A global wave of green truck transformation is gathering momentum—how can commercial transportation rise to the challenge?

Caught between surging market demand and stringent regulatory requirements, the global shift to green trucks has become imperative. Truck manufacturers must adopt new strategies if they are to survive in this rapidly evolving landscape. The first step on this long journey: earning the trust of fleet operators while simultaneously developing a robust network of charging infrastructure.

A groundbreaking transformation is unfolding in the commercial truck sector, with major global manufacturers taking center stage and swiftly embarking on their own digital transitions. Zero-emission trucks could even upend the automotive industry’s traditional landscape within the next five to ten years—perhaps even before the much‑anticipated advances in digital connectivity and autonomous driving bring about profound change. As numerous countries successively revise their regulatory frameworks, “green” powertrain performance continues to improve, and public awareness of the impacts of climate change steadily grows, the commercial transportation sector is accelerating its transition to zero-emission trucks.
For medium- and heavy-duty truck manufacturers and fleet operators, zero-emission powertrains are the only path forward—but navigating this transition will not be easy. Globally, the vast majority of established automakers face a dual challenge: maintaining the profitability of their existing businesses while addressing the substantial capital investments required for electric‑propulsion systems. Recently, a global study by BCG has shown that commercial truck manufacturers, fleet operators, and their ecosystem partners need to buckle up, stay ahead of the curve, and leverage four emerging strategic approaches to navigate swiftly and smoothly toward a sustainable future.

01 Future Prospects and Driving Factors

In recent years, the COVID‑19 pandemic and the chip shortage have triggered a series of crises, putting simultaneous pressure on both the supply and demand sides of commercial trucks. However, as the global economy returned to normal last year, bolstered by a thriving e‑commerce market, infrastructure investments by governments in many countries, and favorable supply‑chain conditions, global vehicle sales also rebounded to pre‑pandemic levels in 2021. The Chinese market has been the primary driver of this recovery, while the European and U.S. markets remain mired in the economic downturn caused by the pandemic.

The struggling automotive industry is gradually returning to normal, but commercial truck sales may not rebound to pre-pandemic levels until 2025. According to forecasts, global sales of medium- and heavy-duty commercial trucks will exceed 3.3 million units by 2030, with an annual compound growth rate of 2%. Among the world’s three largest markets, China will lead with 1.1 million units, while the U.S. and European markets will rank second and third, respectively, with 500,000 and 400,000 units (see Figure 1).

Driven by economic policies and commercial viability, electric trucks will soon be a common sight in the world’s three largest markets.

More importantly, Driven by economic policies and commercial viability, electric trucks will soon be a common sight in the world’s three largest markets. BCG research indicates that sales of battery-electric trucks and fuel-cell trucks in the aforementioned markets will grow rapidly. The European and North American markets will lead the way, with the Chinese market following closely behind. Battery-electric vehicles (BEVs) are powered by rechargeable battery packs and have no auxiliary power source, while fuel-cell electric vehicles (FCEVs) are driven by a fuel cell that generates electricity through the reaction of oxygen from the air with onboard compressed hydrogen, supplying power to the drive system; they may also be paired with small batteries or supercapacitors.

By 2030, it is projected that in the European market, battery-electric trucks will account for approximately 32% of new commercial truck sales, while fuel-cell trucks will make up about 19%. In the United States, these shares are expected to be 21% and 4%, respectively, whereas in China they are forecast to be 15% and 5%. By 2030, zero-emission trucks will account for 28% of the market in Europe, the United States, and China—equivalent to 500,000 vehicles—marking the official launch of the global transition to green trucks (see Figure 2).

Overall, the transition of commercial transportation to green propulsion systems is an inevitable outcome of the interplay between two driving forces.
 

Green Regulation

From a macroeconomic or policy perspective, both the European Union and the United States are tightening regulations on internal‑combustion‑engine vehicles while introducing a series of measures to promote zero‑emission and low‑emission trucks. For example, in December 2019, the European Green Deal raised its emissions‑reduction targets, aiming to cut greenhouse gas emissions by 55% below 1990 levels by 2030. For trucks, we assume that the EU will adopt regulations similar to those for passenger cars or vans, requiring a 50% reduction in truck greenhouse gas emissions by 2030 compared to 2021 levels.

