Thursday, April 4, 2013

Frost & Sullivan sees Europe emerging as strong regional market for medium- and heavy-duty natural gas vehicles

Europe is set to emerge as a strong regional market for medium- to heavy-duty natural gas (NG) commercial vehicles, populated by several competitors on both OEM and supplier sides, according to a new analysis by Frost & Sullivan.

Driven by energy price volatility, tightening emission norms, and the shale gas revolution in the US, the market for NG vehicles is gaining considerable momentum. Of all alternative NG technologies, compressed natural gas (CNG) and biomethane technologies pose the least pressure on existing infrastructure. By 2018, the NG market in Europe is expected to reach production levels of nearly 18,000 units.

Frost & Sullivan projects that that NG truck and bus penetration will reach an estimated 3.4% and 12.7%, respectively, by 2018.

Spark ignited technology will account for around 90% of commercially manufactured NG buses, while compressed ignition technology will dominate the liquefied natural gas (LNG) truck market with around 60% share. The heavy duty segment is set to account for 75% of NG truck sales with LNG being a dominant fuel option.

OEMs' willingness to differentiate products through technology partnerships is leading toward increasing focus on compression ignition and dual fuel technologies, according to Frost & Sullivan. Compression ignition would facilitate the use of NG vehicles for long haul application, which would compensate for the higher upfront cost-provided the fuel infrastructure and diesel NG price differential exists.

In future, the margins for module suppliers will shrink, and the same will happen for component suppliers when OEMs begin exerting pricing pressures as volumes start to grow. Duty cycle restriction of NG vehicles can be overcome through concerted strategies aimed at developing vehicles and products that deliver highest efficiencies in certain targeted vocations and duty cycles along with necessary fuel infrastructure.

This study is part of the Automotive & Transportation Growth Partnership Service program.