Chinese climate policy to drive its heavy-duty truck market

By: Shirly Zhu


Analysis: moves in leading EV nation’s large-truck sector holds clues to future

Chinese climate policy to drive its heavy-duty truck market
Shirly Zhu

 

As the world faces up to the realities of climate change, all eyes are on China, currently the world’s largest greenhouse gas emitter.

In September 2020, president Xi Jinping announced at the UN General Assembly the objective of peak CO2 emissions by 2030, and carbon neutrality by 2060.

Whether China will achieve this goal in full has been questioned by many. But it is clear that they will try. This has major implications for the battery electric and hydrogen fuel cell heavy-duty truck market in China.

Decarbonisation of heavy industry implies need for clean heavy duty trucks

Currently we see limited penetration for new energy heavy-duty (HD) trucks in China, as we do across the globe, owing to high prices and lack of charging infrastructure.

But our interviews with market leaders in the sector point to the fact that emission-free trucks are a focus for a range of industries as they respond to national and local government emission-cutting policies. 

Nikkei Asia reported recently that party officials in Tangshan in Hebei Province imposed stringent emissions controls on steel-makers in response to Xi’s announcement, cutting production by between 30-50%.

However, China’s burgeoning economy needs high production levels and the longer-term picture in the steel industry will be the modernising and decarbonising of production lines and the electrification of their associated lorry fleets.

In some sectors, electric or hybrid HD trucks have been around for some time, though in limited numbers.

We are talking mainly of vehicles covering short ranges in areas of high-density population, such as city sanitation vehicles, which are already well-established in China.

As far back as July 2011, Reuters reported the introduction of 1,060 full electric sanitation trucks on the streets of Beijing, and in 2018 500 electric waste vehicles manufactured by BYD, a Chinese company, were rolled out in Shenzhen.

Our interviewees reported the progressive outsourcing of sanitation services to private companies, and the subsequent pressure placed on those companies by local leaders, as well as government inducements in the form of subsidies, to commit to new energy vehicles to combat high pollution levels.

China posts significant increases in new energy truck sales in first half of 2021 

New energy light-duty trucks have enjoyed far greater penetration on China’s roads than have equivalent heavy-duty vehicles. But our interviews detect that the gap may be about to narrow.

According to data from the China Association of Automobile Manufacturers (CAAM), sales of NEV HD trucks reached 1,732 units in the first half of 2021.

This constituted a year-on-year increase of 22.4%. Of these, 240 units were hydrogen fuel cell trucks, accounting for 13.85% of total NEV HD truck sales, and 381 units, or 22% of the total, were battery-swapping vehicles. 2021 could indeed be regarded as a landmark year for new energy HD trucks in China.

We feel the fuel cell powered option is something to take particular note of.

Previously prevalent in the bus sector, it is spreading into the truck market, and interviewees quoted important supporting policies promoting fuel cell use in the medium and heavy duty lorry sector, such as the ‘Notice of Launching Demonstration Applications of Fuel Cell Vehicles’ issued by multiple central government ministries in September 2020. This initiative should incentivize the whole value chain for new energy commercial vehicles.

Battery-swapping: the way ahead?

Whilst the technological challenges to electrification of long-haul transportation trucks currently seem significant, if not insurmountable – battery size, range and charging time being the main barriers – mass adoption of EV solutions for short-distance HD vehicles such as on city streets (e.g. waste lorries), in mines, or in internal transportation scenarios such as steel plants is definitely in prospect.

This is also the case for medium-sized construction vehicles such as dumpers and small excavation machinery. But even with short-journey HD vehicles, range and charging time can be an issue. Our interviewers extracted some interesting data regarding battery-swapping.


Read about Janus Electric’s battery swap plans, here


HD battery-swap trucks saw good sales in the first half of the year, but it is a new technology, and issues remain to be resolved, such as a lack of industry standards allowing a proper match of batteries to vehicles.

An interesting point was made by one interviewee: some major operators in coal mining in China’s coal-rich north reported that they achieved a better TCO with electric trucks compared even to diesel, the main reason for this being that they have their own powerplants, and so can charge their vehicles very cheaply.

In competition with EV is the hydrogen fuel cell. In a fuel cell truck, the operational mileage is much longer than for electric trucks, and the fuel cell filling time is much shorter than electric battery charging time. But the technology has disadvantages: capital expenditure on a fuel cell vehicle is high – more than double that of an electric truck.

Interviewees suggested that government subsidies could help to lower the price of these vehicles, but they could still cost up to 30% more than the equivalent electric truck.

Another major negative factor is the infrastructure required to support fuel cell vehicles. Interviewees highlighted the difference in cost of building a fuel cell filling station and an EV charging station, putting the cost of the former at RMB10 million (A$2.16 million) for a 1,000kg installation, which is significantly more than the cost of an EV charging facility.

This would inevitably have a knock-on effect on vehicle operation costs, putting hydrogen at, say RMB40-50 per kilogram (A$8.6-10.8), twice the cost hydrogen would need to be to bring the vehicle TCO down to anywhere near economically realistic levels.

China poised to be a major global player

Whilst the US will be the world leader in new energy HD trucks, we expect China to be a front-runner.

We could well see Chinese government policies fuelling both Chinese and global markets, with global suppliers servicing a growing Chinese market, and successful Chinese OEMs exporting their products.

Our upcoming truck and bus report will contain the latest deep-dive data supporting the anticipated growth in the EV and fuel cell HD truck sectors in China and globally.

Shirly Zhu is principal analyst with international market analysis firm Interact Analytics

 

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