Commercial Vehicles March 2021

Electric Commercial Vehicles: How Will The Biden Administration Impact The Market?

Rueben Scriven
Rueben Scriven

Rueben is one of the warehouse automation industry’s leading analysts and is a regular speaker at leading industry events. He has moderated several panel discussions on the topic of commercial vehicle electrification and has also appeared on CNBC, providing insight on the global electric bus market.

Earlier this month, we updated the Interact Analysis global hybrid and electric truck and bus forecast to reflect the change of US administration, along with several other factors which we think will have a long-term impact on the electrified commercial vehicle market. Within this insight, we’ll discuss:

  • What major assumptions have changed because of the new administration 
  • Which segments will be most affected by the change of administration
  • Why there’s a reason for cautious optimism
A reason for cautious optimism 

Whilst the Biden administration will certainly benefit the US electrified commercial vehicle industry, it’s unlikely that it will result in a huge change. For example, Biden’s administration recently stated that it would phase out gas powered government vehicles. However, Biden failed to provide a timeline or strategy to do so.

What’s more, just over one third of the government’s vehicle fleet is made up of postal vehicles which Oshkosh recently won a large contract to replace over the next 10 years. Whilst many thought this contract would be made up of predominantly electric vehicles, it later transpired that just 10% of the vehicles would be electric. It is clear that a transition towards electric government vehicles won’t happen overnight. As a result, we encourage people to take the Biden administration’s assertions with a pinch of salt and focus more heavily on the fundamental drivers for electrification; namely TCO, subsidies and corporate commitments.

Annual registration forecast for medium and heavy-duty commercial vehicles

Electric buses to receive a boost 

That being said, we expect that the US battery electric bus market will see a significant boost as a result of the Biden Administration (including both transit and school buses). From a TCO perspective, electric school buses are one of the most uneconomical segments to electrify which is why our previous forecast assumption was so pessimistic. Our previous forecast assumed that once the VW mitigation fund was depleted, so too would be the demand for electric school buses. Biden’s commitment to clean school buses has given us the confidence to raise our forecast projections for this segment.

Furthermore, Alexandria Ocasio-Cortez and several other house and senate representatives put forward the Build Green Act which aims to spend $500 billion on electrifying public transit over the next decade; $150 billion of which would be set aside for electric rail, vehicles and charging infrastructure. Whilst the bill stands little chance of making it through congress according to Bloomberg, the group plans on pushing the Biden Administration to include some of the measures in the soon-to-be announced package tackling infrastructure, climate goals and economic growth.

It should be noted, however, that while Biden has signalled that the US will electrify its entire school bus fleet by 2030, the supplier base has expressed concern over the feasibility of such a commitment. This would in effect require approximately 50,000 electric buses to be delivered each year for ten years straight. Given the immaturity of the market, it will take several years to develop the supply chains necessary to transition entirely to battery electric school buses. This transition will be further constrained by the Buy American federal procurement obligations.

We expect that the US battery electric bus market will see a significant boost.

Californian Advanced Clean Trucks (ACT) rule more achievable 

Another segment we see as having a more positive prognosis is the battery electric medium-duty truck market. In order for OEMs to meet the targets for the Californian Advanced Clean Trucks (ACT) Rule, they will need to start selling a higher percentage of zero emission medium- and heavy-duty commercial vehicles. The medium-duty segment will be the main focus of this policy and with the new administration in place, we’re more confident that these ambitious targets will be achieved. That said, the majority of the demand for battery electric medium-duty trucks will come from California along with other states which adopt the ACT rule. Whilst the policy framework targets a penetration of 36% of zero emission medium and heavy-duty trucks sold in 2030, the penetration across the entire US will be significantly lower.

To find out what other assumptions have changed in our latest forecast update, contact Rueben Scriven directly: rueben.scriven@interactanalysis.com

Posted in: Commercial Vehicles.