Fleet Management News & Business Info | Commercial Carrier Journal
Issue link: http://read.uberflip.com/i/815349
commercial carrier journal | april 2017 53 Low diesel prices slow market penetration, but for how long? BY JASON CANNON T he price of a gallon of diesel hovered around $4 from 2011 to 2014, which made a strong business case for fleets interested in cheaper and cleaner- burning natural gas. However, the average price of diesel fell to $2.30 per gallon last year, its lowest point since it crossed the $2-per-gallon mark in 2004, stunting growth in the alternative fuels segment. "Diesel prices are a headwind," says Brad Douville, West- port Fuel Systems' vice president of business development and product management. "e [return on investment], depends on mileage and several other factors, but at $4 [for a gallon of diesel], the phones don't stop ringing." e U.S. Department of Energy says the use of natural gas reduces greenhouse gas emissions anywhere from 6 to 11 percent, and according to ACT Research data, 6,885 natural gas trucks were sold last year, up slightly from 6,767 units sold the prior year. Driven mostly by engine emis- sions regulations, the agency's forecast calls for 6,900 units this year – about 4 percent of all heavy truck sales expected for 2017. "I don't want to call it a stagnant market," says Steve Tam, ACT Research vice president. "But I would argue we're in-between the innovator and early-adopter stage." Cheap diesel and concerns about the mileage range of natural gas engines may have kept the second wave of truck buyers out of the market, but domestic shale gas production and increas- ingly strict emissions standards may be poised to reignite interest in alternative powertrains. Frost & Sullivan, in a February report, projects market penetration of natural gas heavy-duty trucks to reach 7.2 percent by 2025. "As the market experiences increased propane penetra- tion rates, OEMs need to expand their engine portfolio with gasoline engines or forge partnerships with technology experts," says Saideep Sudhakar, Frost & Sullivan mobil- ity research analyst. "e entry of Nikola and Tesla in the hybrid- and electric-truck market and Provost and Temsa in the alternative-fuel bus market will prompt major OEMs to launch similar offerings." From 2011 to about 2013, when natural gas-fired engines quickly were building momentum, many foretold of adoption rates of 20 percent by 2020, but Douville says those expectations have been dialed back. "Twenty percent by 2020 isn't realistic," he says. "We can get to 20 percent, but on a delayed timeframe. What's driving [adop- tion] is going to move from parity in the price of oil to 'What is the price of a diesel vehicle that's going to meet the GHG require- ments?' I think we're going to see the economic equation shi, and that will drive penetration." Cheap diesel and concerns about the mileage range of natural gas engines may have kept the second wave of truck buyers out of the market. UPS last year invested $100 million in CNG fueling stations and plans to build six more while deploying 390 new CNG trucks.