Recently, the use of more sustainable forms of transportation such as electric vehicles (EVs) for delivering goods and parcels to customers in urban areas has received more attention from urban planners and private stakeholders. To provide some insights toward the use of EVs, this work develops an optimization framework using portfolio theory, which takes into account the cost and the risks associated with some input parameter uncertainties, for determining an optimal combination of EVs with internal combustion engine vehicles (ICEVs) in urban freight transportation (UFT) over some planning time period. This model can assist an urban freight operator to choose the best investment strategy for introducing new vehicles into its fleet while gaining economic benefits and having positive impacts on the urban environment. When taking into account the risks that are involved, the numerical results show that EVs have the potential to compete with ICEVs in UFT. (C) 2016 Elsevier Ltd. All rights reserved.