Road Transport CO2 Emissions: Smooth Technology Transition or Revolution Ahead?
Minus 80% between 2015 and 2024: This is what happened to Diesel car sales volumes in the European Union (EU) according to data from the European Automobile Manufacturers' Association. Shall we now see the same overwhelming shift on the road transport truck market, as a similar response to regulatory pressures and demands of increasingly environment-conscious clients?
Let us have a look at the technology outlook and impact on the concerned industries: truck manufacturers and their suppliers, freight transport companies and also vehicle leasing firms.
The priority given to combatting climate change in the EU leads us to focus our comments here on this forerunning part of the world. Also, we will restrict our remarks to long-haul transport and Heavy Goods Vehicles (HGV), keeping the short-haul and last-mile perspectives for a later write-up.
Size Matters
Let us first set the scene with a few key data regarding HGV used for long-haul transport. Such vehicles in Europe typically cover 80,000 to 180,000 kilometers per year, with tractor units enjoying a 12 to 15 years lifespan. Semi-trailer tractor (or tractor unit) powertrains typically rely on Diesel Internal Combustion Engines (ICE) with a 400-600 hp (300-450 kW) output from a 13-liter displacement, in-line 6 cylinder engine. This is to be compared with the average ICE for passenger cars (EU figures for 2018 sales): 98kW, 1.5 liter displacement.
Also, HGVs offer “single-tank” ranges that can go up to 3,000 kilometers, allowing to drive from Madrid to Berlin without having to refuel in tax-heavy France. Maximum length and authorized gross vehicle weight are strictly regulated, leading to a premium for lightweight semi trailer construction and compact tractor units (so-called “flat-nose” layout, vs “long-nose” in the US), so as to protect available payload. No such constraints for passenger cars!
GHG Emissions under Regulatory Pressure
Today, the passenger car market keeps rushing on its road towards always lower GHG emissions and transitions to battery electric powertrains. The equation is different and probably more complex for long-haul trucks, due to specific emission regulations that combine with the above mentioned payload and overall truck size constraints, also because of quite different economic considerations.
Long-haul trucking is indeed subject to more and more regulations aiming to improve road safety, ensure fair competition in the road transport sector, and, above all, reduce emissions. On this latter topic, the EU is clearly paving the way and truck emissions regulations are a key part of its comprehensive strategy to decarbonize the transport sector and achieve climate neutrality by 2050.
As a first step, these regulations will include the enforcement in 2025 of new, more stringent CO₂ Emission Standards: The EU has set a target of 15% reduction in CO₂ emissions for heavy-duty vehicles by 2025 compared to the 2019/2020 reference year. This regulation will apply to new heavy-duty vehicles registered from July 1, 2025, to June 30, 2026, before further tightening.
The next deadline for truck GHG emissions regulations comes in force as early as March 25, 2026. On this date, countries with government-directed distance-based tolling systems will be required to charge trucks for air pollutant emissions in addition to CO2 emissions as part of the revised “Eurovignette” Directive (road user charge).
Beyond this smooth tightening, what will trigger the need for a technological revolution is the rest of the roadmap:
- From 2030: New trucks weighing over 7.5 metric tons will need to reduce emissions by 45% compared to 2019 levels;
- From 2035: This emission reduction target increases to 65%;
- From 2040: A 90% emission reduction target will be applied to new heavy-duty vehicles.
A Multi-faceted Technology Response
In contrast with the passenger car industry clearly focusing on battery electric vehicles, the truck manufacturing sector has not yet converged to a dominant technological strategy and a multi-faceted approach is being deployed:
1. Battery Electric Vehicles (BEVs):
While currently more suitable for medium-haul routes, advancements in battery technology are expected to make BEVs increasingly viable for long-haul transport. Battery size is a key parameter here in order to protect commercially available payload. By 2030, about 20% of newly registered commercial vehicles heavier than six metric tons are projected to have battery-electric powertrains. Daimler Truck, Daf Trucks, Iveco or Volvo Trucks already offer a range of BEVs, with additional offers for semi-trailer tractors scheduled in 2025 (Scania, MAN, etc.). Ranges remain around 500 km on a battery charge, still far below the 3,000km allowed on a single tank for a Diesel-engine truck.
2. Hybrid Electric Vehicles (HEVs):
Various forms of hybridization, from mild to full hybrids, are being developed, in a similar way to what is seen in the car industry (38% of EU car sales in 2024 were HEVs). Hybrid configurations allow for Diesel-type ranges, hence more versatile usages.
3. Hydrogen Fuel Cell Vehicles (FCEVs):
FCEVs are emerging as a strong contender for long-haul trucking due to their long range capacity, fast refueling times compared to battery charging, and, of course, zero-emission capabilities. Major manufacturers like Hyundai (first XCIENT Fuel Cell tractor was launched back in 2020) or new entrant Nikola are developing fuel cell trucks with ranges of 1000-1200 km, whereas Daimler Truck plans to begin series production of hydrogen fuel cell trucks in the second half of the decade. Key parameter here is infrastructure development, to allow for convenient refueling wherever trucks may venture.
