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ow Europe’s electric truck-makers can avoid the mistakes of the car industry
The market share of battery electric trucks is relatively low but growing fast: this is the critical stage when the strategic choices made by European OEMs will determine their future.
Europe’s passenger car makers have now made rapid strides in electric mobility, but not without some serious strategic errors along the way.
Manufacturers were slow to offer a compelling range of battery electric vehicles (BEVs), with high priced and poorly executed cars limiting the early adoption market. They struggled to get to grips with the software-led nature of BEV development. And above all they failed to convince buyers that an electric vehicle ecosystem including adequate charging infrastructure was in place.
Battery electric trucks (BETs) are the next frontier in European electric mobility and the set of challenges faced by truck-makers is not identical, but it is very similar. There are three phases in BET adoption, and Europe’s OEMs need to get all of them right, before their Chinese competitors do:
Phase one: European OEMs need a product portfolio driven by actual use needs, not by competition over specifications
Phase two: they need to develop an ecosystem that delivers predictability in charging and service
Phase three: they need to scale fast, by breaking down adoption barriers
Here, we set out the actions truck-makers need to take now to master these three phases.
Graphic 1 – Three critical phases for European truck makers
Product development for BEVs demands a ‘use case mentality’ that understands that vehicles are part of a larger electric mobility ecosystem, in which, firstly the vehicle must convince potential buyers. This is true of all BEVs and especially true of electric trucks. Manufacturers must develop the capabilities of their electric vehicles and the offered ecosystem around them, even while maintaining a portfolio of internal combustion engine (ICE) vehicles that compete on product specification. While the BEV is now established as the clear future mobility technology, truck OEMs can only expect their vehicles to succeed when recognized as components of a trusted electric ecosystem.
This means the development of BETs should be treated as the strategic core of the OEM’s business, not as ‘side project’ alongside a legacy ICE product core. This is particularly important for truck-makers, and leading EU OEMs are demonstrating this: for example, Traton now allocates at least 50% of its R&D budget to electrification, which is more than typical passenger car OEM spendings which are around 40%.
The use case is the primary product development factor for BETs. Trucks need to be developed for clearly defined purposes, from light urban delivery to heavy long-haul transport: there is no one-size-fits-all solution. Developing a compelling range of products adapted for defined use cases also makes modularity in design and production exceptionally important, to eliminate duplication of high-cost R&D.
In BET development range is not as important as for passenger cars. Many truck use cases involve either limited range needs (for example in limited areas of operation where charging availability is unrestricted) or highly predictable routes of operation (where charging infrastructure can be targeted). In any case the range capability of long-haul trucks already fulfills the hard criteria for a transport economy where driving time is limited by regulation, and where further range improvements will increase flexibility and the range of feasible and reliable operations.
European OEMs are already part of the way down this strategic route: all leading OEMs already have advanced BETs in their product portfolios, but there remain portfolio gaps where electric versions of trucks at competitive sticker prices and competitive total cost of ownership are still lacking.
To fill these gaps and secure positioning in what will soon become a more competitive market, Europe’s OEMs will need to do further work on developing the BET ecosystem. The ecosystem is more than the machine: it consists of vehicle, infrastructure and usage. A product-only focus is no longer enough to be competitive in an evolving market.
Charging networks driven by passenger car OEMs like the Ionity network available in 24 European countries, or the Tesla Supercharger network in 30 European countries, have already accelerated electric mobility infrastructure development, giving a strong usability signal to potential buyers. Comparable networks specific to BETs will have the same ecosystem-building effect.
Lean charging solutions for BETs focused on depot and en-route charging will leverage the predictability of truck usage and increase trust in the BET ecosystem. Furthermore, they can reduce the costs.
Digital solutions can further improve the ecosystem, making BET fleet management more efficient such as through time-shifted charging and charging optimization. OEMs will need to anticipate these services when developing their products within the ecosystem strategy.
Passenger car customers have exhibited a continued unwillingness to transition to BEV options because the combination of vehicle, accessible infrastructure and adaptation to usage is not considered sufficiently attractive: the ecosystem has not been perfected. For BETs the equation is more attractive due to the greater predictability of truck use, which is a fundamental advantage in the creation of a compelling ecosystem.
Offering attractive products at small volumes is not enough to establish market leadership; early high market penetration is needed to achieve emission targets and to enable the scale effects to compete with new players. European passenger car OEMs lacked speed and scale when launching their BEV portfolios, losing out on the scale effects that would reduce costs. This gap was rapidly filled by new competitors from China that undercut prices. Today, European truck OEMs have attractive BET products, but competition from China leveraging scale advantage is an imminent market threat.
European OEMs already have BETs in the market, and BETs are gaining market share. For example, around 10% of newly registered trucks in Germany are already electric (of which most are from European OEMs). Heavy duty commercial vehicles have lower sales shares, but are constantly growing. That demonstrates existing strength in an emerging product category, but it is not enough to secure a future position in BET manufacturing. Companies will need to improve availability of products and achieve high market penetration to keep the momentum going and to achieve the scale to succeed even if that means sacrificing short-term margins. Scale effects and learning curves define long-term profitability in electrification.
Manufacturers should address logistics buyer risk by rolling out vehicle-as-a-service offerings to improve cost predictability and boost BET sales in the early phase of this market.
Graphic 2 – Share of newly registered BETs is growing in Germany
Source: Neuzulassungen, Kraftfahrt Bundesamt
Europe’s passenger car makers have already learned that treating BEVs as a ‘second strategy’ with low-volume, premium-priced production is not appropriate for the age of electrification. This strategy does not achieve the scale needed to reduce costs and support infrastructure and ecosystem build-out.
But Europe’s BET manufacturers can avoid repeating this error. To maintain their leadership position, European truck OEMs need to further extend their product portfolios based on actual truck use cases, which are different to passenger car use cases and more favorable to BETs. They need to scale their market presence by using digital service models to reduce buyer risk. And above all they need to think ‘ecosystem first’, moving beyond product focus to a holistic vehicle-infrastructure-use model.
These strategic shifts are not optional: competitors, particularly Chinese truck-makers, are already following this path.
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