Climate Insight Series
As global efforts to combat climate change accelerate, decarbonising the heavy duty vehicle (HDV) sector, namely trucks and buses, has become increasingly vital to reducing greenhouse gas (GHG) emissions from road transportation. Despite representing less than 10% of vehicles on our roads, HDVs produce around 35% of road transport emissions and their impact continues to grow. In this article we explore the key pathways to decarbonisation, including advances in battery electric vehicle technology, the evolution of charging infrastructure, and the role of government policy and corporate commitments. By examining current trends and future projections, we aim to highlight the opportunities and challenges in transitioning this critical sector toward a low-carbon future.
The pathway for decarbonisation and the story so far
The International Energy Agency (IEA) reports that the transportation sectorUnder the International Energy Agency’s Net Zero Emissions Scenario, emissions from Heavy Duty Vehicles need to fall by c15% from 2022 to 2030 to be aligned to a 1.5C pathway. Though the pace of decarbonisation is slower than for many other sectors, reflecting the difficulties the sector faces, a substantial increase in the sale of electric and hybrid HDVs is required. To achieve this, by 2030 over 50% of bus sales and 37% of heavy truck sales would be plug-in hybrid or electric.
While it’s important not to place too much weight on any one scenario, clearly the sector is behind where it needs to be. In 2023 electric buses accounted for 3% of overall bus sales and figures for trucks were substantially lower (less than 1%).
These sales are unevenly distributed geographically, with China accounting for most sales of both electric buses and trucks. Electric bus sales in China have been over 50% of total sales since 2016, and several other European countries also exceeded this level in 2023. For electric trucks, China accounts for more than 70% of the market, again followed by Europe, though sales of electric trucks make up a far smaller proportion of overall truck sales in these regions.
A note on technology
Global sales of low emissions HDVs are dominated by battery electric vehicles (BEVs), which accounted for over 90% of sales in H1 20241. Plug-in hybrid models only accounted for 3% of sales and fuel-cell HDVs account for around 5%. As battery technology has improved, it has made BEVs far more viable for longer haul applications, potentially squeezing out future fuel cell HDVs as a more competitive option for long haul trucking. Though fuel cell vehicles may become more competitive over time and may be able to service specific use cases in future, we have mainly focused on BEVs in this article given that dominance.
What are the issues?
Sector heterogeneity
The HDV sector covers a wide range of different vehicles and use types, impacting both the expected pace of decarbonisation and its economics. For example, city buses, with pre-determined routes and low daily mileages, are far more attractive candidates for electrification today relative to heavy freight trucks, with high daily mileage and less predictable route patterns. In addition, within the truck segment, unique vehicle configurations (in terms of engine size, gear box, tyre size etc) are far more common relative to passenger vehicles.
Batteries
The technology to decarbonise HDVs is fundamentally the same as for passenger vehicles, only at a larger scale. Given the far greater size and weight of HDVs, the size of batteries needed to power electric HDVs were prohibitive in terms of additional weight and price, which is a key reason why passenger vehicle transition has progressed much faster.
However, battery technology has improved significantly over the past decade, with the energy density of batteries used in vehicles improving by around 6% annually since 20102. Manufacturers expect battery energy densities to continue to improve over time as engineering expertise continues to improve.
Historical and estimated changes to battery pack energy density
Source: BloombergNEF.
Note: NMC = nickel manganese cobalt oxide; NMCA = nickel manganese cobalt aluminum oxide; NCA = nickel cobalt aluminum oxide; LFP = lithium iron phosphate; LMFP = lithium manganese iron phosphate; LMO = lithium manganese oxide; Na-ion = sodium ion.
As well as energy density improvements, battery chemistries have also evolved. There are a range of different chemistries currently used for electric HDVs but by far the most common is lithium-ion batteries with lithium iron phosphate (LFP) cathodes. The market share for LFP is also increasing over time, which tends to be a cheaper alternative to alternative battery chemistries.
These improvements in battery technology, combined with lower raw material prices and increased capacity have caused battery prices to fall significantly over the past five years.
Historical volume weighted average lithium-ion battery pack prices by sector
Source: BloombergNEF. Note: Passenger battery-electric vehicle figures are a global average.
Total cost of ownership
Road transport accounts for nearly two-thirds of global land freight, making it a vital component of economic activity in most countries. Ultimately, the costs of transporting goods impacts the prices of those goods, influencing competitiveness. Therefore, if electric HDVs are to displace internal combustion engine (ICE) HDVs, they must compete on cost.
Currently the purchase price of electric HDVs is between 1.5x-3x higher than their ICE equivalents. However, these capital costs are coming down over time, driven in large part by those declining costs of battery technology and in some segments of the market, cost parity between battery trucks and diesel equivalents may come by 2030.