4. Improved Internal Combustion Engine vehicles (ICE):
Ultra-efficient ICEs using alternative fuels such as biofuels, synthetic fuels (Power-to-Liquid), and natural gas (CNG/LNG) will doubtless keep playing a role, especially in the transition period. Hydrogen-fueled ICEs may also be an option in the quest for zero-emission with lower CAPEX investment for engine manufacturing (at the expense of lower energetic efficiency) and the following benefits: Operational similarity to Diesel-engine operation (easier for drivers and fleet managers) and infrastructure compatibility with the growing hydrogen ecosystem.
In addition to these powertrain strategies, optimization work on powertrain control (adapting to different truck mission profiles), chassis components (e.g., tires) and aerodynamics keeps on delivering improvements (e.g., the recently launched Volvo FH Aero tractor claims energy consumption gains of up to 5% thanks to its aerodynamic refinement).
Also, beyond technical and industrial progress of each of the above-mentioned technologies, some key factors will have a major influence on the mid and long-term outlook:
- Infrastructure development, particularly for hydrogen refueling and electric charging stations, is crucial for the widespread adoption of FCEVs and BEVs;
- Commercial vehicles are becoming increasingly Software-Defined Vehicles (SDV), with more powerful onboard computers to support advanced driver assistance systems and fleet management solutions. This technology shift will impact powertrain solution choices.
- The economic benefits of automated or autonomous driving are expected to be realized more quickly in trucks vs passenger cars.
At the end, the adoption of these different technologies will of course depend on public policy support. But it will mostly result from the efforts devoted by the whole value chain, from upstream technology companies down to end-clients: truck manufacturers (both legacy firms and new entrants), suppliers to the industry and their ecosystem (the majority of which being also stakeholders in the passenger car transition), transport and logistics companies, industrial and commercial clients from all sectors.
The resolute deployment of such efforts – CAPEX and OPEX- by industry players certainly requires a favorable economic context and associated mid-term visibility, which the EU somehow fails to enjoy or credibly promise for the time being. At the same time, no other world region offers a comparably demanding market context. There are therefore, at this point in time, significant doubts regarding the timely and successful roll-out of the EU regulatory framework.
Inevitable Mid and Long Term Fleet Management Headaches?
For road transport companies and asset-bearing long-term leasing companies, devising an economically optimal and feasible strategy to cope with this regulatory roadmap is nothing short of a headache:
- Lifecycle management: a long-haul truck unit typically covers 80,000 to 180,000 km per year in Europe (average is 100,000 miles in the US) depending on truck operating modes. This translates into an average lifespan of 12 to 15 years with conventional Diesel trucks, while BEV or FCEV truck life expectancies remain to be determined. This should be compared to the 10 and 15 years between now and the drastic 2035-2040 EU regulatory milestones. In the meantime, road usage tariffs will be enforced at growing costs and clients will increasingly demand “proofs of virtue” regarding supply chain -hence trucks- GHG emissions.
- Major European road transportation companies operate several thousand trucks, with a growing majority of them long-term leased rather than owned outright (exact share unknown, but long-term leasing dominates the European medium and heavy-duty truck rental/leasing market, with an estimated 56% market share in 2024 and a global asset value of ca EUR 60bn). A major scissors effect will impact leasing companies, due to current Diesel-truck assets value crushing and more costly replacement vehicles becoming the only available options.
- Some experts suggest to alleviate the financial and environmental load by retrofitting Diesel-engine long-haul trucks with BEV or FCEV systems. This does not appear as an economically viable path, as such solutions would face high hurdles vs native BEV trucks (sub-optimized integration of large battery packs impacting payload capacity, complex and costly structural modifications to truck's frame, electrical systems, and drivetrain).
The Way Ahead
It is expected that while a mix of technologies is likely to coexist for some time, hydrogen fuel cells and advanced battery-electric systems are poised to become dominant in long-haul road transport, with optimized ICE technology playing a transitional role.
Multiple factors will shape both the long-term landscape and the transitional period, and will involve significant reshuffling in the whole value chain, already implying M&A activity especially for components or systems suppliers and also for transport companies. This is what we can clearly see through our contacts within both industry segments, with strategies as diverse as technology portfolio adaptation, industry drop-outs or trans-national fleet operational optimization.
How CDI Global may support you
We take pride at CDI Global in our ability to support companies involved in such major evolutions, thanks to the unique combination of deep industry expertise and 50+ year M&A experience.
Our industry experts were involved, in the course of their careers, in matters such as battery electric vehicle development, transport fleet management or advanced combustion research, and this background proves invaluable in fully understanding industry challenges.
When the road transport industry is concerned, we are able and happy to have our Automotive and Transport & Logistics Industry Groups join forces to best advise our clients and help them craft and roll out their strategy through our offices on all continents.
By: Gerard Payen, CDI Global Partner
