As the market for new energy vehicles continues to surge in most major economies, the competition has become fierce in the field of new energy passenger cars. However,a specific type of vehicle, commercial vehicles, including buses and trucks, is still a blue ocean market, with plenty of opportunities. The commercial vehicle industry is still in its early stage in pursuing electrification, and there is a lot of room to explore different technological routes.
Under the "double-carbon" goal, commercial vehicles, as the main sector of the automotive industry to help reduce carbon emissions, are ushering in a period of opportunity for green transformation.
China ranks first in the world in road and rail transportation, and vehicle transportation accounts for 99% of the country's passenger traffic and 84% of cargo traffic, which in total means that passenger traffic contributes 100 billion passengers per year and cargo traffic contributes 38 billion tons per year. China's oil import dependence exceeds 70%, of which around 48% is used for road transportation consumption.
Commercial vehicles are worthy of noticing not only because they possess huge environmental impacts with more energy consumption. By the end of 2021, China had about 33 million commercial vehicles of all types, accounting for 11% of overall vehicles owned yet contributing more than 50% of the carbon emissions of automobiles. Therefore, the carbon reduction target forces the entire automotive industry, especially the commercial vehicle industry to embrace green transformation.
Commercial Vehicles: Definition and Industry Value Chain
Commercial vehicles are automobiles that are designed and technically characterized for the transportation of people and cargo. Commercial vehicles are commonly classified into two categories: buses and trucks, of which trucks mainly include micro trucks, light trucks, medium trucks and heavy trucks according to the different carrying capacity. Buses, according to the number of people carried, mainly include micro buses, light buses, medium buses and large buses, etc. Secondly, divided by the usage of each product, commercial vehicles can be categorized into three groups of cargo, people and special vehicles, where special vehicles refer to vehicles with special functions to undertake special transport tasks of the car, for instance, sanitation special vehicles, engineering special vehicles, special vehicles, business special vehicles, transport special vehicles, military special vehicles and so on.
The leading new energy commercial vehicle companies in the industry have a comprehensive industry chain, covering many important links, penetrating upward into core components such as powertrain, battery PACK and thermal management system, and forming cooperation with many downstream customers to provide scenario-tailored products and solutions, such as developing scenario-specific autonomous driving systems to create autonomous transportation systems. In addition, these companies provide services covering the whole life cycle of products such as charging and switching, maintenance, vehicle network remote monitoring, vehicle data analysis, etc., gradually forming a closed-loop advantage of the whole industry chain and promoting the integration of upstream and downstream resources.
When we summarize the market performance and characteristics of new energy commercial vehicles, it is found that the user demands of new energy commercial vehicles are still different from traditional fuel vehicles in the short term. Due to the characteristics of the application scenarios, and technical and ecological challenges of new energy, commercial vehicle users still have strong concerns about new energy infrastructure and product value. Therefore, in addition to the high penetration rate of policy-driven new energy urban buses, the penetration rate of new energy trucks is still low and has a large market space.
New energy commercial vehicles stand as a major growth driver for the commercial vehicle market, showing positive future growth potential.
In recent years, China's commercial vehicle market has been affected by a combination of factors, such as subsidy retreat and the epidemic. Therefore, the market has stagnated after sustained growth, with 2020-2022 portraying even negative growth rates. However, entering 2020, we have seen a continued increase in the penetration rate of new energy commercial vehicles, reaching nearly 10% in 2022. This figure implies it has approached the point of large-scale commercial operation.
We believe against the backdrop of a weakening overall market; new energy commercial vehicles will continue to grow strongly and will become the main driver of the commercial vehicle market in the future, with further breakthroughs in core technologies in the areas of powertrain, intelligent network connectivity and autonomous driving. The penetration rate of new energy commercial vehicles is expected to reach 41.0% in 2026. China's new energy commercial vehicle penetration rate is expected to exceed 20.0% in 2024, which is expected to complete the 14th Five-Year Plan target ahead of schedule. According to Frost Sullivan, China's new energy commercial vehicle sales will grow from 121,000 units in 2020 to 1,443,000 units in 2026, with a CAGR of 51.1%.
Battery electric vehicles (BEVs) are the main component of new energy commercial vehicles.
In the Chinese commercial vehicle sector, electrification is now the generally accepted technological path to low-carbon development. Electrification mentioned in this report refers to the ratio of the sum of sales of battery electric vehicles (BEVs), plug-in hybrid electric vehicles (PHEVs, including add-on vehicles) and fuel cell vehicles (FCVs) to the total annual new vehicle sales of the category in a given year.
In terms of electrification types, BEVs are the largest component of new energy commercial vehicles, with new vehicle sales increasing year by year, while sales of PHEVs have been declining continuously, and FCVs are still in the demonstration operation period, with sales of only several thousand units.
Examination of Three Different Electrification Technological Routes
PHEVs: Policy support, high powertrain efficiency
Energy-saving and New Energy Vehicle Technology Roadmap (2.0) includes for the first time proposed targets for fuel consumption reduction for buses and trucks, and recommends hybrid technology as an important technological route for the next 15 years based on the actual situation in China. Hybrid technology is an important strategic choice to achieve the goal of energy saving and consumption reduction in commercial vehicle sector.
