North American Light-Duty NGV Market Forecast To Swell

The next seven years will see steady growth in the worldwide market for light-duty natural gas vehicles (NGVs), with 3.2 million units sold in 2019. By then, a total of 25.4 million will be deployed globally.

Right now, NGVs are gaining renewed interest from both consumers and fleets due to the current high cost of gasoline and diesel. Many parts of the world have substantial and growing supplies of natural gas, resulting in a wholesale cost that is near record lows in some countries. Additionally, methane has much cleaner emissions than either gasoline or diesel vehicles, which makes natural gas an attractive fuel for use in transportation.

NGVs are available both in passenger cars and in light-duty pickup trucks, SUVs and vans. These vehicles typically run on compressed natural gas (CNG) because the tanks for CNG are lighter in weight and less costly than liquefied natural gas (LNG). Natural gas must be cooled to -259 degrees F to be liquefied and stored in insulated containers.

The markets for light-duty NGVs vary significantly depending on the region and country:

North America:
The light-duty truck segment leads the North American market because the market largely consists of fleet purchasers rather than individual consumers. Fleet sales of NGVs are growing at a rate of 10.8% annually in North America. The vast majority of NGVs are vehicles that automotive OEMs have prepped with engine upgrades and then sent to suppliers to install the CNG equipment. Almost all of these vehicles are built to order.

Honda is currently the only OEM to manufacture a CNG passenger car (the Civic GX) for the North American market, though the sales volumes for this vehicle are very small in comparison to the sales of other Honda Civics.

Latin America: Latin America is one of the few regions where the consumer market is larger than the fleet market. This market is also home to two of the largest NGV markets in the world, Argentina and Brazil. Combined, they account for 25% of total NGVs globally.

The other markets in Latin America combined have sales of less than 100,000 vehicles in 2012, but we expect to see strong growth (about 10% CAGR each) over the next several years.

Europe: The European NGV market varies widely between countries. Ukraine and Italy are the largest light-duty NGV markets, where 2012 sales will reach 151,487 and 159,046, respectively. In both countries, OEM factory-built vehicles from Fiat and other manufacturers run on CNG, and the refueling infrastructure is largely in place to support a retail market for the vehicles.

Other markets in Europe continue to struggle with growing refueling infrastructure fast enough to meet the needs of both consumers and fleets.

Asia Pacific: We forecast the Asia Pacific market to grow to become the largest market for NGVs later this decade, thanks to strong growth in a variety of markets, such as Thailand (24% CAGR), India (23%) and China (20%). Pakistan also has a large fleet of NGVs, but the market has seen a lot of volatility as the government looks to reduce strains on the country's natural gas supplies.

Smaller markets, such as Uzbekistan and Armenia, have seen tremendous growth in NGV conversions of existing vehicles in the past but are likely to face NGV market saturation by mid-decade, which will slow sales growth considerably.

Middle East/Africa: The Middle East is home to the largest market for light-duty NGVs, Iran. Egypt also has a relatively strong light-duty vehicle market, particularly among taxi fleets. Outside these two markets, very little demand exists for NGVs in Africa.

Overall, there are four main drivers of growth in the light-duty NGV segment: economic benefits; environmental benefits; availability of fuel and vehicles; and energy security.

The low wholesale cost of natural gas means that the fuel is relatively stable in cost and has a low price. This low cost, in comparison to gasoline or diesel, allows the incremental costs for the vehicles to be recovered, and light-duty NGVs will typically have a lower cost of ownership than a comparable gasoline vehicle.

NGVs also have substantially lower greenhouse gas, particulate matter and nitrogen oxide emissions than gasoline- or diesel-powered vehicles. As governments look to reduce GHG emissions from light-duty vehicles, NGVs are seen as a tool to meet those requirements, particularly in Europe.

The breadth of vehicle models available and the growth of NGV refueling infrastructure remain key concerns for the market. In regions like North America, Europe and parts of Asia Pacific, the growing infrastructure remains focused on servicing fleet customers. This focus will likely limit the growth of passenger cars in North America and overall demand in the other markets.

Many governments have incentivized the growth of NGVs by either offering reduced taxes on the vehicles or by increasing investment in refueling infrastructure. In most markets, vehicle development has focused on the small car (50% of global sales in 2012) and the minivan/van segments (30% of global sales).

In many regions, natural gas is widely available as a domestic fuel, which eliminates having to import petroleum products. Using natural gas as a transportation fuel reduces dependence on imported crude oil or imported refined gasoline.

Globally, the market for light-duty NGVs – including passenger cars, light-duty trucks and commercial vehicles – is expected to grow at a CAGR of 6.2% between 2012 and 2019. North America will experience robust growth of 10% CAGR, but because the market is small, that growth is not expected to lead to a dominant market position.

Dave Hurst is a senior research analyst and John Gartner is research director at Pike Research, a part of Navigant's Energy Practice. The company just released its comprehensive ‘Light Duty Natural Gas Vehicles’ report, which addresses a number of important issues for OEMs, NGV conversion companies, equipment providers and other stakeholders.

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