April 8, 2013
Europe is likely to emerge as a strong regional market for medium- to heavy-duty natural gas (NG) commercial vehicles, as several OEM supplier competitors jockey for marketshare.
Driven by energy price volatility and tightening emissions, the market for NG vehicles is gaining considerable momentum. Of all alternative NG technologies, compressed natural gas (CNG) and biomethane technologies pose the least pressure on existing infrastructure.
By 2018, the NG market in Europe is expected to reach production levels of nearly 18,000 units.
“OEMs need to develop market and application focused technologies that complement current state of natural gas infrastructure with forward compatibility with upcoming CNG/LNG infrastructure. Focus should also be on supply chains that enable reduction of upfront cost associated with these vehicles, which are currently perceived by many potential customers as being prohibitive,” Frost & Sullivan Automotive & Transportation Consulting Analyst Saideep Sudhakar, says. “However, OEMs and suppliers are working both independently and synergistically, through a combination of vertical and virtual integration, to add growth momentum to this steady, evolving market segment.”
A report from Frost & Sullivan, Strategic Analysis of the Medium- to Heavy-duty Natural Gas Commercial Vehicle Market in Europe, says NG truck and bus penetration will reach an estimated 3.4 percent and 12.7 percent, respectively by 2018.
Spark ignited technology is expected to account for nearly 90 percent of commercially manufactured NG buses, while compressed ignition technology will likely sieze the liquefied natural gas (LNG) truck market with around 60 percent share. The heavy-duty segment is set to account for 75 percent of NG truck sales with LNG being the dominant fuel option.
OEMs’ willingness to differentiate products through technology partnerships is leading toward increasing focus on compression ignition and dual fuel technologies, Sudhakar says. Compression ignition would facilitate the use of NG vehicles for long haul application, which would compensate for the higher upfront cost – provided the fuel infrastructure and diesel NG price differential exists.
The report says margins for module suppliers are likely to shrink in the future, as will component suppliers when OEMs begin exerting pricing pressures as volumes start to grow. Duty cycle restriction of NG vehicles can be overcome through concerted strategies aimed at developing vehicles and products that deliver highest efficiencies in certain targeted vocations and duty cycles along with necessary fuel infrastructure.
“OEMs need to develop duty cycle focused product platforms and collaborate with fuel suppliers and governments to create a favourable environment for the adoption of NG vehicles by fleet owners,” Sudhakar says. “Suppliers need to focus on vertical integration to ensure sustainable growth and development of the market.”