medium to heavy duty natural gas commercial vehicle market in europe by frost & sullivan

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

M8D2-18

February 2013

2 M8D2-18

Research Team

Bharani Lakshminarasimhan Industry Analyst

Automotive and Transportation

91.44.6681.4121

[email protected]

Saideep Sudhakar Consulting Analyst


91.44.6681.4125

[email protected]

Lead Analyst Contributing Analyst

Research Director

Sandeep Kar Research Director, Commercial Vehicles


1.416.490.7796

[email protected]

Strategic Review Committee Leader

Sarwant Singh Partner,


44.207.915.7843

[email protected]

3 M8D2-18

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 MD and HD Natural Gas CV Market -

External Challenges: Drivers and Restraints 43

Forecast and Trends 52

Component Pricing and Revenue Forecasts 67

Market Share and Competitive Analysis 78

Truck OEM Profiles 88

Bus OEM Profiles 96

Supplier Profile 105

Conclusions and Future Outlook 113

Appendix 119

4 M8D2-18

Executive Summary

5 M8D2-18

Executive Summary Key Findings

Natural gas truck and bus penetration is expected to reach 3.4% and 12.7% respectively by 2018. 1

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.

2

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.

3

Shift from oil linked to spot pricing of natural gas will reduce the price of natural gas and drive the

natural gas vehicle adoption. 4

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. 5

Source: Frost & Sullivan

6 M8D2-18

Executive Summary Market Engineering Measurements

Market Stage

Nascent

Component

Market

Revenues

71.6 M

(2011)

Market

Units/Volume

2,750

(2011)

Component Market Size at End of Forecast Period

446.1 M

(2018)

Price Sensitivity

8

Compound

Annual Growth

Rate

31%

(CAGR)

MD and HD Natural Gas CV Market: Europe, 2011

Stable Increasing Decreasing ng

Number of

Competitors

<10

(active market competitors in

base year)

(Scale of 1 to 10, Low to

High)

For a tabular version click here.

Note: All figures are rounded. The base year is 2011. Source: Frost & Sullivan

Market Overview

7 M8D2-18

High

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: Compound Revenue, Forecast, Europe, 2011 and 2018

MD and HD Natural Gas CV Market: Natural Gas CV Penetration Forecast, Europe, 2011 and 2018

MD and HD Natural Gas CV Market: OEM Growth Potential, Europe, 2011-2018

Un

its

0.7%

3.8%

2011 2018

cast, Europe, 20, pe,

472,000

404,452

Natural Gas CV

Penetration

Total Production

0.0

100.0

200.0

300.0

400.0

500.0

2011 2018

LNG CNG

�71.6 M

�446.1 M

Rev

en

ue (

� Million)

CAGR

29.8%

MD and HD Natural Gas CV Market:

Key Takeaways, Europe, 2011

OEM Characteristics Growth

Potential

IVECO Broad product line from 3.5 tons to 26 tons

Daimler Strong presence in refuse market and early

mover in distribution market

Volvo Early mover in dual fuel platform through

technology partnerships

MAN Wide experience in manufacture of natural

gas engine and leader in bus segment

Scania Wide experience in manufacture of natural

gas engine Low

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.

0.7%0.7%

2,750

3.8%

18,200


8 M8D2-18

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

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.

2018 OEM Production Powertrain Split


0

20

40

60

80

100

120

DAF Daimler IVECO MAN Scania Volvo Group

Un

its i

n T

ho

usa

nd

s

HEV NG Diesel

383,552 units

2011

449,300 units

2018

94.4% 97.9% 92%

4.7%

2.2 %

99.7%

1.8%

3.4%

0.2% 0.1%

1%

88.7% 97% 97.5% 95.6%

2.5% 0.6%

0.9% 3.3%

3.5%

2.4%

1.5%

8.8%0.3%

9 M8D2-18

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

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.

2018 OEM Production Powertrain Split


0

2

4

6

8

10

12

Daimler IVECO MAN Scania Volvo Group

Un

its

in

Th

ou

sa

nd

s

HEV NG Diesel

20,900 units

2011

22,700 Units

2018

67.1%

12.7%

86.5%

20.2%

8.6%

4.9%

81.7%

10.9%

7.4%

84.2%

12.1%

3.7%

91.9%

4%

4.1%

80.5%

6.8%

12.7%

77.1%

16.2%

6.7%

10 M8D2-18

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 moving towards increasing engine sizes in medium and heavy duty trucks.

2011 2018

100

200

300

400

Power (hp)

Year

500

MDT 200hp 200hp200hp

180hp

HDT

245hp

460hp

280hp HDT

500hp

MDT 250hp

200hp

Transit Bus

260 hp

330hp

180h

2011

th t f

2018

Transit Bus

245hp

360hp

MD and HD Natural Gas CV Market: Engine Band Width, Europe, 2011 �We are pretty happy about our LNG trucks. The

only thing is engine power could be increased

� � Senior Transport Consultant, European Fleet

Executive Summary Power Bandwidth Higher power, spark ignited engines are expected to be launched by OEMs to cater to the long-haul heavy-duty

segment.


