Shift to battery electric trucks represents a vast opportunity for sales and revenue growth as truck fleet operators replace existing diesel fleets with battery electric (BEV) alternatives

LONDON, 27 February – Within a decade, the battery electric Heavy Duty Vehicles (HDV) market is expected to be larger than the Internal Combustion Engine (ICE) equivalent, with revenues for electric truck and bus sales reaching more than $320 billion by 2035, finds a study by Carbon Tracker published today.

The think tank forecasts that the cost of batteries will fall significantly as manufacturing costs decline due to economies of scale and new composite materials used. As battery costs decline, manufacturers will ether pass these savings on to buyers through lower prices or increase the battery capacity of trucks which will ease concerns around range.

As the range of vehicle capabilities available and lower prices are reached, it expects the volume of BEVs to expand significantly from current levels.

This shift to battery electric trucks represents a vast opportunity for sales and revenue growth for HDV manufacturers like Volvo, Daimler Truck and Traton as truck fleet operators replace their existing fleet with electric alternatives. This ‘re-fleeting’ could occur quite rapidly as operators look to take advantage of the operational cost benefits of an electric fleet including fuel, servicing/maintenance, and avoidance of CO2 based road tolls.

Ben Scott, head of automotive and report author, said: “Competitors are here now, and the incumbents don’t have time on their hands. They need to react quickly by developing a re-fleeting strategy and effectively transitioning their vehicle production asset base to produce EVs or face obsolescence.”

“We recommend investors call on policymakers to help expand the high voltage grid and speed up the planning and approval process for power connections and infrastructure. The right renewable energy policies need to be in place to ensure that clean energy is available to power an electric vehicle fleet.”

The report: ‘Re-Fleeting Revolution: Delivering Financial Returns in the Electric Heavy Duty Vehicle Transition’ finds competitors from China are already looking to take advantage of this re-fleeting opportunity, with incumbent HDV manufacturers Volvo, Traton and Daimler Truck falling behind. Each of these incumbent manufacturers sold less than 5,000 HDVs in 2024, yet China’s BYD sold more than 450% more.

The pace of sales growth for BYD electric trucks should be concerning for the incumbent truck makers. Incumbents also face the challenge of more competitors not only in China, but also from Tesla who plan to sell their electric Semi truck in 2026. If European and US HDV manufacturers don’t act, the same thing could happen to the truck market as occurred in the bus and passenger car sector.

Electric HDV production costs would likely rise in the event of a tariff/ trade war, resulting in more localised manufacturing and supply chains. The new US Administration may weaken existing HDV emissions standards (EPA Phase 3) as part of its broader approach towards environmental regulation. However, decisions by individual governments to embolden ICE HDV truck manufacturing/sales will likely weaken global competitiveness, as investment in electrification is reduced, falling behind global trends towards zero emission mobility.

Oil Demand Destruction                                                                                                                                

As the current global HDV fleet is almost exclusively fuelled by diesel, Carbon Tracker forecasts that the transition to BEVs will result in oil demand destruction of 2.5 million barrels per day by 2036. In the same year, the HDV fleet could demand as much as 600 TWh of power (equivalent to the combined annual electricity consumption of the UK plus Italy).

This is an important factor in the scalability of electric HDV deployments, with co-dependencies on the successful global rollout of renewable energy and grid upgrades.

Carbon Tracker’s previous report Heavy Lifting Required: Truck Makers’ Electric Transition found that the slow transition of leading HDV manufacturers risks putting wider climate goals at risk. Despite only making up 3% of vehicles on the road, ICE HDVs contribute 30% of emissions from road transport and that percentage is expected to grow as electrification spreads more rapidly across smaller vehicles.

Growth in the global market for battery electrification of trucks is 6-8 years behind that for cars and vans, but this gap could quickly diminish if certain conditions are met including 1) vehicle cost parity/ innovative financing solutions 2) confidence in electric range and utilisation 3) suitable charging infrastructure and power requirements.

The contrast in transition speed between HDV and passenger vehicles partly reflects structural differences between the two markets. The passenger car market is relatively fragmented, with new entrants like Tesla and BYD pushing electrification. The HGV market, by contrast, is highly consolidated, with 10 producers controlling over 70% of market share and fewer new entrants pushing electrification.

The market’s failure to transition at pace means that these companies are heavily exposed to commercial risks. Regulation in the UK and EU will impose increasingly tough targets beginning in 2030. On current trends, most HDV manufacturers will struggle to be compliant with these regulations and risk facing penalties.

 

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Once the embargo lifts the report can be downloaded here: https://carbontracker.org/reports/re-fleeting-revolution-delivering-financial-returns-in-the-electric-heavy-duty-vehicle-transition/

For more information and to arrange interviews please contact: 

Conor Quinn                    conor.quinn@greenhouse.agency                                               +44 7444 696 214

Joel Benjamin                  jbenjamin@carbontracker.org                                                    +44 7429637423

Stefano Ambrogi             sambrogi@carbontracker.org                                                     +44 7557916940

About Carbon Tracker

The Carbon Tracker Initiative is a not-for-profit financial think tank that seeks to promote a climate-secure global energy market by aligning capital markets with climate reality. Our research to date on the carbon bubble, unburnable carbon and stranded assets has begun a new debate on how to align the financial system with the energy transition to a low carbon future. www.carbontracker.org