delivered are 102 inches.”

Cherepakhov said a movement in the Legislature this year to amend the width requirement didn’t go far — but he’s confident it may soon. And he’s also working on plans to build buses that are of the smaller size.

“We have not yet rolled out anything in New Jersey, but we expect to later this year,” he said. “If that rule was able to be changed today, there could be electric school buses on the road tomorrow.”

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Cherepakhov saw the coming of electric buses — not to mention what could be a far greater market, electric commercial vehicles — shortly after joining the company in June of 2014.

“In 2016, I bought a company called EVI, which, at the time, was the second-largest electric truck manufacturer in the country,” he said. “I did that because it came with a service team that everybody knew and respected.

“I thought, ‘We’re going to roll out electric school buses. If we don’t have somebody to service them, then those kids will be on the side of the road waiting for some diesel mechanic to come and try to figure out how to hook up a battery.’

“My concept was: If you’re going to build a business with new technology, you need to show everybody you’ll be able to support it. Otherwise, people would buy new technology and not be able to get it to work, no one would be able to service it, and they wouldn’t buy another one.”

He said it’s been a slow and steady process.

Christian Garcia, right, and Frank Koehler work on an emergency response vehicle in the conversion unit of First Priority Group.

“In the last two years, we’ve built that service team to be the largest independent EV (electric vehicle) service team in the country,” he said.

Cherepakhov said helping to manufacture and service commercial electric vehicles is another potential growth area for First Priority Group.

“Today, we service vehicles for UPS, FedEx, Frito Lay, Staples and others,” he said. “Some of the U.S. government entities use us and some of the companies that are coming up now and just getting ready to roll out electric vehicles will be using us to support them.”

It’s why he sends his team to California to train with the old EVI technicians.

It’s why he’s confident two full bays at his new warehouse soon will be devoted to Green Fleet. 

And it’s why he feels the Green Fleet division could eventually become 50 percent of the company’s revenue.

“We can sell them, and we can service them,” he said. “We’re the backbone of this. Where we have the advantage is this: After 20 years of being in the automobile business, we understand what fleets need. And we have experience in servicing and we have production where we can do upfits.

“As far as I know, we’re the only commercial, bicoastal operation that’s capable of doing both of those things.”

Cherepakhov said the company spent time and money lobbying officials in California. He said he’s not ready to do that in New Jersey just yet. 

He’s confident time is on his side.

“There’s an understanding that this is an investment that’s not really profit-centered today,” he said. “It’s an investment that we’re making in the future of the company.”

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First Priority Group is not just an electric vehicle company. Far from it.

It was built on — and still thrives on — converting vehicles for specialized use.

That’s the day-to-day driver of the business in 2018.

Vehicles come to the facility from government agencies, utilities, hospitals and other emergency service providers. They need an upgrade.

“When (groups) get a blank chassis, it does them no good,” Cherepakhov said. “These cars are about 10 percent done when they come to us.

“They’ll say, ‘Build us a command center, personnel carrier, chief’s vehicle.’ It can be undercover cars or security details. It can be an ambulance.

“We do it all: All the programming, all the wiring, the radios, the antennas, the lighting, communication. These end up being pretty extensive vehicles from an operational standpoint.”

Cherepakhov said any request can be met.

“This facility, in terms of conversion, is really the biggest in the area,” he said. “The variety of things we can do here is amazing. Back there is a cabinet shop where we’re making the interiors exactly the way the customer wants. We can do command centers with specific instructions.

“If you need lettering, great, we started a graphics group. You need body shop work, we can do that, too.”

And soon all of that may come on a new-age vehicle, Cherepakhov said.

“We’re waiting for the electrified chassis to show up here, so we can build the first conversion for cities and introduce that into the mix,” he said. “That may be coming later this year.”

For security purposes and confidentiality reasons, Cherepakhov said he is not allowed to reveal many of the organizations he does business with. A walk around the warehouse, however, showed some of the biggest names in the region.

He said one thing helps him maintain these relationships: service.

These are not one-time transactions, Cherepakhov said.

