Published on February 20, 2014
Strategic Analysis of the Medium- to Heavy-duty Natural Gas Commercial Vehicle Market in Europe Compression Ignition LNG Technology Poised to Deliver Highest Volume Contribution Brief Summary Few Slides from Complete Study on This Topic M8D2-18 January 2013
Research Team Lead Analyst Contributing Analyst Saideep Sudhakar Wallace Lau Research Analyst, Automotive & Transportation +1.416.490.0813 Consulting Analyst Automotive and Transportation 91.44.6681.4125 firstname.lastname@example.org Wallace.email@example.com Research Director Strategic Review Committee Leader Sandeep Kar Franck Leveque Vice President, Automotive & Transportation Research Director, Commercial Vehicles Automotive and Transportation 1.416.490.7796 +49 (0) 697703321 firstname.lastname@example.org Franck.email@example.com M8D2-18 2
Contents Section Slide Numbers Executive Summary 4 Research Objective, Scope, Methodology, and Background 16 Definitions/Segmentation 22 Market Overview 26 Mega Trends and Industry Convergence Implications 41 Total Market - • External Challenges: Drivers and Restraints 43 • Forecasts and Trends 52 • Component Pricing and Revenue Forecasts 67 • Market Share and Competitive Analysis 79 Truck OEM Profiles 89 Bus OEM Profiles 97 Supplier Profile 106 Conclusions and Future Outlook 114 Appendix 120 M8D2-18 3
Executive Summary M8D2-18 4
Executive Summary—Key Findings 1 Natural gas truck and bus penetration is expected to reach 3.4% and 12.7% respectively by 2018. 2 Compression Ignition (CI) engines powered by high pressure direct injection (HPDI) and dual fuel technology will provide the necessary impetus for the natural gas (NG) commercial vehicle(CV) market. 3 Liquefied natural gas (LNG) technology is expected to dominate the NG truck market owing to the infrastructure support provided by projects such as the blue corridor project across freight corridors in Europe. 4 Shift from oil linked to spot pricing of natural gas will reduce the price of natural gas and drive the natural gas vehicle adoption 5 NG component revenue market is expected to reach €446.1 million by 2018. LNG and compressed natural gas (CNG) tanks are set to emerge as top revenue generator in the components market. Source: Frost & Sullivan M8D2-18 5
Executive Summary—Market Engineering Measurements MD and HD Natural Gas CV Market: Europe, 2011 Market Overview Component Market Revenues Market Stage Nascent €71.6 M 31% (CAGR) €446.1 M 2,750 (2011) Compound Annual Growth Rate Component Market Size at End of Forecast Period Market Units/Volume (2011) Price Sensitivity (2018) Number of Competitors <10 8 (Scale of 1 to 10, Low to High) (active market competitors in base year) For a tabular version click here. Decreasing Stable Increasing Note: All figures are rounded. The base year is 2011. Source: Frost & Sullivan M8D2-18 6
Executive Summary—Strategic Fact Sheet Natural gas penetration in the European MD and HD natural gas CV market will reach 3.8%, and component revenue is expected to grow at a 29.8% CAGR. MD and HD Natural Gas CV Market: Natural Gas CV Penetration Forecast, Europe, 2011 and 2018 MD and HD Natural Gas CV Market: Compound Revenue Forecast , Europe, 2011 and 2018 500.0 472,000 LNG 404,452 Units Natural Gas CV Penetration 18,200 3.8 % 2,750 0.7 % Revenue (€ Million) Total Production 400.0 300.0 CAGR 29.8% 200.0 €71.6 M 100.0 2011 2018 2018 MD and HD Natural Gas CV Market : OEM Growth Potential, Europe, 2011–2018 Growth OEM Characteristics Potential Broad product line from 3.5 tons to 26 tons Strong presence in refuse market and early mover in distribution market Early mover in dual fuel platform through Volvo technology partnerships Wide experience in manufacture of natural MAN gas engine and leader in bus segment Wide experience in manufacture of natural Scania gas engine. Daimler High M8D2-18 €446.1 M 0.0 2011 IVECO CNG Low MD and HD Natural Gas CV Market: Key Takeaways, Europe, 2011 • IVECO’s broad product line and early mover advantage will be critical for market share growth in the truck segment. • MAN is expected to lead the bus segment. • The LNG component market will experience a CAGR of 75.4% due to increasing LNG infrastructure and wider adoption among fleets. Note: All figures are rounded. The base year is 2011. Source: Frost & Sullivan 7
Global LNG Prices and Major Natural Gas Trade Patterns Imports from North America can drastically alter natural gas dynamics in Europe. MD and HD Natural Gas CV Market: NG Trade Patterns and LNG Prices, Global 347.8 MT UK $ $9.0 121.7 MT $ Cove Point $2.55 $ Belgium $ $8.85 $ Spain 81.0 MT 110.1 MT Lake Charles $ $2.65 115.7 MT $ $13.60 86.9 MT 79.2 MT India Japan $15.21 $ $2.20 Altamira $ 103.2 MT $9.64 $15.21 Korea 179.4 MT $13.61 230.0 MT $ per million Global LNG btu Prices Major natural gas trade patterns • Major NG exporting regions are Russia and Middle East with Europe and United States importing greatest volumes historically. • NG production from shale resources has steadily outgrown the demand in NA, resulting in oil companies turning around to export gas across the Atlantic. US Federal Energy Regulatory Commission’s (FERC) first approval for LNG exports from the lower 48 states for Cheniere Energy Inc. opens the gateway for US natural gas producers to take advantage of global price differential. Source: Frost & Sullivan M8D2-18 8
