Population, Pricing, and Battery Supplies Point to Concentration in the Commercial EV Market

April 15, 2024

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The passage of the federal Infrastructure Investment and Jobs Act in November 2021 kicked off a wildly generative two-year period for the clean transportation industry. Some of the most notable commitments were made in the domestic battery and electric vehicle industries. While the wave of federal funding and legislation continues to carry investments, companies, and new products forward in 2024, the pace of progress is bumping against physical and economic obstacles in a season of political uncertainty. As the battery production and commercial vehicle supply chains become more and more intertwined, their co-dependency provides a useful forecast of the EV market size and scale as fleets chart the path to corporate targets and/or local mandates.

A variety of decarbonization targets are informing fleets’ purchasing choices. At the federal level, legislation passed in the last two years requires government agencies to meet a 100% zero emission (ZE) purchasing standard by 2027 (light duty) and 2035 (all other). California has also set transition dates for passenger cars, transit agencies, school bus fleets, and specific on-road trucking segments. Billions have been invested in this transition, and more is needed. Multiple states have approved or are considering selling and purchasing mandates similar to California’s, and private companies as well as public entities have published internally motivated decarbonization goals for their transportation operation, often within the next decade. While the terms of decarbonization vary, most programs promote if not require the use of battery-electric vehicles (BEVs).

Once an uncertain ugly duckling, the BEV market has matured into an adolescent swan that, in some ways, looks remarkably like the conventional vehicle market. Records maintained by GNA since 2021 show that the number of Class 4-8 battery-electric trucks, vans, and buses certified and/or advertised for sale in the U.S. held steady between 2021 and 2022 before jumping about 55% in 2023, or from about 85 models to about 130 models. However, only about 55 models have been certified and/or advertised for sale in 2024 as of March. A closer look suggests that the industry is contracting around familiar providers. In both the Class 4-6 segments and the Class 7-8 segments, the manufacturers who have not yet certified or advertised models for 2024 were responsible for just over 50% of the 2023 models. Many are new entrants, or companies without a history selling conventional combustion-powered vehicles. About half of the Class 7-8 trucks and buses offered in 2023 were from new entrants who have not advertised models in 2024, and one-fifth were from manufacturers (mostly new entrants) who have left the market. As the model counts from new entrants have dropped, the counts from traditional providers has grown at a slower rate, offering customers less variety but more extensive service networks. These trends suggest that fleets’ money and attention may circle a familiar set of suppliers rather than a newly diverse market.

Data obtained by GNA suggests that fleet appetites are already trending towards familiar ground. Of the approximately 2,000 Class 4-8 on-road BEVs deployed in 2023, about 65% were made by 12 of the 18 traditional manufacturers selling models during that time. The remaining 35% were made by seven of the 24 new entrants, most of which delivered only a few dozen units during the year. This reveals an important insight for the regulators setting purchasing targets for whole industries: The number of registered manufacturers and models is not a reliable measure of the solutions available for working fleets. It also suggests that the burden of ramping production while reducing cost may further shrink the market.

This burden appears to be getting heavier, even for the industry’s heavyweights. Analysis from Bloomberg presented in January 2024 found that commercial vehicle battery prices fell only 14% globally (excluding China) between 2022 and 2023, and it will likely hover above $130/kWh for at least another year. Analysts added that any near-term declines will be smallest in the U.S. due to Buy America requirements. Batteries are one of the largest single cost components of a commercial vehicle and their upwardly sticky price is one of the main factors sustaining high van and truck prices. Data obtained by GNA shows that rather than declining as expected by California regulators and other industry groups, Class 8 truck prices consistently hovered around $330,000 and $380,000 (before tax) in 2022 and 2023 and have risen to around $450,000 in 2024 so far.

The ambition of domestically concentrated supply chains includes price stability and the nature vehicle manufacturers’ relationships to the battery industry may serve as indicators of future pricing curves. Many of the investments by well-known cell and pack manufacturers, such as LGES and Samsung SDI, have been made in partnership with leading vehicle manufacturers, like GM and Hyundai. Component and vehicle suppliers, such as Cummins, Daimler and PACCAR, have formed coalitions to share the risk, cost, and opportunity of expanding domestic battery supplies. A few unique stakeholders, such as BYD and Tesla, are refining existing battery manufacturing components of their business to sustain their competitive edge on both the vehicle and battery fronts. While much remains to be seen in the early years of the U.S. battery industry, it’s reasonable to expect that the companies securing battery supplies today will be first to compete on cost and lead times in the latter half of the decade.

At TRC, our daily responsibility is to advise stakeholders on the context for fleet decarbonization and help them make impactful, enduring choices. Absent a crystal ball, we mine available data to interpret the present and anticipate inflection points ahead. While any number of events can interrupt a trend, we strive to diligently track events as they occur knowing that patterns invariably emerge over time and that understanding the relationships between markets is key to preparing for success, particularly when these markets exist in conditions never seen before. If the market intelligence behind this analysis or on adjacent topics is valuable to your clean fuel strategy, please connect with our Technical Insights lead, Eleanor Johnstone, to discuss areas for collaboration.