THE FUTURE OF COMMERCIAL VEHICLES HOW NEW TECHNOLOGIES ARE TRANSFORMING THE INDUSTRY By Andreas Jentzsch, Joel Janda, Gang Xu, Peter Wiedenhoff, and Andreas Girisch ig changes are brewing in the What does this mean for OEMs? What bets Bcommercial vehicle market. The should they make, given their strengths, advent of new types of powertrains, rapid and what capabilities will they need? How progress in autonomous driving technol­ can they set themselves up to maintain cur­ ogy, and the explosion in connec tivity are rent operations while navigating the transi­ spurring unprecedented changes in tion to a very different future? attitudes and expectations—of buyers as well as of the general public—and in regulation. We anticipate that by 2030 The Sales Outlook for these developments will have fundamen­ Commercial Vehicles tally transformed the market. In 2018, there were about 120 million com­ mercial vehicles on the road worldwide. Of To understand the pace of adoption of the 14.7 million units sold last year, 11.4 these evolving technologies and the impli­ million were light commercial vehicles cations for OEMs, we interviewed more (LCVs) and 3.3 million were either heavy­ than 100 global manufacturers, industry duty trucks (HDTs) or medium­duty trucks suppliers, and experts. We also created a (MDTs). bottom­up adoption model to forecast trends in key markets. Overall, commercial vehicle sales are grow­ ing slowly and will level out over the next While our research suggests that adoption ten years. From 2018 through 2030, we an­ rates for new powertrains and autonomous ticipate annual growth of 2%. Growth vehicles will vary by region and use, con­ across the world’s major markets—the US, nectivity is a different story. It is quickly be­ Europe, and China—will be negligible. coming ubiquitous, and the new business Overall industry growth will depend on models that it spawns will shift the sources smaller markets throughout the rest of the of profit throughout the value chain. world, where the modernization of road networks and commercial transportation is drawback of batteries is their output an ongoing project. relative to weight, which restricts payload. Large­scale adoption for As OEMs gear up production of new­ long­distance applications (that is, for energy vehicles, and as existing vehicles MDTs and HDTs) is unlikely. that use internal combustion engines age, adoption will begin in earnest. For exam­ Beyond 2030, battery­powered electric will ple, by 2030, we expect that more than most likely become the most mainstream 35% of all LCVs sold will be new­energy of the three technologies globally, at least vehi cles, of which more than 70% will be for shorter­distance uses. For one thing, as battery­ powered electric vehicles. Roughly a zero­emissions solution, battery­powered 26% of all HDTs will be new­energy vehi­ electric vehicles enjoy broad support from cles. In the meantime, a handful of technol­ the public and from policymakers. For this ogies will be in use, as battery technology reason, battery technology has captured and new­vehicle manufacturing evolve. most of the global research effort in the passenger and commercial vehicle markets and continues to improve rapidly, producing The New-Energy Powertrains increasingly high­energy­density batteries. Three new­energy technologies show espe­ Altogether, battery cell manufacturers have cially strong commercial promise: publicly committed to adding 1000 GWh of capacity over the next ten years. • Liquefied natural gas (LNG). Its fast refueling ability and its support for long­range transport are among LNG’s Adoption Trends by Region most appealing qualities. Yet its com­ The US, Europe, and China are at the fore­ mercial viability depends on the front of implementing these new power­ presence of an ample natural supply or train technologies. Adoption rates will vary, on public policy support, as well as on of course, by regional market, by vehicle adequate infrastructure (fueling type, and (importantly) by use—whether stations and a distribution network). for deliveries in town or between cities, These conditions favor adoption in and whether for long­haul or closed envi­ countries such as the US and China. ronments, such as construction sites and harbors. • Hydrogen fuel cell. Its advantages— zero emissions, quick refueling, and Such factors as energy supply, manufactur­ long­range capabilities—make this ing capability, infrastructure, and govern­ expensive technology attractive. But ment policy (regulation as well as econom­ the viability of hydrogen fuel cell ic incentives) will help determine which powertrains depends on the availability powertrains dominate in each vehicle class of cheap electric power, which makes in each major market. By 2030, across key countries such as China and France the