Shale Gas Reserves in Europe Significant recoverable reserves are identified in Poland, France, and Norway. Shale Gas Market: Exploration and Production Overview, Europe, 2012 Shale Gas Reserves in trillion cubic feet 83 20 20 42 8 187 180 • Significant recoverable reserves have been found in Poland, France, and Norway • Due to the small scale/nascent activity, current regional policies are believed to be adequate for governing shale gas production in Europe. Current policies include o Mining waste directive o Groundwater directive o Water framework directive o Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) Prospection / Exploration Moratorium on Exploration No activity on shale gas Energy Independence Vast and well- mapped reserves Drivers M8D2-18 Bridge to low carbon future since NG is more efficient and cleaner fossil fuel Strict regulatory framework Unresolved environmental concerns High costs to develop resources Restraints Source: EIA, Frost & Sullivan 9
Executive Summary—Total Trucks Shipped in the MD and HD CV Market Penetration of non-diesel fueled powertrain technologies in the truck segment to reach over 5% by 2018. MD and HD Natural Gas CV Market: Truck Unit Shipment Forecast, Europe, 2011 and 2018 449,300 units 2018 OEM Production Powertrain Split 383,552 units 99.7% 0.1% 2.2 % 4.7% Units in Thousands 0.2% 3.4% 120 100 3.5% 3.3% 0.9% 80 60 1.5% 0.3% 8.8% 1% 2.4% 2.5% 1.8% 0.6% 40 20 97.9% 92% DAF Daimler 88.7% 97.5% 97% 95.6% 94.4% 0 2011 IVECO HEV NG MAN Diesel Scania Volvo Group 2018 • Truck production to increase at a compound annual growth rate of 2.3% over the 2011 to 2018 period. • An EU mandate of 20% green house gas (GHG) reduction by 2020 will drive market for advanced powertrain technologies. • IVECO, Daimler, and Volvo are expected to lead the NG adoption in CVs among European OEMs. Note: All figures are rounded. The base year is 2011. Source: Frost & Sullivan M8D2-18 10
Executive Summary—Total Bus Market Europe Advanced powertrain adoption is expected to reach 33% by 2018; the hybrid and natural gas powertrain set will benefit the most. MD and HD Natural Gas CV Market: Bus Unit Shipment Forecast, Europe, 2011 and 2018 2018 OEM Production Powertrain Split 12 8.6% 4.9% Units in Thousands 20,900 units 3.7% 10 22,700 Units 12.1% 8 12.7% 6.7% 6 20.2% 4% 16.2% 6.8% 10.9% 7.4% 4 2 4.1% 12.7% 77.1% 81.7% 80.5% 91.9% 84.2% 67.1% 86.5% 0 Daimler 2011 IVECO HEV MAN Scania NG Diesel Volvo Group 2018 • Medium- and heavy-duty bus production forecast to grow at a 1% CAGR over the 2011 to 2018 period • Despite slow growth in volumes, NG penetration will reach 12.7% by 2018. • MAN and IVECO lead the natural gas adoption, while Volvo and Daimler shifting towards hybrid electric vehicles in addition to showing interest in NG powertrain. Note: All figures are rounded. The base year is 2011. Source: Frost & Sullivan M8D2-18 11
Executive Summary - European Natural Gas Engine’s Power Bandwidth Higher Power Spark Ignited Engines are Expected to be Launched by OEMs to Cater the Long Haul Heavy Duty Segment MD and HD Natural Gas CV Market: Engine Band Width, Europe, 2011 Power (hp) “We are pretty happy about our LNG trucks. The only thing is engine power could be increased”— Senior Transport Consultant, European Fleet 500hp 500 460hp 400 360hp HDT HDT 300 330hp 280hp 260 hp 250hp 245hp Transit Bus Transit Bus 245hp MDT 200 MDT 200hp 200hp 180hp 100 2011 2018 Year 2011 2018 • The engine power bandwidth in medium duty truck is between 180hp to 200hp while that of heavy duty truck is between 245 hp to 460 hp and transit bus is 260 hp to 330 hp in 2011. • Volvo provides 460hp in D13C 12.8 lit engine in truck segment based on dual fuel technology through partnership with Clean Air Power. • Most OEMs in Europe posses captive spark ignition natural gas engine platforms, hence any development of high power engines will be swiftly applied to truck platforms in the long haul segment. The trend is Source: Frost & Sullivan analysis. moving towards increasing engine sizes in medium and heavy duty trucks. M8D2-18 12
