As recent industry headlines across the heavy-duty truck market have been dominated by a slew of new electric truck products and record-breaking class 8 truck orders, the previously steady-stream of news about the growing natural gas market has subsided. In spite of the headlines, or lack thereof, the heavy-duty natural gas truck market continues to steadily march forward and mature, and is on track to have one of its best sales years ever.
However, with growth comes growing pains as some in the industry are hearing they may not be able to get a new natural gas vehicle (NGV) for many months from now. And while many are quick to assume this is due to issues specific to natural gas engines, parts or simply a lack of availability from truck OEMs, the reality is that NGV truck orders are experiencing the exact same challenges as their diesel counterparts. From the growing economy to available grant funding, there are several factors that are impacting the entire heavy-duty truck market and the immediate deployment of NGVs.
In spite of the headlines, or lack thereof, the heavy-duty natural gas truck market continues to steadily march forward and mature, and is on track to have one of its best sales years ever.
The Economy, Tax Law and the Impact on New Truck Orders
Class 8 truck orders – regardless of technology/fuel type – for July 2018 was the highest number of truck orders recorded since March of 2006, and several of the months before July were record breaking months as well.
A major driver of this growth is the booming U.S. economy. And economic activity translates to growth in the manufacturing sector, which in turn translates to growth in the trucking industry to move the goods that Americans buy.
Truck orders have also likely gained an additional boost due to the new tax law, which for 2018 offers companies the ability to accelerate depreciation on capital assets.
With the surge in truck orders, OEM build slots have quickly filled up through spring 2019. Any truck order, whether for a diesel or NGV, is subject to this backlog. So, regardless of the fact that natural gas engines, CNG/LNG fuel systems, and other necessary components are readily available from reputable suppliers across the country, the OEM build slots – or lack thereof – is hindering the immediate growth of heavy-duty NGVs here in 2018.
VW Settlement Funding as a Growth Catalyst
In recent weeks, we have begun to see the first round of state-level programs open for public and private fleets to apply for a piece of the $2.9 billion Volkswagen Settlement Environmental Mitigation Trust Funds. The primary goal for these funds is to offset the incremental cost of deploying new transportation technologies that will cost-effectively reduce harmful emissions.
NGVs are currently one of the only commercially available vehicle platforms that can provide significant emission reductions across most heavy-duty weight classes.
NGVs are currently one of the only commercially available vehicle platforms that can provide significant emission reductions across most heavy-duty weight classes. This is particularly true now that there is a 12-litre natural gas engine from Cummins Westport that is their newest addition to their line of “near-zero emission” products that are certified to emit 90% less emissions than the most stringent national emissions standard.
This has created an ideal win-win situation for state agencies that are looking for projects to fund with their share of Volkswagen settlement funds that can achieve significant emission reductions, and for fleet operators who need vehicle products that can be purchased from major OEMs and have an established supply chain to ensure assets can be maintained for the long haul.
The nationwide release of the Volkswagen settlement funds will continue to ramp up, offering a game-changing opportunity as the funds will provide sustained and market-moving incentives over the next several years, with natural gas trucks primed to provide substantial – and immediate – emission reductions using commercially viable and available technologies.
Thousands of NGVs are Being Delivered This Year
The evolution of the heavy-duty natural gas truck market has experienced year-over-year growth that is supported by an existing and expanding natural gas fueling infrastructure. In 2018 alone, we will see thousands of new build heavy-duty natural gas trucks hitting the road, and this increasing trend will continue in the years ahead, particularly with the VW funding now in play. And should diesel prices creep up another $0.50 or more, we can expect to see even further investment in NGV technologies.