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The global commercial vehicle market size in 2020 was at USD 1.26 Tn, with North America holding the largest share. The market is expected to grow at a CAGR of 5.2% from 2021 to 2028. The increasing need for transportation in the aftermath of the COVID-19 pandemic is the way of hope for medium and heavy-duty commercial vehicles. The market is bouncing back at the backdrop of the lockdown relaxation and restrictions.
We are already seeing growth in the sector in the emerging market, growing demand in the logistics industry, and the construction sector. The market will witness growth owing to the growing economies across developing and developed nations.
Construction and e-commerce activities increased demand for material transportation, resulting in increased sales of commercial vehicles worldwide. The automotive industry is experiencing the following:
Green choices – electric and alternative fuels
Major OEM and startups are looking for an alternate power source to replace fossil-fuel-powered internal combustion engines (ICE). Some have developed commercial electric vehicles ahead of a regulatory push to produce these vehicles with environmental concerns at a high.
Urban commercial vehicles are likely to be electric first – city-level regulatory conditions. A focus on brand sustainability and the low mileage of these vehicles makes them a solid choice for electric propulsion.
Tesla has already introduced a semi-commercial vehicle, Cybertruck, an all-electric pickup truck with a medium tonnage capacity. General Motors created an electric version of Hummer, a fully electric pickup truck of medium tonnage.
It will be a challenge to move to electric for intense duty and longer-range requirements. If vehicles are to electrify, hydrogen could be a critical fuel choice. Fuel cell trucks use the same electric drivetrain as battery trucks.
Due to the onboard hydrogen storage, fuel cell trucks have a much longer range, require fewer stops on long routes, can be fueled much faster, and will not risk lost cargo capacity. Daimler is actively working on this drivetrain technology, testing it at 625 miles or more.
In short, fuel cell trucks have the same benefits as diesel, without the harmful emissions, provided the hydrogen production pathway can be efficiently and effectively decarbonized. Incidentally, a long-haul, Class-8 truck with a 100-kilogram hydrogen tank can be fueled about 15 times faster than charging a 1-2 megawatt-hour battery needed on the battery-electric equivalent.
Evolution in vehicle architecture
The basic truck chassis architecture has changed very little in decades. The architecture is then heavily customized by OEMs to fit multiple vocations. Industries with product stagnation and higher customization costs have the potential for disruption. Breakthrough in alternate fuel powertrain, primarily electric, provides an opportunity for powertrain innovation.
Along with replacing the engine with an electric motor, battery, and other components, there is a significant innovation that OEMs can bring to chassis design and the software control layer. Startups are developing these skateboard platforms for commercial vehicles focusing on light commercial vehicles.
However, partnerships like that of REE and Hino could migrate to higher weight classes. These standard platforms would use passenger car components and be customized for different applications through modularity or software control. Skateboard architectures could be the technical solution to revolutionize commercial vehicles.
Connectivity, data, and efficiency
With connectivity playing a crucial role, OEMs will fit vehicles with a high-speed connection to display 3K to 4K video for safer driving experiences. Further, the connectivity will also influence data gathered in public transport, traffic, parking, and environmental problems.
Connectivity will aid the collection and processing of data, which is expected to continue into 2022. Moreover, overall vehicle efficiency will become a significant trend in the next five years. Driver behavior, powertrain and vehicle efficiency, and routing optimization will define vehicle efficiency.
The commercial vehicle market plays a ‘second fiddle’ to the passenger segment, often borrowing solutions and technology developed for that market, leaving the market ill-served, fragmented, and not maximizing its potential.
There is a wide array of aftermarket telematics solutions and third-party software vendors offering apps and platforms for data management. But every commercial vehicle OEM and supplier has their proprietary telematics offering that could maximize battery range and life. Most telematics does not integrate.
Consolidation in the telematics market to develop a handful of global platforms providing access to high-quality solutions could expand the value of telematics to fleet operators and allow the market to reach its maximum potential. However, there is progress towards complete solutions.
Geotab is a telematics platform that integrates multiple apps and services from different vendors. Daimer Trucks North America invested in Platform Science, a telematics platform provider, to integrate various applications.
Further, there is a focus on improving powertrain efficiency to propel a vehicle. Vehicle efficacy is enhanced with aerodynamics, fully inflated tires, or more efficient auxiliary systems like electrically powered APUs.
Usage-based insurance package
Insurance companies are also getting into action, and more will enter the markets in 2022. The usage of sensors has led to modern vehicles learning about drivers, like driving patterns, driving incidents, and behavior.
In this decade, vehicle owners will offer access to data and enjoy various personalized packages. Good drivers who follow the rules will likely obtain better insurance packages. Insurers already have the tech, namely, AI/ML and sensors to measure speed, airbag deployment, hard braking frequencies, and where vehicles are driven.
Growth of the Asia Pacific market
Heavy-duty commercial vehicles (HCV) include vehicles with a gross vehicle weight higher than 16 metric tons, such as heavy trucks and buses. The demand for downsized engines and the deployment of multi-axle vehicles may boost vehicle performance.
Increasing construction and logistics activities have seen positive sales of heavy vehicles in countries like India and China. China’s One Belt One Road initiative is a highly ambitious project to serve a multi-geography market through rail, road, and sea routes.
In Saudi Arabia, the Neom project will develop a smart futuristic city with a total area of 26,500 square kilometers and 460 kilometers. Automotive players are initiating plans to expand their HCV business in these potential regions.
With the growing demand for operational efficiencies and economies of scale, companies are also leasing renting vehicles, which could open for servitization-as-a-service.
Servitization as a business model
Servitization is a process of replacing a traditional ownership model with an ongoing service model where a user/customer pays for access to a service that fulfills their need, where features include a guaranteed product ‘uptime.’
Servitization is finding usage in aerospace and automotive. Uber is implementing a shared service model where the user pays per trip or per month for access to ‘mobility.’ For commercial fleet operators, for a monthly spend, their freight/transportation needs are met, including fuel, servicing maintenance, and guaranteed vehicle availability.
Rivian is also working on skateboard architecture to support future vehicles or be adopted by other OEMs.
A push for agility and innovation
IT departments are integral for strategic processes of decision-making. Furthermore, experts are vital to the production pipeline, product development, and commercial departments. Applying agile techniques drives innovation in vehicle sectors which is important to understand consumer needs.
With a set pace, most automotive players are adopting the plan, and they are anticipating that agility will heavily influence the vehicle sector in the 2020s. With the rapid growth of e-commerce, companies define how we purchase goods and how goods reach us. Companies like Amazon invest in making supply chain and warehousing efficient and significantly invest in robotics.
The competitive landscape will be radically different in 10 years. OEMs and suppliers that do not react to the other trends in this insight risk consolidation, becoming low-value assemblers, or going out of business. Fleets that do not adopt technology or pursue a relentless focus on efficiency risk having their business models disrupted by those offering a service model.
Draup’s analysis of the commercial vehicles and buses brought various automotive trends, including various solutions OEMs are working on. Major OEMs include Daimler, Nikola, Freightliner, Scania, and others. Service providers include Infosys, LTI, HCL, TCS, KPIT, Accenture, etc. The report consists of deep dives into companies, the outsourcing landscape, key trends OEMs and startups are working on, and opportunities in the sector.
Draup is a sales intelligence and real-time sales signals tracking platform that leverages data from 8,000+ sources. Its custom machine learning models extract actionable insights about key players for the sales team’s benefit. Its insights provide a holistic view of opportunities and devise a value proposition to explore use seize sales opportunities.
