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Urban restrictions and innovations in last mile delivery are set to propel the uptake of eLCVs and connected solutions

Rapid urbanization has created new retail and e-commerce platforms which require efficient logistics, leading to the growth of the Light Commercial Vehicles (LCV) market. The market is set to witness further growth, aided by robust demand in Latin America, India, and China, finds the Global Light Commercial Vehicle Market Outlook, 2019.

Globally, the sales of LD trucks and pickup trucks are set to touch 6.7 million and 5.6 million, respectively. While the U.S. leads in pickup truck sales, China is clearly ahead in the LCV segment. LCV unit shipments are likely to grow by 4.8% from last year, led by India, Latin America, and Asia-Pacific.

New LCV registrations in 2019 are predicted to be around 12.88 million units, led by India with a double digit growth rate, followed by Latin America, the Gulf Cooperation Council (GCC), Asia-Pacific, and China. While China’s Wuling Motors is the market leader in the LCV segment, Ford leads in the pickup truck space.

eLCV market confronts cost-related challenges

With the growth of autonomous technology and electrification, the LCV market is witnessing collaborations among incumbent OEMs and start-ups alike in the production of electric LCVs (eLCVs). It is predicted that increasing emission regulations, especially in urban and semi-urban areas, will propel the usage of eLCVs. There are, however, several impediments to their widespread uptake.

As the adoption of electric vehicles (EVs) expands, lithium will become the new oil. eLCVs will benefit from the volume of scale achieved by electric passenger cars, and any setback here will make it difficult for the price of a battery pack to drop below $100/kw by 2024-25. The rise in demand for rare earth metals used in motors is likely to further impede EV affordability.

Another challenge is infrastructure costs. Charging stations can cost a minimum of $7000 plus installation costs, which, at times, is more than the cost of the equipment itself. Fast charging stations with a charging capacity of about 350kw can cost $250,000 and above with installation.

Despite these hurdles, the eLCV market forecast for 2025 is bright. China will clearly dominate the space, accounting for a 43.9% share of the global eLCV market. Electrification will be driven by technology evolution, improving economics, and policy changes across countries in 2019.

Travelling light

Major OEMs are expected to achieve CO2 emissions targets by 2021, by coupling electrification with lightweighting efforts. OEMs are expected to reduce the weight of their vehicles by about 20-25% by 2025. By reducing the weight of the vehicles by just around 45 kg, OEMs can achieve significant reduction in CO2 emissions.

Combining advanced materials with electrification or engine downsizing is expected to help OEMs effortlessly achieve the 2021 emission reduction targets. To achieve this, between 2017 and 2025, the most commonly used materials for lightweighting body closures and structures will be High Strength (HS) steel for mainstream vehicles and aluminium for large and luxury vehicles.

Autonomous vehicle development gathers pace

The Volkswagen Group has introduced the Sedric‖ concept – an electric, connected autonomous vehicle with no steering wheel or pedals – aimed at the shared mobility segment. It’s expected that by 2022, level 4 autonomous vehicles will be ready where the transfer of responsibility from driver to the vehicle will be nearly complete. The driver will not have to use his hands, feet, eyes or mind to control the vehicle. Every OEM or disruptor is working towards this goal using sensor fusion technology.

Autonomous passenger shuttles are at a nascent stage of adoption. Potential revenues from this market are estimated to reach close to $50 billion by 2030. Autonomous shuttles are expected to lead to a lower price per ride and higher utilization per vehicle. However, the impact of autonomous shuttles is not expected to be seen in the market or be significant before 2025.

Multiple solutions emerge to cover last mile delivery requirements

Tailored last mile delivery solutions are needed to meet dynamic customer and business requirements in 2019. In future, drone deliveries will facilitate same-day delivery as a norm and revolutionize same-hour delivery patterns.

However, airspace regulations and safety concerns will place operational limitations on drone deliveries. As an alternative, delivery bots, which are more cost-effective for end-users and less restricted by regulatory mandates, are being tested to solve the last mile challenge.

Mobile depots are also expected to make urban deliveries faster. These depots are driven to the city center from fulfilment centers with parcels for that day, with deliveries carried out using electric tricycles. Last mile delivery and less than truckload (LTL) mode of transportation are expected to experience substantial growth in 2019.

The road ahead

Increasing partnerships and collaborations of LCV OEMs with technology and logistics companies will create tremendous opportunities for growth in the global LCV market. Reduction in battery prices and advancements in autonomous driving technology will spur electric and autonomous LCV development, thereby shaping the future of the market.

Investments from incumbent automakers and start-ups are pouring into the EV space paving the way for substantial electric LCV product launches across the globe with all major players switching to electrification by building in-house expertise.

For more information on the Global Light Commercial Vehicle Market Outlook, 2019, please contact Vineeth Purushotham, Industry Analyst – Commercial Mobility, at vineethp@frost.com

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