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.
- Peak sales of ICEs to happen soon in some markets
- Battery electric powertrains to drive replacement, but hydrogen fuel cell important too
- Expect ‘minimally’ viable investments in plants and engine R&D as suppliers prepare for electrification
In Interact Analysis’ most recent assessment of the global commercial vehicle market it has found that in several markets the sale of commercial vehicles with an internal combustion engine will peak before 2030.
A combination of government policies and subsidies, fleet operator sustainability goals, low-emission zones, and improving total cost of ownership are helping to drive a long–term transition toward alternatively fuelled commercial vehicles. However, the rates at which different markets will ‘move electric’ are very different.
In APAC, peak combustion engine commercial vehicle registrations (including hybrids) are forecast to occur in 2027 (See Figure 1). In China, this point is much earlier – 2022, in fact (See Figure 2). Strong growth for ICE commercial vehicles in India and Southeast Asia will wipe out much of the ‘success’ that China is able to achieve from decarbonizing its transportation system.
In EMEA, peak combustion engine commercial vehicle registrations are forecast to occur in 2024 (See Figure 3). However, depending upon the trajectory of recovery from COVID-19 and the focus on green tech, this could happen sooner.
In North America, there is no peak forecast for the registration of combustion engine powered commercial vehicles – the market is forecast to continue to grow during our forecast period to 2030 (See Figure 4). A lack of subsidies and low fuel prices make the TCO position for electrified vehicles uncompelling. It is unclear what impact the Biden administration will have on the market; however, a policy position that requires several hundred thousand vehicles to be electrified ever year would be required before 2030 to cause a peak for ICE sales.
Are suppliers ready for peak ICE?
As engine sales peak and then decrease, engine manufacturers will struggle to justify major investments in R&D or engine plants. If they do, they will likely partner to de-risk the capital cost or find they must invest to meet stricter emission standards. Recent examples include:
- GM and Isuzu to invest $175m in Ohio plant to expand production of DMAX heavy–duty diesel pickup engines
- Cummins and Navistar announce new long-term agreement – “”…will offer International customers the most competitive and fuel efficient engines in the market while reducing our investment requirements to meet future emissions regulations,” said Phil Christman, President, Operations, Navistar.”
Ahead of a shift toward electrified powertrains, suppliers have been investing in M&A activity and partnerships to make sure they have both the production capacity and technology to offer low and zero emission solutions.
As peak engine volumes are reached, there will likely be a continuing shift away from investment in combustion engine technology and manufacturing. Only minimal levels of investment can be expected to keep plants operational or to allow development of technologies that support future engine emission standards. As engine production volumes begin to decrease we may see some vendors pull back from the market or reassess the viability of production sites that currently struggle to be profitable.
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