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.