October 16, 2018

Heavy-Duty Trucks - Alternative Fuel and Automation Update

By Sylvain Gavard
Demand for electric heavy-duty trucks in the United States and Europe is likely to remain at low levels during the next two to three years because of high prices, lack of autonomy and infrastructure, and solutions presented at the IAA truck fair in Germany have not boosted U.S. or European outlooks.

United States
EV Still Leads Alternative-Fuel Options

As in OTR Global's July 19 Alternative Fuels and Automation snapshot, 12 fleets and component suppliers expect electric vehicles (EV) to be the alternative-fuel option that will grow the fastest during the next two to three years, while just a handful expect hybrid technologies (electric or fuel cell) to advance quickly.

Although several sources said established, deeper-pocketed OEMs, such as Daimler AG, are expected to benefit the most, others said start-ups, such as Thor Technology Corp., were more nimble but unlikely to be able to produce trucks in large enough numbers to gain a real foothold. "I recently spent a week in Silicon Valley talking to several start-ups. The problem is that none of them are truck OEMs, nor do they understand the truck markets, fleets or driver needs, although I will say they have no fear," a large fleet maintenance executive said. "Thor does batteries, tech and software. They have a good thought process but not a practical understanding. Embark [Inc.] doesn't know anything about trucks. They're all software and likely will rely on Paccar [Inc.] or Volvo [AB] to sell their product or be acquired." Another source said, “Thor and start-ups will be more nimble. The older guys have more process and will likely be slower out of the gate. Thor will do well at the start but [fleets are conservative], and it remains to be seen who will use a start-up. I think they will continue developing technology and then get bought by a Paccar or Navistar [International Corp.]." Several also mentioned Toyota Motor Corp., which is developing partnerships with companies like Paccar to test its hydrogen fuel cell technology at ports. Others mentioned similar potential partnerships in the wings.

Sources said testing ahead of actual production would likely take most of the next few years, likely accompanied by improvements in battery technology. "Alternative fuel trucks will likely come first to drayage lanes where these trucks fit range needs," one fleet executive said. "We are betting that in two years' time both battery cost and weight will be cut in half, so perhaps that will give a boost in 2021. The manufacturers are in earnest, trying to get numbers of how many they'll sell and how to price the vehicles." Other sources were not as certain that the infrastructure needs would be met so quickly, limiting near term adoption for over-the-road uses; several said that as long as diesel remains priced low enough, fleets will stick with it and near-zero technology, like natural gas. "CNG is maintaining. Diesel will continue to predominate. EV is limited by duty, geographies,” a fleet executive said. A component supplier said, "It will come down to infrastructure and ROI. It's still an older generation that runs the truck market. The way they do things and until they are completely comfortable with it, as long as the fuel prices remain digestible, that's where we are going to be at for the long haul."

EV Solutions at IAA Fair Remain Unattractive for Long Haul
Western European and U.S. sources who attended the biennial IAA Commercial Vehicle trade show (Europe’s largest trade fair for transport, logistics and mobility) in September in Hanover, German, said they were surprised by OEMs’ efforts to present their alternative fuel offerings, especially EVs. A Benelux Volvo dealer said, “Every manufacturer showed its full electrification solutions at the IAA -- that was impressive.” A U.S. component supplier said, "At IAA, compared to two years ago, electrification was the big deal, whether a tier-1 supplier -- such as ZF [Friedrichshafen AG] or Eaton [Corp. PLC] -- involved with mobility and trying to figure out what can [his] company do to help with the electrification of vehicles, or OEs or even Tier 2 suppliers trying to figure out what place his product has in EV.”

However, European and U.S. sources said nothing really new regarding EVs was presented by OEMs during the IAA, and no European source returned from the trade show saying demand for electric heavy-duty trucks would develop faster than they anticipated before the show. Most European sources said it could take 10 years before attractive EV solutions for heavy-duty trucks appear on the market. A German Scania AB dealer said, “There was nothing that blew my socks off.”

Similar to U.S. sources, European sources also said electric solutions to date were viable only for medium and light trucks, because EV solutions for heavy duty trucks remain too highly priced, while not offering enough range capacity. A German MAN SE (Volkswagen AG) dealer said, “Everybody is advertising, but as long as price is three-fold, it lacks sense to me to move away from diesel.” A German DAF dealer said, “The battery doesn't deliver. With a reach of 100 km and the outlook of hanging on the socket for hours, it is not ready for the market.” A U.S. component source said, “Two years is not realistic for EV technology to reach the necessary point for significant adoption in long-haul trucking in the U.S. Even if the technology becomes available, diesel is still not expensive enough to drive adoption of alternative fuels in a meaningful manner. To paraphrase Scania's CEO, 'This is not low-hanging fruit.'" A U.S. fleet maintenance executive said, “IAA had the biggest displays of batteries. Right now, they are way too heavy for long haul. I don't think that will resolve in two years. When Volvo told me the significant price for Vera, I told them they didn't need a very big production facility.”

Natural Gas Solutions Remain Most attractive, but Demand is Extremely Low
European dealer sources said that natural gas solutions remained the most attractive to them for heavy-duty trucks, at least in the short to medium term. Yet, similar to the July findings, European sources said demand for trucks using gas solutions was still very low because of unattractive pricing and that the lack of gas infrastructure also heavily weighing on demand. A Benelux Volvo dealer said, “Demand for alternative fuels is still very, very, very low right now. I think LNG will develop the fastest, while electrification will be the next thing within 10 years.” A German Volvo dealer said, “Gas stations are already in the planning process, but so far, there are only two sea ports in Europe that are prepared to receive liquid gas: Rotterdam [Netherlands] and Peenemünde [Germany].”

