Trucking powered by natural gas is poised to grow at a compound annual growth rate (CAGR) of 14% between 2012 and 2019, and the market for natural gas buses is expected to grow at a CAGR of 19% during the same period.
Heavier use of natural gas in each of these transportation sectors is being driven largely by lower fuel costs and emissions, compared to diesel. Fleet managers are increasingly turning to natural gas as a means to meet more stringent environmental regulations, as well as to save substantial capital on fueling.
Generally, original equipment manufacturers (OEMs) can build trucks and shuttle buses on assembly lines, or truck body builders or conversion companies can convert them from other vehicles. OEMs manufacture most heavy-duty transit buses on their standard assembly lines.
In terms of fuel, trucks typically run on compressed natural gas (CNG) because their tanks weigh less and are less costly than those for liquefied natural gas (LNG). LNG trucks, however, are increasingly used as longer-range vehicles (400 miles or more, compared to 150 to 300 miles for CNG).
Currently, the worldwide breakdown of refueling stations for these two types of natural
gas is 117 LNG refueling stations versus 20,233 CNG refueling stations. About 45% of the LNG refueling stations are located in the U.S., even though China has the largest number of annual sales for LNG-fueled trucks, with 3,020 vehicle sales anticipated in 2012.
In the truck market, end use largely drives vehicle design. As a result, the rebounding construction industry is expected to push growth in the overall truck market. Other strong targets for natural gas trucks are the refuse and transit bus markets – both of which are seeing significant growth in natural gas uptake despite relatively flat overall markets in North America. As cities expand in the Asia Pacific markets, the construction, refuse and transit segments are all seeing strong growth.
Drivers and barriers
Four basic demand drivers are propelling the market for natural gas vehicles (NGVs):
Economic interest. As a vehicle fuel, natural gas provides a financial benefit. In most cases, the incremental cost of an NGV is between 15% and 40% more than a diesel equivalent, depending on the vehicle type and fuel capacity. Due to lower fuel costs, this initial cost is typically recovered within two to seven years. After that, for its remaining lifetime, a natural gas truck or bus can still provide several years of cost savings.
Environmental benefits. NGVs emit substantially lower greenhouse gases (GHG), particulate matter (PM) and nitrogen oxide (NOx) than diesel-powered trucks and buses. Governments, therefore, perceive using natural gas trucks and buses as a tool for reducing emissions. And while these vehicles reduce smog and other emissions, the owners or operators can enjoy the marketing benefit of promoting themselves as ‘green.’
Availability of fuel and vehicles. The growth of fuel and vehicle availability and a wider range of heavy-duty truck engines have increased the appeal of trucks in segments in which they may not have had a strong presence in the past. New, more powerful engines are increasing the capabilities of vocational trucks and over-the-road tractors.
Energy security. In many countries, natural gas may be a domestic fuel that reduces reliance on imported petroleum products or imported refined gasoline.
Each of these key drivers holds different weight in different regions and with different stakeholders, but most market players generally accept all of them as the main reasons for purchasing NGVs. In turn, global sales of natural gas trucks will exceed 111,000 units in 2019, with medium-duty trucks expected to represent approximately 86,000 of that total.
The largest natural bus market will be Asia Pacific, accounting for 86% of sales by 2019. Although the North American and Western European markets will see strong natural gas bus growth (10% CAGR each), Asia Pacific will see a growth rate of 21%, with India, China, and Thailand leading the region in sales.
In markets where CNG light-duty vehicles (passenger cars and light trucks) predominate, the share of natural gas trucks and buses will actually be lower. Market manipulation is one reason for this, such as in Iran, where the government subsidizes diesel fuel so that it costs only about a quarter of CNG. Or, in places like Pakistan and Ukraine, the cost of CNG is not low enough for purchasers to recover the cost of heavy-duty CNG conversions within a reasonable time frame.
A key to growth in the NGV markets is robust opportunities for refueling. The regions with strong NGV markets now are likely to see slow growth in refueling stations, while markets with strong NGV growth forecasts should see a corresponding growth in NGV stations.
For instance, Thailand's number of refueling stations is forecast to grow from 502 in 2012 to 1,338 in 2019. China's refueling infrastructure is anticipated to increase by 2,145 stations, from 2,830 stations in 2012 to 4,975 stations in 2019. The Asia Pacific region overall will have more than 11,500 stations by then.
Dave Hurst is senior research analyst and John Gartner is research director at Pike Research, a part of the energy practice of Navigant Consulting Inc. To get more information about the group's new ‘Natural Gas Trucks and Buses’ report, click HERE.