(FORTUNE Magazine) – CRAWL BEHIND A DELIVERY VAN FOR a mile or two, and you quickly figure out that its stop-and-start progress consumes an enormous amount of fuel and produces clouds of noxious exhaust. That makes such trucks ideal candidates for hybrid technology that uses an emission-free electric battery instead of its gasoline or diesel motor to propel the vehicle at slow speeds, and that transforms the energy created in braking into more electric power that can be used in the next driving cycle.

The first truck operator to try to exploit this opportunity in a big way is FedEx Express, which put a fleet of 18 diesel-electric hybrid delivery trucks on the road more than a year ago. FedEx delivery trucks are real stop-and-go junkies: Each one typically makes about 100 stops per day and travels an average of 1,500 miles per month. In testing at the Southwest Research Institute, an independent R&D outfit in San Antonio, the hybrids got 42% to 56% better mileage than conventional FedEx trucks. (FedEx won't release the actual numbers for competitive reasons.) "We've been very pleased with the results so far," says John Formisano, VP of global vehicles at FedEx. "The hybrids have been really well received by our courier workforce."

The FedEx hybrid program got started a few years ago when the company formed an alliance with advocacy group Environmental Defense to encourage fleet operators to develop cleaner, more efficient medium-sized trucks. FedEx awarded a contract to create the propulsion system to Eaton Corp., a Cleveland maker of truck components, which worked on the hybrid powertrains at its technical center in southwestern Michigan. Reducing urban exhaust emissions was a major goal of the program, and the trucks have scored very well in testing, including a 96% reduction in particulates vs. later-model FedEx diesel trucks. A large part of the gain comes from exhaust filters fitted to the four-cylinder Mercedes diesel engines, but hybridization can help reduce diesel emissions in other ways too. "With the hybrid we can buffer transient power demand--when a driver gets on and off the accelerator--with the electric motor and shave off little bits of inefficiency from the diesel," says Jeffrey Carpenter, senior chief engineer for power controls at Eaton.

Truckmakers and component suppliers around the world see the hybrid opportunity and are working on systems they hope will be a hit as fuel prices and environmental worries mount. Between 120,000 and 140,000 medium-duty trucks roll off assembly lines in North America alone every year, making the national fleet a major consumer of diesel fuel and gasoline. Among the players is GM's Allison Transmission division, which is scaling down its hybrid city-bus system for use in lighter trucks. A Canadian startup called Azure Dynamics has delivered hybrid prototypes to Purolator Courier and the U.S. Postal Service; Fiat's Iveco unit in Italy is working on hybrid trucks too. DaimlerChrysler is developing a hybrid version of the Dodge Sprinter commercial van, as well as a "plug-in" variant that tops up its batteries from the power grid when off duty, extending the range it can drive under electric-only power. And in Japan, Toyota's Hino Motors truck subsidiary has been selling medium-sized hybrid trucks for a couple of years. With the runaway success of Toyota's Prius hybrid car, nobody in the truck world can afford to take his eyes off Hino for too long.

For now, the nascent world of hybrid trucks is caught in a classic chicken-and-egg situation: Affordable costs won't be possible until production volumes get ramped up, which won't happen until costs come down. Eaton would like to supply components for hybrid commercial trucks at about a 20% premium over conventional ones--about the same premium as in hybrid cars. But it can't meet that target without building thousands of units annually. Later this year the company will move away from workshop-style assembly operations and produce the next batches of prototype hybrids on factory tooling. "The question now for us is, Do we want to jump into the shallow end of the swimming pool or the deep end?" says Kevin Beaty, business unit manager for hybrid electric powertrains. Tax credits for hybrid trucks like those available for hybrid cars would help reduce selling prices, Eaton and FedEx executives say; the energy bill now in Congress may include such a provision.

Eaton is hedging its bets in the stop-and-go derby: It supplies FedEx's archrival with another experimental system to squeeze more fuel economy out of delivery trucks. United Parcel Service will soon begin testing one of its familiar brown vans with something called hydraulic launch assist. The system captures braking energy and stores it in "accumulators," cylinders that contain nitrogen and hydraulic fluid separated by a polymer bladder. When the truck driver applies the brakes, a hydraulic motor-pump mounted on the truck's driveshaft operates in pumping mode. It sends pressurized fluid into the accumulators, compressing the nitrogen gas inside. When the driver steps on the accelerator again, the system flips into hydraulic-motor mode, adding the oomph stored in the accumulators to the power coming from the truck's diesel engine.

It's the same operating principle found in the Super Soaker water guns kids use to drench each other in the summer. The system was developed by Eaton's fluid power group in Eden Prairie, Minn. The group's business development manager, Brad Bohlmann, says testing shows the gadget can reduce the fuel consumption of a garbage truck by 28%, at a lower cost than that of a full electric hybrid system. Alas, neither energy-saving delivery-truck system will cure the frustration of drivers stuck behind.

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