Iveco, Volvo Slightly More Advanced with Natural Gas Solutions
European sources, whether they attended the IAA or not, said CNH Industrial N.V.’s Iveco was slightly more advanced than its competitors in natural gas solutions, followed by Volvo. However, most sources said it was impossible to say which OEM was best positioned for alternative fuel offerings -- be it gas, electric, hybrid or fuel cell solutions -- because demand remains extremely low. A German Scania dealer said, “No OEM is leading. All have got gas and electric solutions.” Another said, “We don't do many sales, and we don't have anything that others would sell, either.”

Platooning Tested, but Autonomous Trucks Remain a Distant Topic
Dealers in Western Europe were more interested in the topic of autonomous trucks because of the growing problem of driver shortages, but although promising platooning tests are still being conducted in Germany, Poland and the United Kingdom, sources who attended the IAA truck fair said autonomous trucks solutions would not appear on the market in the short to medium term because of technical challenges. European and U.S. sources who attended the IAA said no significant advancement was displayed during the fair regarding autonomous trucks, while the mosaic of different road legislation in the European Union is also a major challenge to be addressed. A German MAN dealer said, “Platooning is being pushed. It is supposed to start being used in 2020, but the legislation is not yet in place and I don’t know when it will be. The test road Munich-Nuremberg seems to work well, though.” A U.S. component said, “Automation is big news or big noise if you prefer, but I didn't see anything really new at IAA. ... Fleets want to know how to repair these trucks, is it successful, will it not allow tampering by drivers?” Another U.S. component supplier said, “Martin Daum [a member of the Board of Management of Daimler Trucks & Buses] said platooning is not going to work. That was a big shot at Peloton [Technology].” 

Additional Quotes
Alternative Fuels
United States

"It's a race. The race is on. Freightliner has a viable electric with its eCascadia. Nikola [Motor Co.] is progressing. Natural gas is still in there. It will all depend on who wins in the infrastructure department. Electric probably stands out as less onerous. Both fuel cells and CNG need EPA-mandated infrastructure." - U.S. component supplier

"There are a vast number of companies competing in the EV space. A lot will fall out. Everybody is trying electrification. OEMs will dictate how this goes. Both Daimler and Volvo have plans. Start-ups have technology but no real production capacity. The price of diesel will also play a part. You've got diesel, LNG and hydrogen technology to compete with. I still think it is 10 years before it gains a 20% market share." - U.S. tier 1 component supplier

Western Europe
“It was only gas and electric solutions that had focus on the IAA. That was to be expected and there was nothing new that we wouldn’t have seen before.” - German Scania dealer

“We see some push for all electric, but their autonomy is too small. It's really impossible to say which technology will emerge in coming years, as new products are coming. I feel gas is good, but will need many years to be operational.” - French Scania dealer

“The only technology that is good to go is gas, but that is not totally new. LNG and CNG. The issue here is still logistics. Without the gas station network, it remains difficult.” - German DAF dealer

“I'm testing hydrogen adapters, and I am positively surprised by its efficiency. It could be an interesting solutions, as full electric is not a viable option in my opinion.” - French Volvo dealer

 “A few weeks ago, we were charging some electric trucks at our base. This caused the electric grid to shutdown. ... This is not building trust." - French dealer

“Iveco and Volvo are most advanced when it comes to LNG, and basically all manufacturers are working on electric solutions. Batteries are still a major issue, though.” - Spanish Volvo dealer

“Iveco is furthest in gas, I think.” - German Scania dealer

“I am very cautious with hydrogen engine talks. I think it's quite dangerous for trucks, and unsafe.”  - French Scania dealer

 “Mercedes may have an advantage with its buses fleet on hydrogen.” - French Volvo dealer

On Automation
United States

"Platooning testing will pick up this year. I still see it on specific lanes in the next two years. The second unit won't need a driver, which is where some of the cost savings will occur." - U.S. Fleet

“Collision mitigation has become very smart. It can go all the way to zero mph, and then restart the truck. Lane departure cameras are getting smarter. Electric assist steering will be married with lane keep in the next two to three years." - U.S. Fleet

"We are testing artificial intelligence product with all the OEMs. Some are asking for additional capacities, like the ability to detect substance abuse. Some OEMs say interest is driven for insurance purposes, but some are more interested in prevention. It seems critical across the board. We are seeing launch indications between now and 2021." - U.S. component supplier

“On autonomous there is lots of discussion around levels 3 and 4. Bendix [Knorr-Bremse AG] and WABCO [Holdings Inc.] are leaders. MobileEye [Intel Corp.] is positioned to be. If insurance companies determine that autonomous equals safer roads, especially if premiums are linked to it, then we'll be surrounded by it. It is a mistake to think it can take the driver out. These will make roads more safe, but there will still be incidents. Do we want to accept a 90% reduction in incidents and allow the remaining 10% to be decided by a machine. Level 3 is available now, but it is optional and as long as it is optional it will remain expensive. It will be at least five years before a meaningful level, say 20%, is reached." - U.S. component supplier

Western Europe
“There are a few pilot projects and OEMs showed films of what could be. Trucks are fitted with technology, but the legislation is not there yet. Platooning would be easiest and fastest to implement, but it’s not legal right now.” - German Scania dealer

“In Nuremberg there has been an autonomous subway in operation for about five years, that is on rail tracks and still on trains the technology is still not being widely used. So, it will take quite a while.” - German Scania dealer


Contributors: Enrico Gualandi, Birgit Heitfeld, Fabrice Pozzoli-Montenay, Inge Schlaile, Roksana Ulatowska and Julie Woodruff

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