Preparing for the Mobility Revolution

Commercial Vehicles go Electric, Autonomous, Connected and Shared
December 2017

Mobility is currently undergoing a profound transformation, specifically with electrification, driving autonomy, connectivity and sharing. The most visible and commented applications of this transformation relate to passenger vehicles. However, buses, heavy trucks and light commercial vehicles are also increasingly adopting these four megatrends. They do so with a different approach as these vehicles are assets used by professionals. Thus, economics, especially total cost of ownership (TCO), will play a much more important role in the speed of adoption of new technologies and business models. Let’s see how the four megatrends impact the various types of commercial vehicles.

 

A. Electrification 

Several countries have planned to ban the sale of fossil fuel powered vehicles. This will take place in 2025 in Norway and in the Netherlands, and in 2040 in France, the UK and China. India, Germany and the state of California are considering similar bans in 2030, 2030 and 2040 respectively. Electrification makes sense for commercial vehicles because of their predictive routes and their high utilization rate which increasingly justifies the extra cost. In addition, the decision to acquire commercial vehicles is essentially based on TCO and increasingly on their societal impact. Therefore, the shift from diesel to electric is likely to be happen faster than for cars.

 

— Buses —

Cities are taking initiatives to ban diesel buses earlier than countries. The mayors of 12 major cities recently signed the C40 Fossil-Fuel-Free Streets Declaration, pledging to add only fully electric buses in their cities from 2025. The city of Paris plans to have 80% of its 4,500 bus fleet powered by electricity and 20% by natural gas that same year. Experts forecast that 25% of all city buses sold globally in 2025 will be electric, 25% natural gas powered and still 50% diesel.  Few companies play in the e-bus market. China’s BYD is the global leader, thanks to the size of its domestic market where 160k units where sold in 2016. Founded in 2004, California-based Proterra offers several e-buses with a range of up to 350 miles — the 660 kWh-battery probably costs about $150k and has a 5t weight. GM and BMW both contributed to the $372m raised to-date. Other players include Yutong in China, New Flyers, Solaris or Complete Coach Works in the US. All major bus manufacturers should shortly announce their e-bus offerings.

 

— Light commercial vehicles (LCV) —

LCVs are a key component of city logistics. In Europe alone, over 2 million units are sold each year, of which 13k were fully electric last year (+38% yoy). Fleets will progressively switch to e-LCVs, first in cities with regulated access. These vehicles drive limited and predictable distances each day and have a high utilization rate. Both small electric vans, Renault’s Kangoo Z.E. (170 mi NEDC range) and Nissan’s e-NV200 (175 mi NEDC) lead the European market with close to 4k units each in 2016. In third position was Deutsche Post’s “Street-Scooter,” a large, fully electric van built in collaboration with Ford. Other large vans are coming such as San Francisco-based Chanje’s V8070 (100 mi EPA, 2017) in the USA, Renault’s Master (2017) and Mercedes’ Vito and Sprinter (2018 and 2019). This market segment will most likely be quickly electrified given its urban focus.

 

— Heavy trucks —

This is a recent territory for electrification. Nonetheless, regulations are emerging that may speed up the shift to e-trucks: Canada’s province of Ontario just introduced a rebate of up to 60% of the incremental cost of electrification (max ~USD60k).  Market players include BYD — trucks ranging from Class 5 / 7.5t (155 mi range) to Class 8 / 35t (92 mi EPA) — and Daimler with the Fuso eCanter (100 mi EPA). The most talked about e-truck is Tesla’s Semi. Presented in Nov 2017, the $200k, Class 8 truck promises 500 miles of range at full load and a TCO 17% lower than that of a diesel truck assuming $0.07/kWh. Tesla intends to guarantee this very aggressive rate based on its future solar, super fast mega-charger, which is supposed to provide 400 miles of range in 30 minutes — hard to believe for this 35t vehicle as it corresponds to delivering about 1-1.5MW (vs 120 kW for the supercharger). Bottom line, over 400 pre-orders have been placed to date for production starting in 2019. Only a month after the product was presented, this number is already significant relative to the 26,000 Class 8 trucks built each year in the US. Navistar and Volkswagen’s Truck and Bus both plan on launching an electric medium duty truck by late 2019. We should expect all truck makers to progressively introduce their own e-trucks. They may end up playing catch-up behind Tesla!

 

— Fuel cell electric trucks —

Fuel cells (FC) offer an alternative to battery storage for long distance and load capacity optimization. However, refueling stations are very expensive at $1m+ each. H2 stations are rare, even in Japan, the most developed market, where there are about 80. Yet plans exist to have 500 stations in California by 2022 and 400 in Germany by 2023. Only two players seem to be working on FC e-trucks. Toyota recently signed a project with the port of Long Beach and the CARB to operate a Class 8 truck fitted with two Toyota Mirai fuel cells. The truck will run on a fixed route within metro LA and charge at a purpose-built 1MW power and H2 generation station. The other player is US-based Nikola, whose future truck is announced with 750 mi of range.

