February 14, 2020

Heavy-Duty Trucks - European Alternative Fuel Update

8TRA GR, CNHI, MAN GR, PCAR, VOLVB SS
By Sylvain Gavard
European heavy-duty truck customers remain uninspired by current LNG and electric solutions, and dealers believe upcoming fuel-cell solutions are most likely to help OEMs meet their 2025 CO2 emission targets.
  • European demand for alternative-fuel heavy-duty trucks remains very low in all countries
  • LNG, electric solutions seen as unattractive because of lack of refueling/charging infrastructure, high purchase prices, lack of incentives, unclear resale value, limited range for electric heavy-duty trucks

Background
Automobile manufacturers are pushing pure electric and hybrid vehicles in order to avoid fines by the European Union if they do not meet CO2 targets by 2021. However, for heavy-duty truck manufacturers, the reduced CO2 emissions targets are not scheduled to begin until 2025. (CO2 targets are for a 15% reduction starting in 2025, rising to 30% in 2030, compared with 2019 levels.) In order to meet the upcoming targets, truck manufacturers have been assessing a variety of different technologies, including liquefied natural gas (LNG), pure electric, hybrid and fuel-cell technologies. 

LNG Heavy-Duty Truck Sales Below Dealers’ Expectations
Western European sources interviewed for OTR Global’s January Heavy-Duty Trucks report said demand for trucks powered by liquefied natural gas (LNG) are the most attractive alternative-fuel solution so far, but sales of LNG trucks remain below their weak expectations because of unattractive pricing, the lack of LNG refueling stations throughout Europe, potentially low resale prices and the end of the German toll incentives for gas trucks in 2020. A French Volvo AB dealer said, "You see articles about LNG trucks being sold, but when you look behind the scenes, you discover the trucks have been offered to the customers in order to get some press coverage…. The reality is that we do not have enough stations in France to offer safe refueling to freight companies." A German Scania (Traton SE) dealer said, “The hype for natural gas is already over, it seems.”

Low Electric Truck Sales, Limited to Light, Medium Trucks
Sources said pure electric and hybrid solutions remain only attractive for light and medium trucks, because of limited range, high purchase prices and the lack of public charging stations. The most optimistic source said, “I think electric trucks are the next really big thing, even for heavy-duty trucks, and I feel optimistic. Still, for now, we are only targeting them in a few countries, those where demand is likely to develop first: Belgium, the Netherlands and Germany. But we expect low demand. Not all customers can afford a 300,000 euro [heavy-duty] electric truck.”

Promising Fuel-Cell Technology Not Ready Yet
Two sources in Germany, where political discussions on climate change are the strongest in Europe, said fuel-cell technology was the only alternative they saw as viable for heavy-duty trucks. However, sources said there are no fuel-cell trucks available on the market. A German Paccar Inc. DAF dealer said, “Fuel-cell trucks present the greatest potential in the long run, but it’s not available yet.” A French Scania dealer said, “There still is no clear view on alternative fuels for heavy-duty trucks, and that makes customers reluctant to invest. So far, the overall new tech market is no more than 5% of demand. When you remember forecasts that were made two years ago, we are way below those projections.”  

Additional Quotes
“In the current difficult market conditions, I cannot see freight companies investing in a hazardous thing like alternative fuels.” French Volvo dealer

“In view of the current difficult market situation [for truck sales], it is difficult to say who is best positioned with alternative fuels. Dealers are wondering if and when the overall trend for truck demand will reverse.” Polish MAN dealer

“Sales of natural gas trucks are slowing because there are lower incentives.” Italian Iveco CNH Industrial N.V. dealer

“The technological change is seen as a pain by manufacturers, as they have not mastered the new technologies, and have to work with subcontractors.” French DAF dealer

“We believe in electric and hydrogen trucks. Demand will develop first with [light and medium] urban trucks, and we still believe that by 2025, 3% of our total truck production will be electric. We don't believe in CNG or LNG because those are still fossil solutions, and they require even more infrastructure than electricity” U.K. DAF dealer

“MAN demands that we show at least one electric light truck to our customers in 2020. They have not imposed a quota so far -- it's only for demo -- but I think they will impose quotas later this year.” French MAN SE dealer

“I see some electric waste trucks being sold… that is interesting, but globally, all announcements on alternative fuels are being pushed back.” French DAF dealer

“Volvo's new electric trucks will be available at the end of 2020. They are not yet available, and the question is whether customers will accept the huge price difference with a normal truck. We'll need help from the government.” U.K. Volvo dealer