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Why We Are Making Our Truck and Bus TCO Data Available for Free

Commercial Vehicles

April 2024

Jamie Fox

Jamie Fox

Principal Analyst

Jamie has over 15 years experience in market intelligence covering components for commercial vehicles including electric vehicles. He holds a BSc in Physics and Astronomy and an MSc in Nanoscale Science and Technology. Jamie is based in Chile.

Why we are making our TCO data available

We’ve decided to make our truck and bus total cost of ownership (TCO) model available. We think doing so will lead to more discussion and debate and will help to improve the model. In addition, this transparent release of our model should counter misinformation and provide a wider understanding of where our data comes from. We believe TCO is less important for the first 1% of the truck and bus market, which will comprise early adopters wanting to experiment with a new technology, those with a genuine desire to take action on climate change, or purchases made to improve a company’s image. However, between 5% market penetration and 90%, purchasing decisions are largely driven by TCO. This is particularly true in the truck market, which is largely a private free market. It is less the case in the city bus market, which is often driven by policy and targets set by city and national governments.

This dashboard shows a preview of the available data. To view the full dashboard, please use the form at the bottom of this insight.

BEVs often don’t win despite their advantages

Imagine you are a fleet decision maker who needs to replace 20 vehicles. Option A is diesel, option B is battery electric. The electric vehicles have a lower range, but that doesn’t matter because these vehicles are used within a city and average 80 miles per day.

The electric vehicle costs much more to buy, but the running costs are much lower. Over the vehicle’s lifetime, the overall cost as TCO will be the same. You know most of your drivers who have had the chance to try one prefer the electric version as it’s nicer to drive, it’s slightly better for the company’s image, and there will be a reduction in odours and pollution in the working environment. So, electric has to win, right?

Well, no.

We know as empirical fact that this isn’t (usually) the case. We know this because we’ve spoken to individuals who sell electric vehicles. Sometimes, typically with a company truly focused on ESG goals, the TCO argument works. Mostly, it doesn’t. Electric trucks typically already have lifetime cost parity or a bit better (with substantial variation by region, vehicle type and the specifics of a given case) and yet diesel vehicles are still the majority of new vehicles sold.

So what’s going on here?

Upfront cost, infrastructure and resistance to change

We think that some of the factors mentioned above (driver preference, environmental factors) are not playing a significant role in purchasing decisions for most organizations.

But three other things are:

Firstly, when buying an EV a greater share of the cost has to be paid upfront. The total cost may be better but the cost in the first few years will be worse.

Secondly, delays and stress in getting charging infrastructure at your hub. If you buy an EV, you need to start planning charging infrastructure months or even years in advance. You may even be told (not necessarily accurately) that it can’t be done, that it’s too much power for your location.

Thirdly, resistance to change – or sticking with what you know is tried and tested. While it’s true that companies, especially large ones, will make careful, analytical decisions based on cost and other factors, it’s also true that companies are made up of people, and some people are cautious or conservative by nature.

EVs can’t just cost the same, they have to be less expensive

These factors mean that cost parity is not good enough and EVs need to be less expensive by a certain amount. But how much? How do you quantify resistance to change and other such intangible factors?

One way is just to study historical data and see what happened in the past. We did this in 2019 when we started our research on trucks and buses and found that most vehicles remain diesel if the TCO advantage of electric is under 25% (i.e. total lifetime cost is more than 80% that of diesel).

However, we also found that by the time EVs are 50% of the TCO of ICE vehicles, they will be 80%-90% of new vehicle sales. After that penetration slows again as some use cases (very high daily mileage, very heavy weights, 24 hour a day use) are very hard to do with EVs.

A good example is cars in Norway. One argument is that supportive government policy led to the decline in ICE car sales. True. But look at the TCO. With all the taxes on a new ICE vehicle, anyone buying one and keeping it for 10 years is losing a LOT of money compared with buying an EV. So that’s why EVs are most of the market. It happens because people and companies do it to avoid losing a lot of money.

TCO is key.

Other things come into play of course – government mandates, clear air regulation, banning ICE vehicles. Where these are present, TCO is an oversimplification, or even an irrelevance. This is more common in buses though; for trucks it is largely a private free market and will remain so in most countries throughout this decade at least. Government subsidies do exist of course, but these are added to our TCO model.

In the S curve for electric vehicles, 25% is when the growth curve starts to get steep, and 50% TCO advantage is when it flattens off. So, the key is to understand when TCO for BEV (which is improving slightly each year) hits 25% and when it hits 50%. This is where Interact Analysis’ model comes in. We’ve used historical data to create a formula that predicts what percentage of vehicles will be electric based on the TCO advantage for a given powertrain and vehicle type in a given year.

We’ve now decided to transparently share the findings from the model and make them public. We hope this step will help us get feedback and improve the model even more.

Key Findings

Some key findings for medium-duty distribution trucks are:

  1. By 2028 (referring to lifetime cost for a vehicle purchased in 2028), the critical threshold of 25% cost advantage for electric vehicles will be reached in China and Germany, but is not forecast to be reached in the US until next decade.
  2. Fuel cell vehicles will not reach cost parity with ICE vehicles this decade, and probably not even by 2035 in most cases, leading to lower penetration rates.
  3. Hybrid vehicles are forecast to be less expensive overall than conventional ICE vehicles, but by less than 25%. This is not enough to drive change and cause a high adoption, but enough to remain as an industry niche.

In our detailed file available to view – which considers energy prices for each of 24 countries/regions to produce country level estimations – information on TCO is also available for other vehicles, such as heavy-duty trucks for distribution, heavy-duty long-haul trucks, and buses.

Please submit your details below to view the full dashboard.

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