The advent of electric trucks, now relegated to prototypes and pilot programs, will affect the financial outlook for vehicle component makers that don’t adapt to the changing market.
That was the message of a recent report to investors from analyst Alexander Potter of Piper Jaffray, who issued an “underweight” investment rating for Allison Transmission Holdings “due to likely disruption from electric vehicles.” Such a rating is a recommendation that investors reduce their holdings in a company.
Potter lists a host of companies – including engine maker Cummins and truck manufacturers Paccar, Navistar and Scania – that are diving into electric vehicle research and projects, potentially leaving Allison behind.
The Indianapolis-based company is the world's largest manufacturer of fully automatic transmissions for medium- and heavy-duty commercial vehicles. Electric trucks don’t use complex, multi-geared transmissions.
“Allison has been mostly silent on the topic,” Potter wrote. “We think Allison has more EV disruption risk than other truck-related suppliers, because Allison’s targeted on-highway markets will probably be the first to electrify.”
To be sure, companies such as Allison have time to adjust, and the internal combustion truck market isn’t going to disappear suddenly. Electric vehicles represent a tiny portion of the global commercial market, just 1.5 percent, industry research firm IHS Markit told Trucks.com. That will remain constant through 2021.
Much of the technology will get a boost from electric buses, a segment that is forecast to grow at a faster pace.
Local noise and emissions reduction goals combined with standardized daily routes that start and end at a central vehicle depot with a charging infrastructure as well as support from sporadic government incentives will speed the adoption of electric buses, according to IHS Markit.
Most of the big truck companies also make buses.
Still, the electric truck offerings from manufacturers and suppliers are growing steadily.
Cummins Inc., a major diesel engine supplier, “has every reason to fear electric drive trains,” Potter said. But it isn’t standing still, he said. It plans to have a fully-electric drive train ready by the end of 2019.
The company issued a policy statement in June, saying that it plans “to be the leading provider of electrified powertrains in our commercial and industrial markets.”
Daimler Trucks is launching an all-electric medium-duty truck this year called the eCanter under the Mitsubishi Fuso brand in the U.S., Europe and Japan.
Both Daimler and Volkswagen, through its MAN Truck & Bus division, plan to introduce heavy-duty electric trucks around 2020.
Tesla Inc. says it will unveil an electric truck in September.
Navistar International Corp. last month shuffled its top management and named its former truck and parts division chief William Kozek to head the company’s emerging technology strategy with a focus on “vehicle electrification and potential disruptive technologies.”
Scania, the Swedish truck and bus company, sees electric vehicles as more than just a research project.
“We have gone from treating electrification primarily as a research area to having many discussions with customers who want to make the shift to sustainable transport,” said Nils-Gunnar Vågstedt, who is responsible for Scania’s research into electrification.
Other senior truck industry executives are moving in the same direction.
“We're working on electric trucks, hybrid electric, hydrogen fuel-cell, natural gas. I mean, we're investing in all alternative fuel strategies to be prepared for what may come,” Ronald Armstrong, chief executive of Kenworth- and Peterbilt-owner Paccar Inc., said in a recent call with investment analysts. “We're certainly focused on being prepared for market dynamics and market transitions as they occur.”
In May, Kenworth said it will build a prototype fuel cell truck and five Class 8 natural gas-electric hybrid drayage trucks for use in test programs hauling freight to Los Angeles-area warehouses from the Ports of Los Angeles and Long Beach, Calif.
Hydrogen fuel cell commercial vehicles represent an additional step in the push for electrification because they use the fuel cell stack to generate power to operate an electric drivetrain, IHS Markit analysts said. Battery electric and fuel cell trucks can share drivetrain components.
One prominent project is Toyota’s plan to supply about 100 fuel-cell buses to transport people during the 2020 Tokyo Olympics. The automaker also is testing its Project Portal Class 8 hydrogen fuel cell truck in Southern California.
If the prototype truck proves commercially viable, Toyota could become the first major automaker to enter the fuel cell market for Class 8 vehicles, perhaps through its Hino Trucks unit or by marketing its proprietary powertrains to truck manufacturers nationwide.
Salt Lake City trucking start-up Nikola Motor Co. also is developing a hydrogen fuel cell-powered semi-tractor it calls the Nikola One. A $110-million funding round to finance the development of the truck is oversubscribed and is expected to close soon, according to company officials. Nikola plans to build its own fueling network and said it is about to gain land rights for the first eight of 376 nationwide fueling stations.
Elsewhere, shipping giant UPS plans to build 17 hydrogen fuel cell parcel delivery vans to operate in the U.S. by the end of 2018.
But there are major hurdles fuel cell trucks need to overcome before large scale adoption.
“This technology is still in early stages and infrastructure questions loom larger than for EVs,” said Antti Lindstrӧm, an IHS analyst.
There are also challenges for battery-based electric trucks.
IHS Markit analysts said heavy batteries and limited range at this point make some trucking applications more suited to electric power than others. Expect to see electric trucks first in urban areas on routes where they make regular deliveries or for vehicles with a similar drive cycle profile such as garbage trucks and street sweepers.
Government fleet uses also may provide a boost to electric truck adoption, according to IHS Markit analysts.
If anything, there’s a likely upside to the forecasts by IHS Markit, Lindstrӧm said, as manufacturers see the market develop and launch programs that aren’t yet publicly announced.