With a background in computational biology, Rueben Scriven joined Interact Analysis two years ago and leads the warehouse automation and on-highway commercial vehicle research areas. Rueben has spoken at some of the leading industry events and moderated several panel discussions on the topic of commercial vehicle electrification. He’s also appeared on CNBC to provide insight on the global electric bus market.
The COVID-19 pandemic has provoked a wide-ranging discussion about the future of road transport. The ongoing climate crisis meant that pollution from vehicle emissions was already high on people’s agendas. The pandemic brought this into sharp relief as people abandoned public transport for fear of infection, and, during lockdowns, looked out onto traffic-free unpolluted streets and gazed up at clear blue urban skies. Coupled to this was the realization that the presence in the atmosphere of high levels of NO2, which inflames and weakens the lungs, has most likely been a contributor to the pandemic death-rate. Our perception of the world has changed, and how we get about poses major challenges.
In this insight, I take a look at likely scenarios in the transport sector, as strategists and manufacturers grapple with the “new normal”.
The Bus Market: a COVID casualty facing major challenges
With passenger numbers decimated by the COVID crisis (down between 40 and 60% in Germany, for example) the bus industry has taken a near existential hit. There have been widespread cuts in bus services, but the bus is an essential mode of transport, most notably in urban agglomerations. The reality is that bus companies and manufacturers will survive but are going to have to factor in considerations such as social distancing, ventilation, digital ticketing and cleansing measures in the design and deployment of their vehicles. As an indispensable form of public transport, essential to keeping cities functioning, governments national and local will have to take up the baton and subsidize bus companies which could be facing the double challenge of reduced passenger numbers, and increased frequency of services to ensure passenger safety. OPEX models of ownership are likely to provide the majority of the funding.
The recent push towards electrification of bus fleets may result in a decline in electric bus tenders, compared to our previous forecasts. In Italy, for example, the National Strategic Plan for sustainable mobility, had set aside €3.7 billion of funding to invest in alternative energy buses, including electric buses and hybrids. Now, for the short term, priorities have changed, and funds are being directed towards the purchase of conventional vehicles, as well as electric vehicles, as part of a strategy to kick-start the economy.
But the long term future of electric buses looks assured with many politicians and mayors publicly stating that they want to ensure the improvement in clean air in urban areas seen during the Covid lockdown is not temporary.
The Heavy Truck Market: road haulage kept countries going during the pandemic, but there are struggles ahead
Road hauliers in many countries have played an important part in the fight against Covid-19. In China, for example, trucks delivered millions of tonnes of essential medical supplies, as well as vital household goods at the height of the pandemic. But demand nosedived as the virus took hold, and lockdown measures were introduced. Only a matter of weeks ago, in certain provinces of China, a mere 10-20% of trucks were operating. The good news, though, now, in China, is that up to 80% of trucks are back on the road.
However, it is clear that the European freight market will sustain a major hit over the rest of this year. This damage could be prolonged into the longer term, if the virus tips countries into economic recession, as many forecasters predict. The truck market in the US is particularly vulnerable, as the pandemic continues to rage and local lockdowns reduce the demand for trucking, and truck manufacturers themselves see reduced orders and production lines grinding to a halt. The likelihood then is that fewer trucks will be needed, and hauliers will invest less in expensive new technology.
Our forecasts for this are not yet complete, but it is instructive to look back at how the previous 2007-2009 Great Recession affected sales of trucks. For example, data from Oak Ridge National Laboratory shows that, in 2009, US class 8 truck sales (that is, trucks weighing over 33,000 lb) were down 37% compared to 2007 levels – with just 95,000 units sold.
Light Duty Trucks
The Covid-19 pandemic saw an explosion in the numbers of online shoppers. Roads may well have been empty of cars during lockdowns, but last-mile delivery vans proliferated. For many shoppers, the online experience during lockdown will be habit-forming over the long term. But the gas-guzzling white vans blocking our streets are likely to be a short-lived phenomenon, functioning, as they mostly do, in crowded urban areas where air quality is an issue. Low emission zones (which are proliferating particularly in Europe) and truck electrification go hand in hand. Last mile vehicles travel short distances from a hub. Charging infrastructure is concentrated in the hubs and so there is no requirement for on-street charging infrastructure. Many electrified last-mile vehicles have already reached TCO parity with diesel trucks. The closer the fulfilment centre is to urban populations, the greater the pressure for delivery vehicles to go electric.
This was highlighted in a recent case involving UK-based Ocado, which announced it would be opening a distribution hub in London located next to a primary school. This prompted furious protests from parents and local inhabitants. In response to the backlash, Ocado announced that it would be electrifying its delivery fleet for the distribution hub with the addition of 100 electric delivery vans. Big players such as Amazon and Deutsche Post have already shown the way where last-mile electrification is concerned, taking major steps to electrify their last mile fleets.
Any constraints to this market are likely to be on the supply side, rather than the demand side, with vehicle builders being unable to keep up with demand.
Powertrains: the inevitable march towards full electric.
Mild hybrids: We expect that mild hybrids will occupy a fairly large share of the vehicle market by 2030, especially within Europe. Whilst we do see a customer demand for mild hybrids, we expect this market will be driven primary by the suppliers who will look to incorporate mild hybrids into their product portfolios in order to meet stringent CO2 emission regulations.
Full hybrids: COVID-19 has raised the stakes in Europe regarding the implementation of low emission zones. The case is strong in such urban areas for the parallel hybrid vehicle, which can operate as an electric vehicle inside low emission zones, and as an ICE vehicle outside. These vehicles mesh well with geo-fencing technology. However, there does not seem to be a big demand in the US for hybrid vehicles. OEMs there are focussing on full electric vehicles.
Full-Electric vehicles: COVID-19 will cause a belt-tightening across nearly all sectors of industry, at least in the short term. This includes electric vehicle manufacturers, who are likely in the present contracted climate to divert capital from research and development for new vehicles and concentrate instead on existing vehicle ranges. This could be a good opportunity for electric vehicle start-ups, as there will be less research and development “competition”. Venture capitalist backers of EV start-ups won’t be so concerned about a short-term slump as they are in it for the longer haul. They are not looking for short-term profitability. Established OEMs will be under pressure from shareholders to avoid taking such risks. Expect in the longer term, however, for full-electric to be back on track to become the powertrain of choice for most transport sectors.
The Challenges Ahead
A fearful public, half-empty buses, stalled research and development, reduced investment, high unemployment and with it depleted disposable personal income – these are the challenges facing a transport sector which prior to COVID-19 looked to be making huge technological advances in a world striving to become greener. These challenges cannot be met by companies and private investors alone. Governments must take a lead where stimulus of the sector is concerned. Our locked-down reaction to the pandemic showed us how quickly nature can recover, so we know it is worth the effort. The European Green Deal is a sign that the world is prepared to move in the right direction.