Hybrid vehicles are vehicles that are driven using two or more energy sources, and the drive system can have one or more sets. The current mainstream market research and the hybrid vehicles referred to in this study refer to oil-electric hybrid vehicles, i.e., vehicles that use electric motors and internal combustion engines as power sources. Broadly speaking, plug-in hybrids and add-on electric vehicles are all hybrid vehicles. The basic principle of energy saving and consumption reduction of hybrid vehicles is that it can make the electric motor work as much as possible in the high specific fuel consumption area at low speed and let the engine work more in the low specific fuel consumption area, so as to achieve higher thermal efficiency.
The advantage of developing hybrid technology in the commercial vehicle sector is that the efficiency of the hybrid system is higher than the efficiency of electric power systems, which can better solve the problem of high torque at low speeds. Compared with traditional fuel vehicles that have no major changes in the car body, hybrid vehicles have no mileage anxiety for long-distance transportations. However, in terms of the current situation, the development of hybrid commercial vehicles also face difficulties, such as no clear policy support, the technical reserves of domestic manufacturers to be improved, higher costs compared to the same class of fuel vehicles, etc.
BEVs: Zero-carbon emissions, limited application scenarios
Unlike the situation faced by hybrid technology, pure electric vehicles are able to achieve zero terminal emissions and are recognized as the preferred solution for low carbon development and zero emission transition in the global automotive industry. In the commercial vehicle sector, at present, pure electric technology is mainly concentrated in specific scenarios of vehicle categories, including public transportation, light logistics, sanitation, dump trucks, dock and port special vehicles, etc. This is inseparable from the characteristics and limitations of pure electric technology itself.
In terms of policy, pure electric vehicles have been the main direction of the government's new energy vehicle promotion, with strong support in many aspects such as subsidies, right-of-way, charging and licensing, and new energy vehicle ratio targets for new and replacement vehicles in public sectors such as public transportation and sanitation, which has greatly promoted the promotion of pure electric vehicles in these scenarios.
The application of pure electric technology in commercial vehicles still faces three major problems. First, the application scenario of commercial vehicles is complex, even for the same type of vehicles, the main technical parameters are very different according to the tonnage and size, so it is difficult to realize electrification. Second, truck users are most concerned about the carrying capacity of the vehicle, when using pure electric vehicles, the range of the vehicle and battery weight are closely related, in order to maximize the time utilization, truck owners have high expectations for the range of the vehicle, but this in turn in the form of increased battery weight squeezed the vehicle's carrying space, while a large number of battery blocks also face long charging time problems. Although the power exchange mode can basically solve the charging problem, but the investment of the construction of the exchange station is also large, which means it is not easy to achieve in the short term. Third, the battery safety of pure electric vehicles also needs to be improved. Commercial vehicles are used with high intensity and long cycle, and long-distance driving leads to increased battery load, which can easily lead to safety accidents caused by battery overheating.
In terms of cost, for most commercial vehicles, the acquisition cost of pure electric vehicles is still higher than that of fuel vehicles in the same class, and the acquisition capital is under great pressure. Although the cost of electricity in use is lower than the cost of fuel at the same mileage, it needs a higher average driving mileage to achieve the TCO (total cost of ownership) balance with traditional fuel vehicles.
In view of the above, suitable application scenarios for electric vehicles in the commercial vehicle market segment include relatively fixed driving routes or relatively closed working environment, such as public transportation, sanitation, airport/terminal/port vehicles, etc.; the main working area is in the inner city, operating in the short and medium distance interval, such as urban logistics vehicles, postal vehicles, end distribution vehicles, etc.
FCVs: Huge growth potential, with technological barriers
Hydrogen energy is considered to be the most promising clean energy source in the future, and many countries and regions have elevated hydrogen energy to a very critical position. Hydrogen fuel cell vehicles are also considered to be an important development direction for future clean energy vehicles. A fuel cell vehicle (FCV) is a vehicle that uses electricity generated by an on-board fuel cell unit to power the vehicle, which is also a type of electric vehicle.
Hybrid technology and pure electric technology are more mature in overall development, albeit there are still some technical barriers in some aspects. Unlike them, hydrogen fuel cells not only require technical breakthroughs in the battery system, but also face many technical bottlenecks in the upstream industry chain, which covers hydrogen production, storage, transportation, and hydrogen refueling. Based on the current development status of fuel cell vehicles and the positioning of each country, for a long period of time, hydrogen fuel cell technology is more suitable for application in medium and heavy trucks used under long-distance and ultra-long-distance transportation and can be promoted to intercity bus scenario, when fuel cell vehicles have economic benefits.
In the long term, as new energy technologies become mature and costs fall, technology and cost will become the main driving factors for new energy commercial vehicles.
With the implementation of the four-stage fuel limit standards, some scenarios of fuel limits need to be met by hybrid technology. This stage of hybrid stands as an alternative version for energy structure upgrade, hybrid-power will become one of the important technical routes of heavy commercial vehicles. In addition, considering the cost of batteries and fuel price fluctuations brought about by the impact of factors, PHEVs possess TCO advantage. Range extension is only an alternative for some brands lacking fuel engine deposits, and it is difficult to become the mainstream of the industry.
For 200km city distribution logistics and short-distance, start-stop working conditions, considering the implementation of new energy right-of-way policy and other scenarios, pure EVs will become the main tech route. Pure EVs in the city with light trucks, municipal sanitation, short-haul traction are expected to take the lead in penetration. For long-distance traction and other intercity long-distance transport scenarios of more than 200km, due to its high demand for battery capacity and power consumption, pure electric models are difficult to achieve, and will be dominated by fuel cell models in the long term.