 

Electrifying commercial vehicles makes sense for regulatory and economic reasons, as battery cost continues to drop below $200/kWh. However, weight remains an issue as a Class 8 truck requires about 1.5t worth of batteries for each 100 miles of range, which reduces the load capacity. Nevertheless, electrification is coming and is here to stay. In a report published in Sept 2017, McKinsey estimated that battery electric propulsion systems will be at TCO parity with diesel between 2022 and 2025 (depending on the region) for buses, between now and 2021 for vans and light trucks, and between 2023 and 2031 for heavy trucks.

 

 

B. Driving autonomy

Bringing autonomous driving to all vehicles will reduce road casualties and free up time for drivers to perform more value-adding tasks. There will also be economic benefits specifically for trucks,  i.e. reducing fuel consumption, addressing a shortage of long haul drivers and lowering the cost per mile (driver cost represents about ⅓ of total cost). Thus, decisions to partially or fully automate truck fleets will be largely based on economics at the micro level and by their social impact at the macro level.

 

Major truck manufacturers are working on their own solutions to bring some level of driving autonomy, including Daimler Trucks with its Highway Pilot system or Paccar, which is testing a Level 4 (eyes and mind off in specific conditions) solution. However, several companies are trying to disrupt the industry. Uber and Tesla are forging ahead with their own autonomous trucking solution. In mid-2016, Uber acquired the then 4-month old Otto (for a reported $700m) which was working on truck driving automation. 

 

Another startup is Peloton Technologies, which has raised $78m (investors include Volvo, UPS, Denso and Magna), and is currently pilot-testing a platooning solution, where driving autonomy is limited to regulating speed. This results in a significant reduction in fuel consumption, with savings of around 5% for the leading truck and 10% for the lagging one. China’s TuSimple is testing a Level 4 solution that is intended to allow for the removal of the driver on freeway segments. A regional driver picks up the shipment and drives it up for 100 miles to a freeway where he/she gets off. The autonomous truck then exits near the point of delivery and a local driver takes the wheel to the end point. Thus drivers don’t have to spend weeks away from home. Other startups working on autonomous trucks include Embark, which is testing its solution with Ryder and Electrolux, as well as Starsky.

 

 

C. Connected vehicles

Commercial vehicles are working assets. As such, they must enable timely deliveries and provide the lowest TCO, highest up-time and no break-downs. Whereas telematic solutions have been around for many years, new sensors, big data combined with artificial intelligence, analytics and cloud computing allow for new services that will bring additional efficiencies. An essential service is remote diagnostics combined with predictive maintenance, such as the solution proposed the startup Preteckt. This minimizes the cost of maintenance as well as reduces the risk of breakdown. Michelin has been offering “tire as a service” for some time. Algorithms combined with modern V2X solutions allow the tire giant to minimize operating cost and maximize truck availability as tires can be delivered to parking areas while the driver rests.

 

Connected trucks allow for other services such as the above mentioned Peloton’s platooning solutions whereby trucks communicate with each other (V2V) and with the startup’s platform.  V2V can also benefit active break assistance and adaptive cruise control systems, as a truck can see what is in front of the truck ahead of it. Driver monitoring is another application. Deep learning-based face and posture analysis solutions, such as Eyeris, provide valuable input on the state of the driver, e.g. his/her level of cognitive awareness, which in turn allows for increased safety and productivity. Many other applications and use cases are yet to be imagined!

 

 

D. Sharing the cargo space

In 2017, nearly $800bn will be spent on trucking services in the US only, with 40% of trucks operating empty, according to Convoy. The startup, which has received funding from Bill Gates and Jeff Bezos, is applying the ride-sharing model to the trucking industry. It has built a real-time platform to connects shippers with drivers and fleet owners in an effort to maximize truck load, thus reducing shipping cost. Ride-hailing giant Uber started Uber Freight in early 2017, offering a similar service to maximize cargo space utilization and reduce cost: they are off to a strong start.

 

Although ride-sharing services have developed quickly, they have focused on transporting people using passenger vehicles. Recognizing the need to transport goods — e.g. from the hardware store back home — the startup Truxx was founded to connect people who need to move things with other people who own pickup trucks or vans. More applications of the sharing economy are yet to be imagined.

 

 

Increasingly, commercial vehicles are being impacted by the same four megatrends as passenger vehicles, using much of the same technology. Yet their speed of deployment will be driven much more by economic considerations then by emotion. Exciting times ahead!

Marc Amblard

Also published on LinkedIn

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