Executive Summary—Total NG CV OEM Transmission Market Automatic Transmission Plays a Major Role in Refuse and Bus Market with SI Engines while Manual Transmission is Important in the Cost Sensitive Distribution Market. MD and HD Natural Gas CV Market: Duty Cycle Transmission Percentage Forecast, Europe, 2011 100.0 1-5% 10-15% 1-5% 80.0 90-95% 85-90% 60.0 5% 55-60% 40.0 75-80% 20.0 2-5% 30-35% 5-10% 2-5% 0.0 Refuse 20% Distribution Manual Automated Manual LongHaul Automatic Bus 90% 0-5% • Duty cycle such as refuse and construction require higher torque which is facilitated by means of automatic transmission in spark ignited engines. • Dual fuel engines being similar to CI engines generally have higher torque capacity, hence automated manual transmission provides lower cost alternative to automatic transmission in long haul segment. “Price is important, but we look at the overall lifecycle cost of the vehicle, which is lower in case of automatic transmission”— Fleet Manager, European Fleet Note: All figures are rounded; the base year is 2011. Source: Frost & Sullivan analysis. M8D2-18 13
Executive Summary—Technology Roadmap On-board natural gas tanks are experiencing new compositions of materials and designs, and new CI engine architectures are now in focus among OEMs. MD and HD Natural Gas CV Market: Technology and Product Roadmap, Europe, 2006-2018 Industry Trends SI Technology Vertical integration with OEM Rich mixture with EGR Stoichiometric mixture with cooled E GR Lean Burn Mixture Throttle body injected – SI Direct injection Automatic transmission Transmission Manual transmission SCR CI-HPDI System Diesel pilot 5– 7% HPDI – Diesel Pilot 2–3% Dual fuel 70% diesel substitution 50% diesel substitution Aftermarket retrofitment CI-dual-fuel Mode OEM integration Direct injection CNG Tanks Type IV cylinders Type III cylinders Optimized packaging systems based on OEM platforms Engine-coolant-driven pressure release system for fuel pumping LNG Tanks HPDI-LNG Tanks Cryogenic hydraulic pump for delivering high fuel pressure 2006 2010 2014 2018 Source: Frost & Sullivan M8D2-18 14
Executive Summary—Comparison of Different Technologies Fuel flexibility, high end power, and torque engine performance is being cited as advantages for the growth of dual fuel technology. Dual Fuel Engines Direct injection NG NG (Spark Ignited) Fuel flexibility Mixture of natural gas and diesel or 100% diesel Dedicated NG. Limp home service mode on diesel Dedicated NG Infrastructure concerns Not dependent on NG Infrastructure Dependent on NG infrastructure Dependent on NG infrastructure Engine Modifications No change in base engine Requires modification to base engine Requires modification to base engine Engine Performance Matches diesel power, torque and efficiency Power Range: 460 hp Matches diesel power, torque, and efficiency Power Range: 460 hp Reduced power and torque Power range: 200-340 hp Diesel Substitution (by energy) 70-90% > 90% 100% Source: Clean Air Power, Frost & Sullivan M8D2-18 15
Executive Summary—Key Conclusions and Future Outlook Parameters Market Status Competition Technology Barriers to enter European Market Current • The potential size of the market is vast and not fully penetrated (only 950 trucks in a total market size of approximately 384 thousand trucks). • Top 4 OEMs control more than 90 per cent of the truck NG market (Daimler, Volvo, Scania and IVECO). Future • Market to experience strong growth driven by fuelling infrastructure development across the continent coupled with tightening emission regulations. • Total NG unit shipments to reach 18,200 units by 2018. • Competition is expected to intensify across the forecast period with new participants entering the market. • 90% of the natural gas market is controlled by five • There will be partnerships with NG engine major OEM’s (MAN, Daimler, Scania, Volvo, and developers. IVECO) in buses. • There are dedicated SI engines which run on • High power dedicated CI engines and dual CNG for short haul and refuse applications and power engines will play a major role. LNG for long haulage and distribution application. • Natural gas price is oil linked and there are a few government incentives promoting the use of natural gas as a fuel • Co-ordinated EU policy, similar to the NATGAS Act, and availability of cheap natural gas from America will promote the advocacy of natural gas. Source: Frost & Sullivan M8D2-18 16
The Last Word—Three Big Predictions 1 By 2018, 3.8% of all medium- and heavy-duty commercial vehicles manufactured in Western Europe will feature natural gas powertrains. The installation rate in the medium- and heavy-duty truck market will reach 3.4%, while medium- and heavyduty buses will reach 12.7%. 2 A €8.3/MMBtu price level for natural gas in Europe is expected in 2018 by Frost & Sullivan. Given current pricing levels and forecasted prices; and LNG and CNG offering €0.4/DGE cost advantage over diesel fastest payback is expected for LNG in long-haul trucking and CNG in short-haul bus routes. 3 By 2018, 90% of all natural gas powered buses manufactured in that year will feature spark ignited technology, while 80% of CNG trucks will feature spark ignition and 60% of LNG trucks will feature compression ignition technology. Source: Frost & Sullivan M8D2-18 17
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