Discover insights from S&P Global’s report: Reinventing the
Truck 2023

Around the world, disruption is coming to the medium and heavy
commercial vehicle (MHCV) industry. An increased focus on climate
change, strict regulations, and technological innovations are
expected to change the future of this industry. In the 2023
Reinventing the Truck (RTT) update, experts from S&P Global
Mobility and S&P Global Commodity Insights have partnered to
identify and address major questions facing the industry. This
report navigates a landscape in flux. Growing optimism for
electrified vehicles is weighed against the backdrop of practical
challenges. S&P Global’s scenario-based approach strives to
strike a delicate balance between the two. Updates this year focus
on improved prospects for natural gas and hybrid trucks and
challenges around the infrastructure buildout for the MHCV energy
transition, among other things.

Background

As governments worldwide depend on zero-emission vehicles (ZEV)
to meet climate and energy goals, trucking will undoubtedly play a
significant role in the upcoming energy transition. Though medium
and heavy commercial trucks represented less than 4% of on-road
vehicle sales in 2023 (excluding three-wheelers), according to our
Commodity Insights Team, they account for 39% of road transport
liquids demand and 40% of on-road CO₂ emissions,
respectively. This report examines the impact of changes in
technology and regulations on truck demand, propulsion trends,
powertrain shifts, energy demand, and regional climate goals over
the next three decades. It focuses on mainland China, Europe,
Japan, and the United States. The RTT report presents two forecast
scenarios to 2050: Inflections and Green Rules. Inflections
represents a continuation of the status quo, where balancing
decarbonization ambitions must be weighed equally against adoption
constraints. Green Rules, on the other hand, is an alternative
scenario that envisions a strong energy transition driven by
increased focus on climate change and technological advancements.
In this scenario, the clean energy revolution transforms the MHCV
fuel mix.

Inflections: Balancing MHCV decarbonization ambitions
with practical challenges

• Around the world the adoption of battery-electric and fuel-cell
  electric MHCVs varies in pace, and catalysts for change will occur
  gradually.
• In some markets, the zero-emission vehicle (ZEV) sales share is
  expected to accelerate compared with forecasts published 12 months
  ago.
• Diesel alternatives will extend beyond ZEVs, with natural gas
  and hybridization also expected to contribute to the future
  powertrain mix.
• Downside risks to the ZEV forecasts are considered, and any
  changes in the political landscape and proposed regulations are top
  of mind.
• Government policies and initiatives jump-start investment
  activity, but their success is not yet certain.

Green Rules: A clean energy revolution transforms the
MHCV fuel mix

• Market forces and investment activity signal significant
  acceleration in zero-emission alternatives. Governments will
  continue to support the energy transition with new funding
  opportunities combined with the implementation of new
  regulations.
• Countries around the world vigorously pursue the energy
  transition to create a competitive edge in the global
  marketplace.
• Increased demand for clean technology will prompt a robust
  market response, leading to increased supply and lower prices.
• OEM investments and industry innovation strongly pivot toward
  ZEVs.

Additional insights into the new questions we answered and
drivers of change established in the latest RTT report are included
below. We also offer a glimpse into key outcomes from the long-term
forecast and discuss our tracking of energy transition signposts,
highlighting the key conclusions of this year’s report, which is
now available for subscribers.

Exploring catalysts for change and answering new
questions

Each year, as we discuss a new Reinventing the Truck study, we
reflect on key developments and milestones from the past 12 months.
We also anticipate looming trends and catalysts for change that are
on the horizon, this year’s report was no exception.

• Alternatives such as natural gas and most notably hybrid
  electric vehicles (HEVs) show higher forecasts compared with
  previous RTT reports. The sales share of HEVs has increased due to
  strong pressure to comply with upcoming regulations, concerns about
  potential battery raw material shortages, high costs of ZEVs and,
  in many cases, underdevelopment of the ZEV ecosystem.
• Battery cost (dollars per kilowatt-hour) forecasts in our MHCV
  total cost of ownership (TCO) have been increased. However,
  regional differences are important to note, we expect lower battery
  costs in mainland China compared to other markets.
• The costs associated with the adoption of zero-emission
  technology was closely compared to the existing diesel propulsion
  technology, OEMs cannot afford to subsidize the purchase costs of
  ZEVs, any support to alleviate cost burdens would be a key signpost
  to track.
• Regulations in Europe and the United States are complicating
  operations and strategic decisions for global OEMs. Recent changes
  aim to promote cleaner diesel trucks and electrification, but they
  come with additional costs and complexity for internal combustion
  engines (ICEs) and the broader ecosystem.
• In some areas of the global truck market, the ZEV sales share
  in the Inflections scenario is expected to accelerate compared with
  forecasts published 12 months ago. However, it is important to
  point out that these increases are somewhat targeted, with the
  biggest coming in the late 2020s and early 2030s led by
  battery-electric vehicles (BEVs) and fuel-cell electric vehicles
  (FCEVs) in the United Sates and Europe.
• Investment in ICE and corresponding improvements in fuel
  efficiency differ by scenario. In the Green Rules scenario, OEMs
  somewhat abandon their investment in ICE technology.
• Signposts are documented and are key to the ZEV adoption in
  each scenario. The study evaluates necessary trends and
  developments required for these forecasts to materialize.
• The infrastructure for battery-electric and hydrogen-powered
  trucks is complex and requires significant investment. The newest
  RTT report provides insights into the challenges of zero-emission
  MHCV infrastructure and presents potential scenarios for its
  implementation. For instance, by 2030, it is estimated the United
  States may need to have 60,000 to 100,000 MHCV chargers available
  to accommodate the outcomes of our BEV forecast, depending on
  charger utilization.

The long-term impact on oil demand

The adoption of alternative power sources for medium and heavy
commercial trucks will significantly impact the entire logistics
ecosystem and economies worldwide. Oil demand will be a metric
severely affected. Beyond the obvious uptake of ZEVs, several
factors contribute to the decline in oil demand. It’s crucial to
emphasize that no single reason independently drives demand down;
rather, it’s the cumulative impact of multiple factors such as:

• The continued improvement in fuel efficiency of diesel-powered
  trucks. We are in an era especially in the United States and
  Europe, where tightening emission regulations will force OEMs to
  invest in more fuel-efficient technology.
• Advancements in the trucking and logistics ecosystem are
  expected to enhance industry efficiency putting downward pressure
  on the demand to add trucks to the fleet.
• In the long term, growth in truck sales will be partly offset
  by a modal shift in freight movement toward other modes of
  transport such as rail or water. This trend will be particularly
  evident in Europe and mainland China.
• Trucking forecasts are closely tied to economic performance in
  their local markets. Any slowdown in average gross domestic product
  (GDP) growth may adversely impact demand to add new trucks to the
  fleet.

Conclusion

The Reinventing the Truck report unveils two plausible scenarios
amidst a changing landscape. The different scenario storylines
unfold narratives of how the future market landscape will evolve
and how clean energy technology will transform the MHCV fuel mix.
Each insight in the report emphasizes a consistent takeaway: change
is inevitable.

The report is
available now for subscribers.
Please
contact us for more information on the latest Reinventing the
Truck report!

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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• Source: http://www.spglobal.com/mobility/en/research-analysis/charting-the-course-for-the-future-of-trucking.html