Alastair has over 10 years’ experience leading research activities in scaled, high-growth industrial and technology markets. At Interact Analysis he is responsible for electric trucks and buses, autonomous trucks and off-highway electrification.
The challenge for the commercial vehicle market is one of scale – because it represents a far smaller number of assets than the passenger car market, it has always played ‘second fiddle’ to its larger market cousin, often borrowing solutions and technology developed for that market. This has left the market fragmented, ill-served and not maximizing its potential.
Every commercial vehicle OEM and most suppliers have their own, proprietary telematics offering. In addition, there is a wide array of aftermarket telematics solutions and third-party software vendors offering apps and platforms for data management.
For fleet operators, particularly those with a mix of vehicle brand and age, there is an overwhelming choice of telematics solutions that often don’t integrate well with each other (if at all). Furthermore, solutions are typically ‘paid for’ and fleets are ill-equipped to be able to fund more than one or two business tools (if any at all).
Ideally, Interact Analysis believes the industry would benefit from a period of consolidation in the commercial vehicle telematics market with a focus on developing a handful of global platforms that provide simple access to high quality solutions, whilst facilitating easy payment options. This would expand the value of telematics to fleet operators and truly allow the market to reach its maximum potential.
There is some evidence that the commercial vehicle market is trying to drive toward more complete solutions. Geotab is often held up as an example of a major telematics platform that integrates multiple apps and services from different vendors. It was also interesting to note the announcement this week by Daimler Trucks North America about an investment in Platform Science, a telematics platform provider that enables integration with multiple different applications.
Seemingly, every passenger car OEM and their suppliers are rushing headlong into a future of automated and autonomous vehicles. In the short term, the benefits are safer cars with more convenience. In the longer term, the ambition is an end to road fatalities with the opening-up of mobility-as-a-service, where self-driving cars provide mobility on demand regardless of vehicle ownership or the ability to drive.
The future for automation in commercial vehicles seems less clear. Whilst driver and vehicle safety can and should be improved with a swathe of assistance features, the aim of replacing drivers altogether threatens millions of jobs and would be unpalatable in many economies.
Given the complexity involved in achieving full autonomy in all conditions and all situations and the political headwind created in replacing millions of jobs, it seems full autonomy is going to be limited to very specific, high value use cases for commercial vehicles.
Off-highway applications such as port drayage and distribution yards provide the perfect use case for commercial vehicle autonomy in the short to mid-term. Why? There are three main reasons – first, they are typically simple, repetitive routes which are ‘easy’ to automate. Second, these areas typically ‘segregate’ other users (people or vehicles) making automated vehicles less risky. Third, specific employment in these areas is typically low, so the negative perception of job replacement is lessened, particularly if employees can be redistributed or it prevents employees working in dangerous areas.
Vehicle Architecture – breaking the mold
The ‘traditional’, basic truck chassis architecture has changed very little in decades. Nor has the fact that this basic architecture is then heavily customized by OEMs to fit multiple vocations. In industries where there is product stagnation and higher cost associated with customization, there is potential for disruption.
A break toward fully electric trucks provides an opportunity for powertrain innovation that hasn’t been seen in decades.
Beyond the obvious need to replace an engine with an electric motor, battery and other components, there is significant innovation that can be brought to the chassis design and the software control layer.
One notable trend that Interact Analysis has been observing and expects to continue is the adoption of modular ‘skateboard’ architecture, similar to those used in passenger car vehicles.
These skateboard platforms for commercial vehicles have largely been developed by start-ups and are largely focused on the light commercial vehicle segment. However, there is evidence from the likes of the REE/Hino partnership that these could migrate to higher weight classes. These ‘standardized’ platforms would make use of passenger car components (which, through scale, are less expensive) and could be customized for different applications more easily either through modularity or software control. Skateboard architectures could be the technical solution to revolutionize the commercial vehicle market.
With a push to electrification (and accompanying concerns about performance) and ever stricter emission standards, overall vehicle efficiency will become a significant trend in the next 5 years. Interact Analysis would characterize this in the following ways:
- Driver behavior
- Powertrain efficiency
- Vehicle efficiency
- Route/routing optimization
Driver behavior is often one of the largest determinants in how fuel efficient a fleet is. Interact Analysis believes that driver training/mentoring, particularly using telematics, will be one of the keys to improving vehicle efficiency and, with the use of electric vehicles, maximizing range and battery life.
