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New business models around electric trucks and digital services to present opportunities for disruptive growth

Worldwide, the sales of medium-duty (MD) and heavy-duty (HD) trucks grew at a rate of 4.5% in 2018, aided primarily by the sustained growth in top truck markets powered by North America. In China, although the market shrank by 7.5%, sales stayed over the magical one million unit mark, finds the Global Medium-Heavy Commercial Vehicle Market Outlook, 2019. Rising concerns over vehicular emissions, coupled with the intensifying regulatory pressures, will push the market to re-orient itself around more energy-efficient technologies.

In 2019, the global sales of MD-HD trucks are expected to grow only 1.1% because of the slight contraction in the sales of HD trucks in Chinese and EU markets. However, policy interventions in China, such as the implementation of ‘Blue Sky’ regulations announced in July 2018, which aims to phase out one million China-III compliant trucks by the end of 2019, can potentially boost sales this year.

India, Brazil and Indonesia clocked double-digit growth in sales in 2018. These markets will continue to witness positive growth in 2019. North American HD truck sales touched a high of 315,478 in 2018. HD truck orders crossed 490,000, beating the earlier peak touched in 2006 by a large margin.

Electric truck market to witness growth

Electric powertrains, autonomous driving, and digital services continued to attract attention and investments in 2018. These trends are expected to intensify across 2019. While electric powertrains are beginning to be adopted in niche applications like refuse trucks where their total cost of ownership (TCO) is already lower than their diesel-powered counterparts, achieving TCO parity in other applications might take until 2025.

Traditional OEMs ramped up EV messaging this year in competition to Tesla, Nikola, Thor, Chanje and other start-ups. Daimler stated that North America would be the test market for its global electric truck platform, Volvo Truck Corporation announced that it would introduce electric truck test vehicles in California in 2019 before commercializing them in Europe and the U.S., and the TRATON Group entered into partnership with Hino Motors for electric trucks.

Daimler Trucks announced that it would invest $600 million in 2018-2019 towards the development of electric and autonomous driving solutions. Meanwhile, programs such as Volvo’s Low Impact Green Heavy Transport Solutions (LIGHTs), which is being undertaken in partnership with California’s South Coast Air Quality Management District (SCAQMD), will reinforce California’s position as a hot-bed of electric truck prototype testing in 2019.

Electric vehicle (EV) component and technology suppliers have become hot targets for mergers and acquisitions. Global truck OEMs as well as global tier-1 suppliers like Bosch, Dana and Cummins have been investing in mergers, acquisitions as well as joint ventures with EV component/technology suppliers. While truck OEMs/suppliers like Daimler and Bosch have invested in acquiring battery manufacturing companies, Dana has already acquired two motor manufacturers and is expected to acquire an off-highway transmission supplier as well.

Big thrust for carbon emission reduction

While battery electric powertrains attract significant attention in the media and at trade shows, natural gas (NG) is a quietly growing as an alternative powertrain option, especially in Europe and China where there is strong regulatory pressure to cut emissions in HD trucks. Diesel is expected to account for 94.3% of the total sales in 2019, in comparison to 95.2% in 2018 with NG penetration reaching 1.7% in 2019. A total of 70.5% of all alternative MD-HD powertrain trucks will be powered by NG in 2019.

Meanwhile, in response to the growing societal demand for emission reduction, the European Commission has developed the comprehensive Vehicle Energy Consumption Calculation Tool (VECTO) tool for measuring both emissions as well as fuel efficiency. VECTO enables transparent, reliable fuel consumption information, wherein CO2 emissions are calculated either per volume km of transported goods or per ton km of transported goods. This will shift the focus from tailpipe emissions towards GHG / fuel efficiency standards and harmonized global testing standards.

The industry has also responded by developing alternative engine architectures. Improvements in the after-treatment, turbo chargers, injections, and combustion will be complemented by new architectures such as opposed piston engines, split cycle engines, and double compression expansion engines. The split cycle engine will enable a 20% improvement in in thermal efficiency and a 30% reduction in CO2 emissions.

Telematics market is growing strongly

Autonomous technology, backed by technology giants like NVIDIA and start-ups like tuSmiple, drive.ai and Embark, is developing rapidly. However, reaching SAE Level 4 of autonomy is still a decade away. In the meantime, telematics devices are experiencing double digit year-on-year growth in TRIAD markets as well as in China. Alongside the continued growth of telematics devices and services, digital freight brokerage solutions are also set to receive a huge boost with investments worth nearly $2.35 billion already made in 2018 across North America, Latin America, Europe, China, India and Russia.

The European Union and North America witnessed the highest growth in connected fleet telematics, and will continue to lead in this space till 2025. Key telematics services currently provided include mapping, trip records maintenance, logistics, messaging, fuel management, driver management, trailer management, and remote diagnostics.

The global commercial vehicle autonomous driving market is expected to reach $4.2 billion in valuation by 2025, driven solely by incremental cost increases of level 2 and level 3 automation. The market value is estimated to increase nearly three-fold from 2025 to 2035 and reach about $12.3 billion globally. Commercial vehicle sales are expected to remain relatively flat throughout 2019. However, the industry will experience strong revenue growth from the implementation of advanced driver assistance technologies in trucks combined with emerging revenue streams from new service solutions.

In conclusion, some of the key trends to watch out for in 2019 will be the proliferation of digital freight brokerage solutions, and electric and autonomous driving solutions. This will be accompanied by a slew of new product launches by truck OEMs, including the Freightliner Cascadia Level 2 autonomous vehicle in North America as well as IVECO’s New Stralis NP460 LNG in Europe.

For more information on the Global Medium-Heavy Commercial Vehicle Market Outlook, 2019, please contact Silpa Paul, Team Leader – Commercial Vehicles, Mobility at SilpaP@frost.com

About Silpa Paul

Silpa PaulSilpa Paul, Team Leader – Commercial Vehicles, Mobility industry analyst. Paul has published more than 30 research studies covering trucking and logistics.

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