Starting in 2025, European manufacturers will be required to meet both the current emissions targets and the more stringent standards set for 2030 for all newly registered trucks each year. At the same time, European regulators have introduced a series of measures to encourage the production and purchase of zero-emission trucks, while granting manufacturers the flexibility to balance the emission profiles of their model ranges in line with their reduction goals, thereby providing automakers with room to maneuver.

In August 2021, on the other side of the Atlantic, The United States has also unveiled an ambitious emissions‑reduction plan targeting 2023 models and later. If the new regulations are implemented over the long term, they could cut annual carbon dioxide emissions by roughly one-third. However, the new regulations are regulatory in nature and have not yet been elevated to the legislative level, which means that the emission‑reduction measures currently generating high expectations could well become mere empty promises once the next administration takes office. Still, even amid these concerns, there is reason for optimism: fifteen states, led by California, are seeking to restrict the on‑road use of internal‑combustion‑engine trucks. In November 2020, these states each announced minimum thresholds for zero‑emission truck sales and set specific sales targets for manufacturers. Consequently, regardless of how the U.S. political landscape evolves, state‑level decarbonization initiatives will continue to drive steady growth in demand for zero‑emission trucks.
 

Economic factors

From a micro‑ or buyer‑level perspective, fleet operators are approaching the tipping point for adopting zero‑emission trucks. The total cost of ownership for battery‑electric trucks is expected to equal that of conventional trucks between 2023 and 2025, while fuel‑cell trucks will reach this parity between 2028 and 2030 (see Figure 3). Given that profit margins in commercial transportation are extremely thin, electric trucks must be cost‑competitive enough to win the favor of fleet operators.

However, thanks to the combined effect of multiple factors, the cost-effectiveness of green trucks is expected to improve rapidly. First, due to increasingly stringent regulations, Even if automakers develop more efficient internal-combustion engines over the next decade, they still won’t be able to offset the rising costs of diesel vehicles. Secondly, by 2030, battery costs are expected to fall below $100 per kilowatt-hour, signaling… Pure electric trucks will comprehensively outperform diesel trucks in terms of cost-effectiveness across major markets. Moreover, given technological advances and economies of scale, green hydrogen—currently difficult to procure—could begin retailing at $5 per kilogram by 2030, making fuel-cell options economically viable as well. Furthermore, in markets such as the United States, The government will also introduce tax credit policies to further reduce costs at both the production and consumption ends.

In short, these advances will help battery-electric and fuel-cell trucks capture market share. By 2025, battery-electric trucks will be increasingly prevalent in short-haul and regional transport, while by 2030, fuel-cell trucks will also take on long-haul freight duties. By 2030, the economic viability of all‑electric trucks in Europe and China is expected to rival that of conventional trucks, while the United States may lag behind due to the lower cost of diesel vehicles compared with most other countries. Accordingly, as previously noted, by 2030 the adoption rate of zero-emission trucks in Europe is expected to exceed 51%, while in the United States it could reach 25%—provided that the new emissions‑reduction regulations deliver substantial improvements—and in China, zero-emission trucks are projected to account for 20% of new vehicle sales.

02 Three scenarios offer a glimpse into the future of three major markets.

Next, BCG will clearly outline the evolution of demand across the world’s three major commercial‑vehicle markets by examining three scenarios: lagging, standard, and leading.

European market

If the target of a 30% reduction in truck emissions by 2030 remains unchanged, Europe will find itself on a path toward a less favorable scenario in its green transition. Under the most pessimistic outlook, market demand for zero-emission trucks would rise from 1% in 2020 to 25% by 2030. If Europe follows the roadmap set out in the European Green Deal and achieves its target of reducing emissions by approximately 50% by 2030 as scheduled, green trucks could account for 50% of all new vehicle sales. If Europe further raises its emissions‑reduction targets and maintains its leadership in the green transition, demand for zero‑emission trucks in the European market will surge to 65% by 2030, with all newly sold trucks being zero‑emission by 2035 (see Figure 4).