However, the operating costs of electric HDVs are lower and this positively impacts the total cost of ownership i.e. the lifetime costs of the vehicle. When viewed on this basis, medium duty electric trucks used in urban settings are already cost competitive in many parts of the world and according to BloombergNEF research, long-haul trucks are expected to become cost competitive within the next five years.
Total cost of ownership of Class 4-5 trucks with range of 200 miles (320km) in the US
Source: BloombergNEF. Note: For diesel, fuel costs are $3/gallon and $6/gallon; for electricity, fuel costs are $0.2/kilowatt-hour and $0.75/kWh. ’BEV’ revers to battery-electric vehicle
Total cost of ownership of Class 8 trucks with range of 500 miles (800km) in the US
Source: BloombergNEF. Note: For diesel, fuel costs are $3/gallon and $6/gallon; for electricity, fuel costs are $0.2/kilowatt-hour and $0.75/kWh; for hydrogen, fuel costs are $5/kilogram and $15/kg. ‘BEV’ refers to battery-electric vehicle, and ‘FCV’ is fuel-cell vehicle.
Infrastructure
Charging infrastructure must also be in place to support a rapid acceleration of the transition. In theory, electric HDV can use the same charging infrastructure as passenger vehicles but the large battery size, and thus longer charging times, makes it impractical in practice. Therefore, a dedicated network of HDV charging infrastructure is needed to accelerate the transition, and while installation of HDV public charging networks is increasing, large scale development is still in early stages.
Some practical solutions are straightforward. For example. for medium duty trucks, operating in urban environments, with daily driving distances of less than 200km per day, dedicated chargers at truck depots means these vehicles could charge overnight in the depot without having to use public charging infrastructure.
Other more innovative solutions to charging infrastructure are being developed, such as battery swapping and electric road systems. Battery swapping can be done in as little as five minutes and potentially provides other benefits such as spreading power demand and charging when electricity prices are lower, reducing operating costs. This is used extensively in China for electric trucks, with over 50% of the electric trucks sold in China in 2023 being battery swappable models. Electric road systems allow vehicles to charge as they are driving, reducing the need for standalone charging infrastructure. The technology for this is less developed, however, in a world’s first, Sweden has made a commitment to electrify 3,000km of its motorway system by 20353.
What are the solutions?
Policy
Policy can help or hinder the transition, but well-designed policy plays a crucial role, such as the case of Norway and its adoption of EV cars. Despite political challenges in some regions, policies supporting the take up of electric HDVs are rising.
Potential policies to incentivise accelerated take up of electric HDVs include:
- Subsidies to reach upfront purchase costs
- Carbon taxes on fuel
- Mandates that require a proportion of all HDVs sales to be electric in the short term
- Emissions standard regulation on the carbon intensity of new vehicles sales
All have been used to some degree by different countries. A recent report funded by the UK Government’s Department for Energy Security & Net Zero as part of the Economics of Energy Innovation and System Transition (EEIST) programme4, suggests that EV mandates and emissions regulations can be particularly powerful in increasing the market share of electric HDVs and that the impact of other policy measures can be reinforced when used in combination with these.
Corporate commitments
Many large truck manufacturers in Europe and North America, have made a commitment to Net Zero and/or have set targets around reducing tailpipe emissions from the vehicles they sell. For example, Daimler Truck, Traton and Volvo have all targeted at least 50% of sales to come from ZEVs by 2030, in some markets.
Manufacturers have also been building up internal expertise in electric HDVs in recent years; developing different technologies in parallel and typically procuring battery cells from external suppliers.
However, truck sales from most of these manufacturers remains low and they have some way to go to meet their ZEV sales targets.
Zero-emission vehicle sales shares for Volvo, Daimler, Traton and Paccar
Source: Bloomberg Terminal, BloombergNEF, company reports. Note: Shows cumulative share of sales within a year.
Conclusion
Like the automotive sector, the transition of HDVs to electrification is complex and requires coordinated effort from policy makers, manufacturers, energy providers and consumers. There has been progress – our sector analysis shows that solutions exist and are being adopted to varying degrees across geographies – and cost barriers continue to improve as producers innovate.
Electrification of the transportation sector continues to be a crucial contributor to carbon reduction, where electrifying all transportation models could reduce CO2 emissions by up to 80%5.
Source
1 Commercial_ZEV_Factbook.pdf
2 Commercial_ZEV_Factbook.pdf
3 Sweden is building the world's first permanent electrified road for EVs to charge while driving | Euronews
4 Driving the Transition to Zero-Emission Trucks > EEIST
5 https://www.sciencedirect.com/science/article/pii/S2666791623000179
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