11 M8D2-18


MD and HD Natural Gas CV Market: Duty Cycle Transmission Percentage Forecast, Europe, 2011

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.

is lower in case of automatic transmission Fleet Manager, European Fleet

Executive Summary Total NG CV OEM Transmission Market Automatic transmissions play a major role in the refuse and bus market with SI Engines, while

manual transmissions is important in the cost sensitive distribution market.

0.0

20.0

40.0

60.0

80.0

100.0

Refuse Distribution LongHaul Bus

Manual Automated Manual Automatic20% 0-5% 90%

90-95%

10-15%

75-80%

30-35%

55-60%

5-10%

1-5%

85-90%

1-5%

2-5%

2-5%

12 M8D2-18

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.

2006 2010 2014 2018

50% diesel substitution Dual fuel 70% diesel substitution

SI Technology

Industry Trends

CI-HPDI System

HPDI � Diesel Pilot 2 �3%

CI-dual-fuel Mode

Vertical integration with OEM

SCR

Diesel pilot 5 �7%

Aftermarket retrofitment

Throttle body injected � SI

OEM integration

Direct injection

Stoichiometric mixture with cooled EGR

Direct injection

Rich mixture with EGR

Automatic transmission

Manual transmission

CNG Tanks

LNG Tanks

HPDI-LNG Tanks

Type III cylinders Optimized packaging systems

based on OEM platforms Type IV cylinders

Engine-coolant-driven pressure

release system for fuel pumping

Cryogenic hydraulic pump for delivering high fuel pressure

Transmission

MD and HD Natural Gas CV Market: Technology and Product Roadmap, Europe, 2006-2018

Lean Burn Mixture


13 M8D2-18

Source: Clean Air Power, Frost & Sullivan

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

Requires least

modification to base

engine

Requires moderate


engine

Requires heavy


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 and efficiency

Power range: 200-340

hp

Diesel Substitution

(by energy) 70-90% > 90% 100%

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.

14 M8D2-18

Market

Major

Participants Early Adopters

Government

Incentives Opportunities for Growth Market Potential

France

�

Gaz de

France,

GDF Suex

�

Sydeme

�

Duty differential between

NG and diesel

�

The official agreement between

government and industry is

promoting the natural gas market in

France

Germany

�

E.ON,

Ruhrgas,

Daimler

�

BSR (Berlin Waste

Management),

Bayer

�

Funding vehicle and

fuelling station costs �

Reduced duty on CNG

�Clearly defined roadmap in creating

infrastructure and strong policies will

ensure rapid growth of natural gas

vehicles

Italy

�

Fornovogas,

FPT

Powertrain,

IVECO

�

ATAC (Azienda

Tramvie e Autobus

del Comune)

�

Funding new vehicle

purchase and gas

station construction �


NG and diesel

�Well poised for growth due to

established CNG infrastructure and

active retrofit conversion industry

The

Netherlands

�

Groengas

Mobiel

�

VOS Logistics,

Simon Loos

Logistics, Rotra

Forwarding, Ahold

�Local authority schemes

to introduce NGV buses

in public transportation �

Developing as a potential hub for

LNG with private fleet using LNG for

long haul applications

Spain

�

Gas Natural

Fenosa �

Cryoenergy

�

Gruas de Madrid

�Funding vehicle and

fuelling station costs �Reduced duty on NG

�Developing as a potential hub for

LNG with large availability through

ports

Sweden

�

Volvo

Trucks,

Scania

�

Busslink

�Government support for

municipally owned

biogas plants

�Potential hub for bio-methane, and

bio-methane contributes 58% of total

natural gas demand in Sweden

UK

�

Chive Fuels,

CH Jones,

Gasrec

�Coca Cola, UPS,

CENEX �


NG and diesel

�Fuel infrastructure is gradually

building up and private fleets lead in

using natural gas vehicles

Executive Summary Comparative Analysis by Markets The Netherlands is set to emerge as a potential hub for LNG; bio-methane will be featured in Sweden.

Low High

Low High

Low High

Low High

Low High

Low High

Low High


15 M8D2-18

Parameters Current Future

Market Status 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).

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 Top 4 OEMs control more than 90 per cent of

the truck NG market (Daimler, Volvo, Scania

and IVECO).

90% of the natural gas market is controlled by

Volvo, and IVECO) in buses.

Competition is expected to intensify across

the forecast period with new participants

entering the market.

There will be partnerships with NG engine

developers.

Technology There are dedicated SI engines which run on

CNG for short haul and refuse applications and

LNG for long haulage and distribution

application.

High power dedicated CI engines and dual

power engines will play a major role.

Barriers to enter

European Market

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.

Executive Summary Key Conclusions and Future Outlook


medium to heavy duty natural gas commercial vehicle market in europe by frost & sullivan

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