Navigant Research Blog

Alternative Drivetrains Poised for More Growth with Fleets

Dave Hurst — September 26, 2013

The trucking and fleet vehicle industry is facing some enormous challenges but is seeing strong growth this year.  The long-haul trucking industry is facing a well-publicized driver shortage, and all trucks are seeing increasingly strict regulations for emissions, fuel economy, and driver safety.  With the continued slow rebound of manufacturing, automobile sales, and construction, the fleet industry is also starting to feel a bit more comfortable.  Since gasoline and diesel prices are relatively stagnant and economic prospects are improving, is it possible that the momentum felt in the alternative fuel vehicle market for fleets is likely too slow?

The answer to that question is likely to be different for the different types of drivetrains.  There is a tremendous amount of excitement and growth in the natural gas vehicle market, and that momentum continues to be built on a strong economic foundation.  Both the compressed natural gas (CNG) and propane truck markets are generating payback periods that can be as short as about 1.5 years in high fuel use applications.  These short paybacks encourage adoption and can help quickly cover infrastructure as well.  The smaller vehicles that have higher fuel economy see longer paybacks and rely more heavily on government or company efforts to reduce environmental impact – a more tenuous position as the economy rebounds – but fleet budgets remain tight.

Liquefied natural gas (LNG) trucks are more economically challenging.  This is not only a refueling infrastructure challenge.  The trucks also have longer payback periods than CNG trucks with more variance in LNG prices in different parts of the country.  LNG trucks are increasingly likely to feel competitive pressure for fleet dollars coming from CNG rather than diesel (though that is not to understate the competition from diesel).  From a logistic perspective, because of new truck driver “hours of servicerules, it may be that long-haul LNG trucks that have a driving range of 980 miles are not likely to be used significantly different than a CNG truck that gets 870 miles of range.  Trucks are likely to only be used for about 500 to 550 miles before switching drivers, so even with two drivers LNG and CNG long-distance trucks are likely to see similar distances before refueling is required (or at least accessible).

Electric vehicles in fleet markets remain heavily contingent on gasoline and diesel prices.  The cost of operation for a plug-in electric vehicle (PEV) is significantly lower than that of liquid or gaseous fuels, but the acquisition costs remain significant and, therefore, payback periods can be long depending on the drive cycle and the cost of fuel.  The passenger car PEV market is seeing falling prices, but the medium and heavy duty truck market continues to see high costs and low production numbers.  The result is that fleets are likely to have a tough time making a strong case for moving to truck PEVs with long payback periods.  However, PEV passenger cars can be economically beneficial for fleets without easy (or inexpensive) access to CNG or propane, as the cost to install recharging infrastructure remains below refueling infrastructure costs of either fuel.

Overall, the alternative drivetrain market is finding fuels that fit specific niches without significant overlap except in a few specific cases.  It is with this perspective that fleets and manufacturers will gather in Phoenix, Arizona for the Green Fleet Conference.  It will be interesting to see whether current and anticipated gasoline and diesel prices, driver regulations, and potential labor shortages cast a pall over the euphoria.

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