A massive disruption is hurtling down the road into a $ 1.5 trillion global truck market as legacy manufacturers and new entrants battle for pole position in a race for zero-emission truck dominance.
Electric vehicles have quickly attracted investor attention in the last year, as stocks such as Tesla TSLA,
Li Auto LI,
and BYD 1211,
he roared louder. And that’s for good reason: electric vehicles will have penetrated 100% of the global car market by 2040, according to UBS UBS,
By 2025 alone, the Swiss bank expects two players: Tesla and Volkswagen VOW,
– to have emerged as the world’s top sellers of electric vehicles, delivering about 1.2 million cars each next year.
But vehicle emissions refer to more than just cars. There are bigger things that move.
Amid changing regulations and technological innovation, alternatives to both battery electric and hydrogen fuel cell internal combustion engines are emerging to disrupt the global truck market, estimated by UBS to be worth $ 1.5 trillion.
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The Swiss bank expects that zero-emission vehicles, or ZEVs, will eventually displace trucks powered by internal combustion engines, and that the pace of change will accelerate rapidly compared to three years ago as new entrants join. join the fray.
In a report released Wednesday with input from 21 analysts, UBS said it expects most of the truck market to be shared between battery electric vehicles and hydrogen-powered fuel cell electric vehicles. Renewable natural gas could also play a minor role in the market, analysts said.
The main driving force is global emissions regulations, but the economics of both battery and fuel cell ZEVs are also highly competitive. UBS projects that battery- or fuel-cell-powered heavy-duty trucks will be more profitable than diesel by 2030, including the cost of infrastructure. However, the supply of inputs remains a challenge, as a global shortage of battery cells is expected by 2025, according to UBS, and the green hydrogen industry is still young.
UBS predicts that 30% of heavy truck sales in North America, Europe and China will come from ZEV by 2030, and ZEV trucks will account for between 40% and 60% of medium vehicle sales in these regions .
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If Tesla’s goals are taken at face value, then its heavy-duty battery-electric semi truck will be a “superior alternative” to internal combustion engines by 2025, UBS said.
Indeed, to the extent that Tesla can maintain the leadership in battery innovation, Swiss bank analysts believe the American company “may have a built-in advantage” over former heavy-duty truck manufacturers that rely on third parties to deliver. the supply of batteries. .
Conventional truck and engine manufacturers are expected to fight hard to maintain control, including through new offerings and partnerships, but UBS expects they will “lose at least a piece” of the market. Established manufacturers face the “biggest headwind” in this changing space, the bank said.
In medium duty trucks, new entrants such as Rivian, Lion and Chanje are establishing a presence and will be key challenges. These companies are currently privately owned, but could go public through an initial public offering or a merger with a special purpose, blank check acquisition corporation.
Plus: Tesla faces a race with Volkswagen as the German car giant targets battery costs and new gigafactories
As for heavy duty trucks and engines, please wait for Tesla, Nikola and Hyliion HYLN,
to master whether they are able to execute their respective visions, UBS said, although incumbents like Toyota 7203,
and Hyundai 005380,
they are also expanding globally. Analysts noted that new entrants’ electric battery and fuel cell offerings are still under development and may not meet targets in both weight and scope.
In the UBS model, all of the following conventional truck and engine manufacturers are expected to lose market share by 2030: Cummins CMI,
– who owns Mack Trucks – and Traton 8TRA,
which is majority owned by Volkswagen and is expected to complete its acquisition of Navistar NAV,
In this battle between truck manufacturers, UBS expects infrastructure, battery and fuel companies to rise above the fray and make the most of the downwind. These action groups are your favorite selections. The Swiss bank is watching electricity infrastructure company Quanta Services PWR,
and chemicals and battery packs such as Albemarle ALB,
LG Chem 051910,
and Contemporary Amperex Technology Co. Limited (CATL) 300750,
More of UBS’s top and least preferred stock picks from the report are outlined in the chart below: