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Fuel for Thought: The future of EVs and alternative propulsion in the commercial vehicle market

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Aside from the supply shortage, one of the biggest buzzwords in
the commercial vehicle industry over the past few years has
revolved around electric vehicles (EVs). Everyone has an opinion on
whether EVs are a fad or here to stay but what does the data say
specifically about EVs in the commercial industry? Even through the
supply issues of the past few years, there were more EVs registered
commercially through August 2022 than all of 2021.

Since 2015, 53% of new US EV registrations have been Tesla.
However, when we remove Tesla and specifically look at fleets,
cargo vans make up 37% of EV registrations and are being registered
to companies such as Amazon, Walmart, and FedEx. All these
companies have developed partnerships with Rivian, Ford, and
Brightdrop, respectively, with investment or order commitments.
Last-mile delivery is a great fit for EVs owing to the hub and
spoke nature of delivery. These vehicles are not traveling long
distances and can go back to the same hub to charge every night.
These registrations are happening largely in states such as
Florida, California, Arkansas, and Illinois. California is leading
the way for EV growth through availability of more subsidies and a
better charging ecosystem. Illinois is also offering additional
incentives. In states such as Florida and Arkansas, a large
concentration of vehicles have been registered by Amazon and

Another segment of the commercial vehicle population that is
benefiting from EVs is buses. Buses are nipping at the heels of
cargo vans, currently making up 36% of EV registrations. Similar to
cargo vans, buses can go back to the same hub every night to charge
and are traveling distances that fit in the current EV battery
range. School buses in particular travel a known route in the
morning, have hours of downtime that can be used to recharge, then
known routes in the afternoon. Recently, Canada announced 100%
zero-emission trucks and buses by 2040 and USD550 million was
earmarked for those incentives. These incentives offer up to
USD200,000 off of the purchase of certain trucks and buses. In the
United States, the Infrastructure Investments & Jobs Act (IIJA)
increases tenfold the funds available to transit buses and charging
infrastructure to USD5.5 billion. Washington DC, California, and
New York are becoming hot spots for both school buses and
non-school buses. In this category, Lion Electric, New Flyer, Blue
Bird, Proterra, and Freightliner are introducing new EV models.

In addition to cargo vans and buses, there is also news related
to Class 8 electric trucks. Tesla stated that in December it would
deliver to PepsiCo the first of a 100-unit order of the Tesla Semi.
These BEV trucks will likely qualify for a USD40,000 incentive
through the Inflation Reduction Act recently signed into law. Tesla
joins more traditional Class 8 truck builders such as Daimler,
Volvo, and Traton in offering EV semis. Tesla is not the only
newcomer to electrification. Though Tesla and Rivian are the two
most recognizable disruptors in the commercial vehicle market, they
are not alone. EV startup companies have focused on the commercial
vehicle segment as a launching pad for new electrified products.
Cargo vans, buses, and Class 8 semis are the products of choice,
followed by pickups and incomplete chassis. The driving factor
behind these product choices is undoubtedly the significant growth
in e-commerce that began before the COVID-19 pandemic and
accelerated to even faster growth during and following the
pandemic. Online ordering of goods has dramatically increased the
demand for cargo vehicles for last-mile delivery, as well as
interstate transport.

Alongside delivery vans and buses, the commercial vehicle
industry also includes Class 4-8 medium and heavy trucks. Used for
hauling goods, in their own right, or for pulling trailers, these
vehicles are generally above the gross vehicle weight rating (GVWR)
of most production vans. Although registrations of zero-emission
vehicles (ZEVs) in this part of the market are still extremely low,
the pace of adoption in the current decade is set to accelerate. By
2030, as much as 17% of the new truck market is expected to be
ZEVs. Four primary reasons for the expected ramp-up are product
availability, OEM strategies, regulation, and the expected
evolution of the price-cost relationship.

The definition of a ZEV may vary and is anchored in local
regulation. Generally, ZEVs include pure battery-electric trucks,
as well as fuel-cell electric vehicles (FCEVs). Some jurisdictions
may also group some hybrid electric vehicles (HEVs) with these
primary ZEV types. Some ZEVs are produced each year by converters,
which start with an existing OE chassis. More recently, the OEMs
themselves have begun to offer dedicated ZEVs to the market
directly. Whereas new registrations of Class 4-8 OEM-installed
systems in the US finished at fewer than 100 units in 2021, new
registrations of OEM-produced ZEV trucks in 2022 approached double
that in the first eight months alone. Compared with four brands
with ZEV products tracked by S&P Global Mobility’s new
registrations statistics in 2021, seven brands recorded new
registrations of ZEV trucks in year-to-date (YTD) 2022.

In the United States, all the top OEMs are publicly traded. The
evident broadening in the ZEV truck product rollout is by design
and aimed to help the OEMs reach their climate goals, as
communicated to investors. Diverse solutions are available where
ZEV solutions make the most relative sense. These range from
stepvans at the bottom end of the weight range to larger, two-axle
box vans in the middle and daycab tractor trucks at the upper

Manufacturer climate ambitions coincide with encouragement by
regulators and improvements in technical solutions. For their part,
regulators in the US have been particularly active at the
individual state level, where California leads the way in setting
ZEV adoption mandates and plans for public-sector support. However,
California is not alone, and 15 other states and jurisdictions have
announced plans to mimic California’s goals and approach.
Manufacturers are to meet goals stepwise, with gradual progress to
the end goal each year. Together, these jurisdictions have the
potential to promote critical mass in US ZEV volume by the early
part of the next decade.

ZEV offerings in the market today are, in many cases, well above
the purchase prices of comparable diesel- or gasoline-powered
vehicles. Improvements in manufacturing, vehicle design, and
adoption will help reduce costs incrementally over time. Financial
support for producers and truck users may help to further grow ZEV
demand. How much support in the form of public money and other
resources required will depend, in part, on the state of the ZEV
technologies themselves and, in particular, their cost and
suitability in different trucking vocations. While some vocations,
such as long-haul trucking, may be very challenging for ZEV trucks
even in the long term, others could see cost of ownership parity
approach more quickly, for example, stepvans used for parcel
delivery. S&P Global Mobility looks at these and related issues
in our forthcoming report Reinventing the Truck 2022,
produced in conjunction with our Commodity Insights team.


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This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.

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