Q-Series: EVs Shifting into Overdrive: could zero-emission trucks disrupt a $1.5T market?

Emissions regulations and technology innovations are bringing disruption to the global truck market (TAM: ~$1.5T). We expect zero emission vehicles (ZEVs) to eventually displace the internal combustion engine (ICE). Both BEV (battery) & FCEV (fuel cell) will play a role. By 2030, our base case forecast is for heavy-duty ZEVs to achieve 30% market share (annual sales; upside case: 50%), and medium-duty ZEVs 40-45% share (upside: 85%), representing ~$80b of combined 2030 sales in NA, Europe & Asia.

We created an interactive model that calculates heavy-duty total cost of ownership (TCO) for ICE, BEV and FCEV trucks based on 10 line items, and also includes a separate cost of hydrogen production interactive model. We utilized UBS Evidence Lab geospatial analysis to determine where the hydrogen fueling network could be deployed, factoring electricity costs and proximity to distribution centers. We spoke with decision makers at numerous fleets to gauge enthusiasm & areas of concern, with regulators, & with experts in battery and fuel cell technology. Our TCO model has BEVs & FCEVs more cost effective than ICE by 2030, including the cost of infrastructure. We estimate ICE cost/mile will decline to $1.60 by 2030 ($1.63 today), bested by both BEV ($1.47) & FCEV ($1.49), adjusted for weight headwind. We see availability of materials, infrastructure, & a cautious customer base as factors mitigating faster adoption.

We expect conventional OEMs to gain traction with their own ZEV offerings, and leverage their incumbent position to fight off competition. That said, we believe these OEMs are likely to lose market share, as well as parts & service revenues. The impact on margins would appear to be a headwind, but remains unknown.

Most favoured are infrastructure, battery, & fueling companies while incumbent manufacturers face biggest headwind.