Heavy-duty truck makers are investing heavily in new technology to develop zero-emissions trucks in order to avoid paying hefty penalties for non-compliance with carbon-emission reduction targets from 2025, Fitch Ratings says. Batteries are unsuitable for long-haul large trucks, so fuel cells are the leading technology.
The EU has recently adopted emission standards and targets for heavy-duty vehicles to help meet carbon-neutrality targets by 2050 – including a 15% average reduction in emissions from 2025 and a 30% reduction from 2030, compared to the EU average in the reference period (July 2019 to June 2020). Truck manufacturers could pay hefty penalties for non-compliance with these targets.
Most Fitch-rated truck manufacturers in Europe are banking on hydrogen fuel-cell technology for heavy-duty truck electrification. The high cost of manufacturing and operating fuel-cell trucks is one of the main obstacles. Costs will have to reduce significantly before production could be ramped up. If development of fuel-cell trucks continues as planned, mass production could become achievable in the next decade, while more than 40% of heavy-duty trucks could be produced using this technology in 2050.
The long timeframe of the commercialisation of fuel-cell trucks puts the potential cash flow contribution from the sales of such trucks beyond our typical rating horizon. Truck manufacturers’ investment needs for the development of fuel-cell models will have some bearing on their financial profiles, but could be accommodated within their current ratings.
Some manufacturers, such as TRATON, could shift their investments from internal combustion technologies to electrification without significantly increasing capex. Others, such as CNH Industrial N.V. (CNH; BBB-/Stable), may need to increase their investment budgets.