Powertrain efficiency refers to the overall system efficiency of the components used to propel a vehicle. For ICE vehicles, powertrain efficiency is highly tuned and future gains are marginal at this point. With new electric drivetrains, the opportunity to improve system efficiency (and range) is large at this point – systems can be better integrated with one other, new technologies – such as inverter chemistry – will boost performance and software can be used to intelligently control and adapt systems to respond to different conditions, with a focus on peak optimisation. Interact Analysis believes that the nascent electric commercial vehicle market is at least 2 vehicle generations – 5 to 7 years – away from optimal performance.
Vehicle efficiency refers to solutions, outside of the powertrain, that improve overall vehicle efficiency. These might be improved aerodynamics, measure to ensure tyres are fully inflated, or the use of more efficient auxiliary systems like electrically powered APUs. Interact Analysis sees these measures as relatively simple, low cost routes to improving vehicle efficiency, minimizing fuel spend and improving profitability. We expect to see significant traction for these types of technology in the next 5 years.
Route optimization (the ‘Travelling Salesman’ problem) is complex – the most efficient way to deliver to multiple locations. It is a problem that fleet operators, particularly those involved in eCommerce must overcome. Interact Analysis forecasts there will be an increasing focus on both route optimization and the delivery process to improve fuel efficiency and/or improve EV range.
Electrification (but how and where?)
It is clear at this point that there is a major shift happening in the commercial vehicle market. Every major OEM and a large number of startups have developed fully electric commercial vehicle models ahead of both a TCO and regulatory push to introduce these vehicles.
What is less clear is where these vehicles will be introduced and what powertrain will be used. Vehicles for use in urban environments are likely to electrify first – city level regulatory conditions, a focus on brand sustainability and the low mileage of these vehicles makes them a strong choice to electrify.
For vehicles with more intense duty cycles or longer-range requirements, the move to electric will be more challenging. If these vehicles are to electrify, then Interact Analysis believes that hydrogen will be a critical fuel choice for the future.
Somewhat of a buzzword, servitization generally means the process by which a traditional asset ownership model is replaced by an ongoing service model where a user/customer pays for access to a service that fulfills their need, as opposed to buying outright a physical asset. Typical features include a guaranteed level of product ‘uptime’ or ‘availability’.
Servitization is gaining traction in a number of industrial applications – aerospace engines being one classic example. It also goes without saying that, in automotive, the likes of Uber and others are pushing hard on replacing the traditional vehicle ownership model with a shared, service based model where the user pays per trip or per month for access to ‘mobility’.
Interact Analysis forecasts that this type of model will eventually supplant the traditional ownership model for commercial vehicles, with implications for both fleet operators and vehicle manufacturers. For fleet operators the idea is that, for a monthly spend, their freight/transportation needs are met, including fuel, servicing, maintenance and a guarantee on vehicle availability and uptime. This simplifies the operational process for them, makes costs more predictable and, in theory, reduces cost overall (since they should only pay for exactly what they need). For OEMs, the challenge is perhaps more intense – they have to step away from being producers of assets to being service focused. Whilst new vehicle demand should become more predictable, overall volumes may fall since those vehicles in service might be better maintained and last longer. They may also find that their dealer base is disrupted since a service based model is better delivered through an online platform.
The King is Dead, Long Live the King!
One of the riskiest predictions for the future centers around the competitive landscape. Interact Analysis believes that the commercial vehicle market – from suppliers to OEMs to fleet operators – is ripe for disruption, not least because of the 6 other trends outlined in this insight.
With the rapid growth of eCommerce, companies like Amazon have redefined how we purchase goods and, as a result, how those goods reach us. It is clear that Amazon is heavily invested in creating the most efficient warehousing and distribution system, which is why it has major investments in robotics, warehousing and, with Rivian, distribution vehicles.
It is Interact Analysis’s contention that the competitive landscape seen now will be radically different in 10 years’ time. OEMs and suppliers that don’t react to the other trends in this insight risk consolidation, becoming little more than low-value assemblers or, worse yet, going out of business. Fleets that don’t adopt the newest technologies or pursue a relentless focus on efficiency risk having their business models disrupted by those offering a service model.
For more information on our commercial vehicle research, or to speak with one of our analysts, please contact us on email@example.com.