markets, the overall adoption of new­energy most likely candidates for adopting it. vehicles for LCVs will exceed 35% and for Fuel cell technology will be most HDTs will be around 26%. favorable for long­distance uses because of its quick refueling abilities. The US. By 2030, new­energy vehicle adoption in the US will be about 25%. (See • Battery-powered electric. Fully battery­ Exhibit 1.) That figure is lower than the powered electric vehicles tapping a corresponding percentages anticipated for zero­emissions power source are ideal other leading markets, largely because of for LCVs used for in­town, short­distance the downward influence of HDT sales: it driving. By 2025, the total cost of will take longer for the new powertrains to ownership for such vehicles will drop be viable in HDTs, given the US’s huge below that for vehicles that run on travel distances and lower population internal combustion engines. A major density. Overall, the biggest chunk of Boston Consulting Group | The Future of Commercial Vehicles 2 new­energy vehicle sales will be for in­ Europe. New­energy vehicles will account town LCVs (36% of total LCV sales); battery for a bigger share of total sales in Europe powertrains will account for the lion’s (31%) than in the US, but a slightly smaller share of new­energy vehicle sales (31%) share than in China. (See Exhibit 2.) As will within that segment. Battery­powered be the case in the US, most new­energy electric vehicles will also lead new­energy vehicle sales in Europe will be for in­town vehicle sales for LCVs used for inter­city LCVs (46% of total sales, with battery­ delivery and for MDTs used for in­town powered electric vehicles accounting for delivery. This isn’t surprising: battery­ 40% of that quantity). powered vehicles can be charged over­ night, and all of these driving uses involve Battery will be the hands­down winner short­range travel. among the four technologies for LCVs and MDTs in in­town use because distances are For medium­ and heavy­duty trucks— relatively short and the necessary infra­ especially for long­haul transport—LNG structure is easy to build. For inter­city and fuel cell come out ahead. However, al­ MDT use and long­haul HDTs, LNG will though the supply of LNG is abundant, its prevail (at least in regions with sufficient distribution infrastructure is not yet well supply, such as Italy), but hydrogen fuel developed. In specific corridors such as cell will be a serious contender. California, LNG will be viable, but it will not become mainstream nationally. China. As noted, China will have a slight Long­distance transport in the US is often edge over Europe in new­energy vehicle transcontinental, which favors the use of sales (33% of total commercial sales) by hydrogen fuel cell technology. Battery isn’t 2030. (See Exhibit 3.) The nation’s lead yet up to the task; and furthermore, its position in battery­powered electric charging infrastructure will take longer to vehicles will be due in large part to policy establish. support that has spurred the rise of a Exhibit 1 | Forecast of New-Powertrain Adoption Rates in the US (2030) ight coercial ehicles ediudut trucs eavy-dut trucs tons) tons) tons) Adoption rate () 31 13 13 9 7 7 6 7 4 4 4 4 4 4 1 1 2 2 S In-town Inter-city In-town Inter-city Long-haul Special use ASS AN TOTA SAS 36% 12% 17% 19% 24% 14% 25% illion units Battery NG Fuel cell Priority use case Sources: BCG market model; IHS Markit; BCG analysis. 1 “Special use” refers to use in closed environments, such as construction sites, mine sites, and harbors. 2 Bubble size indicates relative size of segment; percentage represents new-powertrain adoption rate in segment. Differences in totals are due to rounding. Boston Consulting Group | The Future of Commercial Vehicles 3 Exhibit 2 | Forecast of New-Powertrain Adoption Rates in Europe (2030) ight coercial ehicles ediudut trucs eavy-dut trucs Adoption tons) tons) tons) rate () 40 18 10 8 8 6 5 6 7 4 4 4 5 5 5 1 1 1 S In-town Inter-city In-town Inter-city Long-haul Special use ASS AN 46% 16% 24% 16% 19% 19% 31% TOTA SAS illion units Battery NG Fuel cell Priority use case Sources: BCG market model; IHS Markit; BCG analysis. 1 “Special use” refers to use in closed environments, such as construction sites, mine sites, and harbors. 2 Bubble size indicates relative size of segment; percentage represents new-powertrain adoption rate in segment. Differences in totals are due to rounding. Exhibit 3 | Forecast of New-Powertrain Adoption Rates in China (2030) ight coercial ehicles ediudut trucs eavy-dut trucs tons) tons) tons) 43 20 20 11 11 11 7 6 5 6 6 3 3 3 1 1 1 2 S In-town Inter-city In-town Inter-city Long-haul Special use ASS AN TOTA SAS 47% 15% 24% 22% 33% 19% 33% illion units Battery NG Fuel cell Priority use case Sources: BCG market model; BCG analysis.