“Think about what these vehicles go through and how much they get beat up,” he said. “For starters, many of these vehicles are running 24 hours a day. Then think about, from a utility standpoint, the storms they work in. Trust me, they get beat up pretty good.”

This leads to another business opportunity: remounts.

This is a big part of the business for the Emergency Services division, which does a lot of its work out of the company’s Manchester facility.

“The remount is where we are the manufacturer,” he said. “Someone will have a vehicle and they’ll use it for three years. It’s got 150,000 miles on it and it’s falling apart, but it’s a beautiful box.

“We’ll take the box off, we’ll refurbish it and make it look brand new and put it back on the road with a brand-new chassis with about the same warranty. That’s good for the companies because it saves them money and it’s good for the environment because we’re not just throwing away something that is still useable.”

The connection to emergency services vehicles leads to First Priority Group’s smallest division: firetrucks.

As with all other vehicles, the company can upfit firetrucks to meet specific requests. The division is smaller, however, because the need is smaller.

“There are only ‘X’ number of firetrucks that are bought each year,” Cherepakhov said.

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Cherepakhov feels First Priority Group is positioned well for the future.

As much as he felt he was ahead of the curve on electric vehicles, he also felt he was ahead of the curve on the industry.

“One of the reasons I bought into this space in 2014 was that this is a business that is going to start consolidating,” he said. “It has dramatically — and it has way more to go. This is a business that has 50,000 mom-and-pops. This is a space that’s going to continue consolidating.

“We’re excited about our position because the arena is a small arena. There are only 5,000 new ambulances sold in the country. There’s way less than that in firetrucks. There are 1,400 remounts in the country. So, when you start doing 100 or 200 out of 1,400, you start being a player.”

Cherepakhov isn’t concerned about the biggest player in the industry: Wisconsin-based Rev Group. In fact, he feels it may help First Priority Group. 

“When I looked at the space in general, I thought there was going to be one massive player to come out, and there has,” he said. “Rev Group is the 64,000-pound gorilla in the room with $2 billion in revenues. They bought up a lot of the manufacturing and distribution.

A positive and negative fuse panel on a new electric school bus.

“In some ways, it’s causing an increase in consolidation. As a garage, you can’t do 4-5 remounts and sell two ambulances. There are more and more regulations coming, which are going to make it more difficult for the little guys to survive.”

Consolidation in some of the companies the sector serves is speeding the issue, too.

“A large hospital system is not dealing with multiple companies to get this work done,” he said. “The bigger hospital systems get, the better it is for us. 

“We’re trying to stay at the front edge of that. We have that position, we’re trying to make sure we stay there.”

As well as expand to other areas.

“Part of our current focus (in conversion) is to move beyond emergency vehicles into commercial fleets,” he said. “Think of utilities, cable companies. They have lots and lots of trucks in their fleet. Emergency vehicles have a little bit of a budget cycle that you have to live with. So, as a result, your first quarter tends to be really off. They get their money, they spend it by Dec. 31 and everybody’s looking at each other on Jan. 1, saying, ‘Where did everybody go?’

“Utilities are dealing with storms and what they mean. And they need things when they need things. We’re starting to get fairly large fleet orders from a major utility in the area. These utilities buy 500, 600, 700 vehicles a year. We’re not going to get that. But 100 would be a great year. I think that’s going to grow.

“The remount division also is going to grow. And, because it’s getting tougher and the rules are getting tougher, the smaller guys aren’t doing as much anymore. We’re probably the second-largest remount manufacturer in the country, behind Rev Group, and we’re looking to grow in that position, too.”

The company is growing, too. In addition to the two New Jersey and California locations, it has a facility in North Carolina. It does business in two dozen states.

Cherepakhov always is looking for new opportunities — and now has more time to do so.

“We just hired a VP of operations and promoted a CFO,” he said. “As I extricate myself from some of those day-to-day activities I probably shouldn’t have been to begin with, it gives me an ability to look at some other things.”

Conversation Starter

Reach First Priority Group at 1fpg.com or 973-347-4321.

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