U.S. market

If the United States maintains its current 12% emissions‑reduction target over the next decade, it will find itself on a path toward a “backward scenario” in its green transition. In this scenario, by 2030, market demand for zero-emission trucks will account for only 15%. Given that several U.S. states are already promoting the adoption of green trucks, if the U.S. government progressively raises its emissions‑reduction targets, market demand for zero-emission vehicles could reach 25% by 2030. If the Biden administration honors its campaign pledge to elevate California’s emissions‑reduction targets to the national standard, the United States could still maintain a leading position in the global green transition. On its own, this could boost sales of zero-emission trucks in the U.S. market to 50% (see Figure 5).

Chinese market

If the government fails to encourage state-owned automakers that prioritize diesel‑vehicle emissions reductions to transition to zero‑emission trucks, the share of zero‑emission trucks in the Chinese market will rise from its current 1% to only 10% by 2030. Since China’s carbon emissions are not expected to peak until after 2030, the government currently lacks strong incentives for emissions reductions. Strengthening regulation and ensuring rigorous enforcement could boost demand for zero-emission trucks in China to 20% by 2030. Encouragingly, China is already working on new emissions standards as it seeks to take a leading position in the green transition. Given that several leading truck manufacturers have already begun producing electric trucks, market demand for electric trucks is expected to surge to 40% by 2030 (see Figure 6).

03 Four Major Strategic Shifts

Faced with this situation, truck manufacturers around the world must adapt swiftly and launch new strategies across four key areas to ensure their survival through transformation.
 

Accelerate new product launches

Electric trucks are the future of commercial transportation, yet related products remain scarce in the Chinese, European, and even U.S. markets. However, this situation may soon begin to change. Last year, Several manufacturers have already launched or plan to launch electric trucks, with some models slated for release in 2022. Daimler Truck, Traton, Volvo Trucks, PACCAR, FAW, and other established players have already begun producing electric trucks. In addition, several new‑entry automakers are vying for a share of the electric‑truck market, including Canada’s Lion Electric, the U.S.’s Xos, Sweden’s Einride, the U.S.’s Nikola, the Swedish–U.K. joint venture Volta, and the renowned Tesla Semi, among others. BCG forecasts that, By 2025, global truck manufacturers will be able to offer approximately 50 zero-emission models, further boosting electric truck sales.

Today, commercial truck manufacturers have only one path forward: making the production of electric trucks their top priority, shortening time-to-market as much as possible—by streamlining vehicle‑development cycles, building advanced manufacturing capabilities, and establishing a supply chain that aligns with these goals. It is worth noting that manufacturers can source all‑electric powertrains from non‑traditional suppliers, and as volume drives economies of scale, component costs will decline significantly.

At present, numerous automakers are forming alliances to share the risks and costs associated with developing new business ventures. In 2019, Iveco, FPT Industrial, and Nikola formed an alliance to jointly develop zero-emission trucks. In October 2020, Transdev and Hino established a joint venture focused on developing electric vehicle platforms; the venture was initially based in Sweden before relocating to Japan. In November 2020, the Volvo Group invested in acquiring a 50% stake in Daimler Truck Fuel Cell, forging a partnership with Daimler to co‑develop fuel cell technology for heavy-duty trucks.

Winning Customer Trust

Currently, most fleet operators are reluctant to invest in electric trucks, mistakenly believing that their total cost of ownership is too high. In 2021, a BCG truck consumer survey revealed that, Eighty-four percent of European heavy-duty truck buyers have no plans to purchase electric trucks within the next decade, citing concerns such as vehicle price, range, charging infrastructure, frequency of charging, and residual value.

Although electric trucks appear more expensive than conventional ones, their maintenance and fuel costs are significantly lower, which ultimately reduces fleet operating expenses over the long term. However, the price of an electric truck is comparable to that of two or three conventional trucks, so most fleet operators are likely to adopt electric vehicles only to comply with increasingly stringent environmental regulations. In other words, green regulations must be further tightened to leave fleet operators with no choice but zero-emission trucks.
Truck manufacturers must overcome numerous hurdles to win the trust of fleet operators with electric trucks. Their first priority is to educate potential buyers about the performance of zero-emission trucks, demonstrate that these vehicles fully meet the diverse needs of fleet operations, and prove that the total cost of ownership for electric trucks is lower than that of conventional internal-combustion-engine trucks.

