HP Innovation Issue 21: Summer 2022 | Page 23

Starting in 2025 , every European truck manufacturer will have to meet the target for emissions from all the new trucks registered in a calendar year as well as the stricter norms that will take effect in 2030 . The silver lining is that the new regulations will offer incentives for making and buying zero-emission vehicles as well as the flexibility to balance the emissions of different vehicle types in each manufacturer ’ s portfolio .

On the other side of the Atlantic , in August 2021 , the Biden administration unveiled ambitious new rules for vehicles from the model year 2023 that , if enforced , long term could cut about one-third of the carbon dioxide produced every year by the United States . However , most of the changes are regulatory , rather than legislative , which means that everything the Biden administration has announced could be reversed in the future by another government with different goals .

Meanwhile , 15 American states , led by California , are trying to restrict the use of trucks with internal combustion engines . In November 2020 , they announced floors for sales of zero-emission vehicles by every manufacturer . These state-level actions likely will result in a steady increase in demand for zero-emission vehicles regardless of the national political climate .

Economics

At the micro or buyer level , the use of zero-emission vehicles by fleet operators is nearing a tipping point . The total cost of ownership for battery electric vehicles will attain parity with that of conventional vehicles soon , between 2023 and 2025 , and fuel cell electric vehicles should follow suit between 2028 and 2030 . ( See Exhibit 2 .) In an industry where margins have always been waferthin , electric powertrains must become cost competitive if fleet owners are to adopt them .

are trying to restrict the use of trucks with internal combustion engines , following California ’ s lead .

Several factors will improve green vehicles ’ cost competitiveness soon . Regulation is likely to increase the cost of diesel over the next decade to a level that cannot be offset by the development of more efficient engines . And battery costs will fall to under $ 100 per kWh by 2030 , which suggests that battery electric vehicles will outperform diesel in almost every market . Even green hydrogen , which is hardly available today , could start retailing for $ 5 per kilogram by 2030 due to technological developments as well as scale , making the use of fuel cell batteries financially viable . And in markets like the US , governments will provide tax credits to make it cheaper for companies to build electric trucks and for operators to buy them .

Together , these developments will result in battery electric and fuel cell electric vehicles gaining market share , with battery electric vehicles increasingly used on short-haul and regional routes by 2025 and fuel cell electric powertrains used on long hauls by 2030 . While the economics of fuel cell electric vehicles in Europe and China will be comparable to those of conventional powertrains by 2030 , it likely will happen later in the US , where diesel costs are lower than in most other countries . Thus , as stated earlier , the zero-emission vehicle adoption rate could rise by 2030 to as much as 51 % in Europe , 25 % in the US — more if new policies force a bigger shift — and 20 % of all new vehicles sold in China . J

EXHIBIT 2

Battery electric vehicles will achieve cost parity with diesel trucks by 2025

FUEL CELL COST > 1.6 €/ KM IN 2020 FUEL CELL COST > 1.4 €/ KM IN 2020 FUEL CELL COST > 1.3 €/ KM IN 2020

0.7

Source : Boston Consulting Group ( BCG ) analysis : What the Shift to Zero-Emission Vehicles Means for Commercial Transportation Note : Total cost of ownership ( TCO ) in EURO / km for heavy-duty trucks ( those over 15 tons ) assuming annual driving of 160,000 kilometers in the US and China and 120,000 kilometers in Europe .

HP / INNOVATION / SUMMER 2022 21