The bumpy road to zero-emission trucks

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - The transition to zero-emission trucks is hindered by significant challenges, including the need for infrastructure investment, regulatory compliance, and the development of new powertrains [2][3][11] - Regulatory interventions are driving the shift towards zero-emission trucks, with the European Union and North America implementing stringent targets and subsidy programs to facilitate this transition [3][5][7] - The market for zero-emission trucks is expected to grow significantly, with projections indicating that by 2035, zero-emission trucks could account for approximately 20% of truck-related value and profit pools, amounting to around $140 billion [25][36] Summary by Sections Regulatory Landscape - The European Union mandates a 43% reduction in emissions for new medium- and heavy-duty trucks (MHDT) by 2030 and 90% by 2040, with substantial fines for noncompliance [5][7] - In the United States, the Environmental Protection Agency has set targets for zero-emission trucks to account for 25% to 60% of new annual sales by 2032, with California aiming for stricter targets [5][7] Infrastructure Challenges - The report estimates that charging infrastructure alone will require investments of $30 billion by 2035 and $60 billion by 2040 in the U.S. and Europe [18] - A significant portion of these investments is yet to be committed, creating a risk-averse environment for infrastructure players [18][19] OEMs and Suppliers - Original Equipment Manufacturers (OEMs) must develop a comprehensive zero-emission vehicle portfolio and scale up production capacities while reducing product costs, which currently have a total cost of ownership (TCO) disadvantage of up to 40% compared to traditional trucks [12][13][32] - Cost reductions of over 50% for fuel-cell systems and achieving battery costs of around $105 per kilowatt-hour are essential for competitive pricing [13][32] Market Dynamics - The shift to zero-emission trucks will disrupt the existing supply chain, requiring new sourcing strategies and partnerships to accommodate the demand for batteries and fuel cells [17][29] - The aftermarket is projected to grow, with potential profits reaching $17 billion to $18 billion by 2035, driven by an increase in the overall vehicle parc [31] Customer Considerations - Small fleets dominate the European market, and many operators are hesitant to transition to zero-emission trucks due to concerns about costs, reliability, and operational fit [20][21] - Fleet operators need to assess their driving patterns and infrastructure requirements to optimize their transition to zero-emission vehicles [21][22] Future Opportunities - By 2035, the truck industry value pools in the U.S. and EU are expected to surpass $680 billion, with zero-emission trucks capturing a significant share of this market [25][36] - New business models, including financing and data-enabled services, are anticipated to emerge as key profit pools in the zero-emission truck ecosystem [34][35]