At present, most fleet operators are reluctant to invest in electric trucks, mistakenly believing that their total cost of ownership is too high.

Create infrastructure

Electric trucks require substantial power support because they are heavier, carry heavier loads, and operate for longer durations than light-duty trucks. Medium- and heavy-duty trucks consume between 0.8 and 2 kilowatt-hours per kilometer, whereas light-duty trucks use 0.2 to 0.4 kWh/km. Moreover, the larger battery packs increase charging times. For example, a supercharger with an average capacity of 120 kW would take approximately eight hours to fully charge a battery pack rated at 1,000 kWh. By 2030, even at current penetration rates, the annual electricity consumption of electric trucks will be equivalent to that of 50 million households.

At present, there are virtually no charging facilities available worldwide for medium- and heavy-duty commercial vehicles. In the United States, the Biden administration’s recently enacted Infrastructure Investment and Jobs Act will allocate $7.5 billion to build a nationwide network of charging stations. These new stations will feature non‑proprietary charging connectors and accept a variety of payment methods. In 2022, the U.S. Congress is expected to pass a second infrastructure spending bill that covers numerous areas, including electric vehicles, incentive programs, and the development of charging infrastructure—among which is a $174 billion plan to install 500,000 charging stations across the country. However, most charging stations are reserved for passenger vehicles, leaving the private sector to develop its own infrastructure capable of charging electric trucks. In general, truck rest stops located along highways, at service areas, loading and unloading points, and transportation hubs are required to be equipped with charging facilities. Manufacturers need to provide charging solutions for truck parking areas, thereby fostering a charging ecosystem for the transportation sector. In Europe, infrastructure projects for charging facilities may require concerted efforts from manufacturers. Consequently, joint ventures aimed at building a network of charging stations along major highways have emerged. At present, Volvo, Daimler, and Traton have reached an agreement to jointly develop a European commercial‑vehicle charging network, with plans to deploy 1,700 charging stations within five years. The three companies’ joint venture is expected to begin operations by the end of 2022.

Innovative business model

For decades, truck manufacturers have remained confined to a traditional business model, focusing primarily on vehicle production and sales, along with a limited array of ancillary services such as automotive financing, leasing, after-sales support, and used‑vehicle sales. Looking ahead, as competition intensifies, these existing lines of business will at best merely sustain the status quo; new revenue streams will be unlocked only by bold pioneers willing to break new ground.
Balancing the drive for a green transition with the need to secure stable revenue streams leaves truck manufacturers with few options, and… Providing customers with charging infrastructure and a usage-based pricing model may be the optimal solution and is expected to become a key component of its core business. By the late 2020s, ancillary service businesses centered on autonomous trucking fleets and battery recycling could also begin to emerge. In the long term, if these new revenue streams are fully leveraged, truck manufacturers stand to enhance their sustained profitability and move beyond single-digit profit growth.

04

After decades of striving to optimize internal‑combustion engine performance, commercial truck manufacturers may now have no choice but to shift their strategies. Many startups are poised to enter the zero‑emission truck market, further challenging the established players’ dominant position. After all, pure‑electric powertrains have fewer moving parts than internal‑combustion engines, and electric trucks are easier to manufacture than conventional ones. Moreover, Established automakers have already built extensive supply chains and mature industry ecosystems, while new‑entry EV makers can leverage their expertise in electric and electronic technologies to produce mechanical components and subassemblies based on existing supply‑chain infrastructure.

Established automakers can only retain the favor of their existing customers and entice them to purchase next‑generation models—thus securing a competitive edge in an industry reshuffle—by accelerating the development of zero‑emission trucks and swiftly scaling up production. Moreover, these established players must recognize that… Establishing supply relationships with digital hardware and software companies is just as important as building robust engineering capabilities. Moreover, pioneers in zero-emission trucks must develop new business models centered on services and customers, while also seeking to forge fresh partnerships.
In 1896, when Gottlieb Daimler invented the first four-wheeled automobile, he christened its two-cylinder, rear-mounted, four-horsepower internal-combustion engine “Phoenix.” Today, 126 years later, the global commercial‑vehicle industry must learn to thrive without relying on internal combustion engines and, driven by green powertrains, rise anew like the phoenix from the ashes.