Electric trucks will be cheaper than diesel – decades sooner than expected

Toxic air lurks as an invisible danger to nearly 45 million Americans who live near major highways and roadways – and pollution from heavy vehicles, tractors and other large trucks is one of the main culprits. These vehicles mainly use diesel engines, preferred over petrol for their ability to carry heavy loads.

However, the downside of diesel is significant: Its exhaust contains more than forty known carcinogens, which contribute to nearly 9,000 premature deaths in the United States each year. The human toll is so high that some parts of Los Angeles are now designated as diesel death zones. Despite making up only 6% of vehicles on the road, heavy-duty vehicles produce more than a quarter of the U.S. transportation sector’s carbon emissions.

Electric trucks are a critical solution, but like the electric vehicles accelerating on the roads today, electric trucks still rely on affordable batteries to make economic sense. The cost of passenger EVs has fallen so rapidly that they are now cheaper outright or over the life of a vehicle compared to gasoline-powered cars, but cost projections for electric HDVs have traditionally lagged behind and are not expected to rise for decades reach the same level as diesel.

However, new energy innovation research shows that the cost decline of electric heavy-duty vehicles has accelerated, meaning they are on track to become cheaper than diesel decades sooner than expected. This economic progress is important for fleet managers planning their purchases and for government officials considering policies to encourage the transition to electric heavy-duty vehicles.

As the U.S. Environmental Protection Agency finalizes the next set of emissions standards for heavy-duty vehicles, EI’s findings suggest that the financial benefits of adopting strong new EPA standards are likely to exceed previous predictions.

Electric heavy-duty vehicles have no smokestacks or tailpipes, and their batteries are charged via an increasingly clean electricity grid, making them a crucial sustainability shift, a leading climate solution and a lifeline for local communities fighting for cleaner air and better health.

Charging batteries of the future

EI’s new research is based on a recent battery cost forecast from Bloomberg New Energy Finance (“the Updated Forecast”), which shows that the cost gap between heavy-duty and light-duty battery packs is closing faster than previously expected.

The analysis compares the updated forecast to a previous HDV battery price forecast from the International Council on Clean Transportation (“the Prior Forecast”). The EPA relied on the ICCT’s prediction in its “Draft Regulatory Impact Analysis,” the preliminary evaluation of the proposed HDV standards. The updated forecast predicts that costs will fall faster than previously expected. For example, by 2030, HDV battery pack prices will drop to $85 per kilowatt hour in the updated forecast, compared to $123 per kWh in the previous forecast.

Future reductions in battery costs will make the future of electric heavy-duty vehicles more financially accessible. Consider Class 8 short-haul tractors, which are used primarily to connect ports and rail transportation hubs, often passing through densely populated urban areas such as Southern California or the New York-New Jersey metro area. The electric version of Class 8 short-haul tractors is estimated to save $7,000 compared to diesel in 2030, instead of costing $14,000 more according to the previous forecast. By 2040, the purchase cost of an electric version will be $20,000 less than diesel, compared to $12,000 previously.

This illustrates a common dynamic across vehicle categories: most of the additional savings from the updated forecast comes from lower battery costs, but a small portion is due to lower “indirect costs” that cover expenses that are necessary for a manufacturer but not directly related into vehicle production, including research, development, marketing and profit margin.

By 2030, even excluding available consumer incentives, electric heavy-duty vehicles will be cheaper than their diesel counterparts in four out of five categories analyzed.

By 2040, electric heavy-duty vehicles will be the cheapest purchase option in all five categories.

The purchase price is just one part of the broader economic concept known as the total cost of ownership. TCO includes all costs associated with the purchase and operation of a vehicle, highlighting the benefits that electric heavy-duty vehicles offer in terms of fuel and maintenance costs.

Understanding TCO is crucial to interpreting the finding that diesel will remain cheaper at the point of purchase in 2030 for Class 8 long-haul tractors. This result stems from the assumption that they will need the largest battery packs of any vehicle to cover long travel distances – more than 100,000 miles per year.

Previous ICCT analysis predicted that Class 8 long-haul tractors would be more cost-effective than diesel in terms of TCO by 2030, even without taking into account consumer incentives or the optimistic future costs of HDV battery packs highlighted in EI’s research. The latest findings show that long-haul tractors, and electric heavy-duty vehicles in general, are expected to achieve an unsubsidized TCO benefit years earlier than 2030.

Calibrating emissions standards for heavy vehicles

At their core, vehicle emissions standards are primarily intended to protect public health and welfare, but economics are a major factor in shaping what is achievable. EI’s new research underlines the growing affordability of electric heavy-duty vehicles, supporting stricter emissions standards for heavy-duty vehicles.

The economic benefits of the proposed heavy-duty vehicle emissions standards are likely to be greater than previously estimated for federal and state policy. To date, eleven states, representing 25% of the national market, have adopted California’s Advanced Clean Truck standards. State-level officials considering whether to support stronger electrification policies for heavy-duty vehicles should expect higher financial benefits than previous analyses.

For policymakers everywhere, this is a pivotal moment, an opportunity to improve public health, accelerate climate solutions and drive sustainable economic growth through progressive policies. Strong emissions standards for heavy-duty vehicles as a cornerstone of a multi-faceted policy strategy to achieve the electrification of transport will clearly set the future direction of the market and unleash the innovation and investment needed to fully realize the exciting potential of electric heavy-duty vehicles.

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