With global cargo and e-commerce demand set to skyrocket over the next 20 years, electric light commercial vehicles (eLCVs) will play a crucial role in the decarbonization of transport. eLCVs are now technologically mature enough to compete with current combustion vehicles on virtually all performance metrics. However, before they can be adopted en-masse into commercial fleets, they must first demonstrate that they can be financially competitive too.
eLCVs haven’t reached that point yet, but IDTechEx’s new report “Electric Light Commercial Vehicles 2025-2045: Markets, Players, Forecasts”, finds that the industry is on the path toward total cost of ownership (TCO) parity. This will provide a significant market driver for adoption, leading to over 11 million eLCVs to be sold annually by 2045.
5-year total cost of ownership comparison for a typical medium-sized diesel LCV and eLCV. Calculations assume average global prices for diesel and electricity. Source: IDTechEx
The cost challenges faced by eLCVs today
Putting aside the obvious environmental benefits they can offer, the main financial benefits of eLCVs lie in their much lower operating costs. Using electricity instead of diesel not only creates considerable savings over a vehicle’s lifetime, but also protects against volatile fluctuations in diesel price that can severely harm fleet operators’ bottom line. IDTechEx’s report “Electric Light Commercial Vehicles 2025-2045: Markets, Players, Forecasts”, finds that a standard eLCV can save as much as US$1,300.00 per year on energy alone compared to a diesel alternative!
eLCVs also require less maintenance than conventional combustion LCVs which have more moving parts and face more wear and tear. This again means lower costs, and greater availability for fleets – as much as two extra days of operation per vehicle per year.
Where eLCVs do struggle is in their higher upfront costs. The CAPEX of an eLCV is still higher than that of combustion, with the cost of battery systems and drivetrains being a major contributor to the price premium. eLCVs also have higher R&D costs and are currently lacking in the economies of scale which may bring prices down. The price premium of an eLCV varies by manufacturer, region, and size – sometimes as low as 10-20% for a smaller vehicle or reaching up to 40-60% for the largest ones! A high upfront CAPEX is detrimental to a vehicle’s TCO and a major barrier to uptake, with many operators unwilling to put such an outlay on a single vehicle.
IDTechEx’s new report also investigates the effects of depreciation on eLCV finances – which is a latent but equally critical challenge they face. Depreciation – which IDTechEx takes to be the difference between purchase cost and eventual resale price – is already incredibly costly for combustion LCVs. eLCVs, however, struggle even more in this area. A persisting degree of hesitance in the market to be early adopters of second-hand eLCVs, as well as concerns around battery lifetime and maintenance, lead to eLCVs facing much faster depreciation. This alone can therefore make up nearly 2/3rds of the cost borne by an eLCV, which can undo any of the savings achieved through energy or maintenance and makes eLCVs a less attractive financial proposition.
The financial landscape is changing in favour of eLCVs
Despite the currently higher costs, eLCVs do have the potential to achieve not just TCO parity with combustion LCVs, but CAPEX parity as well. The industry is already undergoing changes that will make these a possibility in the near future, driving more vehicle owners and operators to consider an eLCV for their next purchase.
Continuing development of battery technology is set to lower battery pack prices, which will lead to reductions in eLCV upfront cost. Improvements in drivetrain efficiency will also enable the use of smaller batteries and less powerful motors, bringing costs down even further.
The growing demand and popularity of eLCVs will also come greater economies of scale. Increased production volumes of vehicles and parts – including batteries and drivetrains – will generate even further savings in the long term. IDTechEx’s report, “Electric Light Commercial Vehicles 2025-2045: Markets, Players, Forecasts”, finds that the first steps of this evolution are already taking place within the eLCV battery space, highlighting key developments in battery production for major players such as Stellantis, GM, and CATL specific to eLCVs. This also reiterates manufacturers’ commitment to eLCVs as the future of cargo movement.
At the same time as eLCVs become cheaper to purchase, combustion LCVs are likely to become more costly to own and operate. With tightening emissions legislation comes more stringent requirements on the engines and exhausts of LCVs. Operators will have to upgrade their vehicles to ensure they comply with these new demands, incurring additional costs in the process.
Simultaneous cost reductions for eLCVs and cost increases for combustion LCVs will help contribute to upfront cost parity. Source: IDTechEx
Regulation is set to play a bigger part in TCO comparisons beyond just the emissions regulations restricting combustion LCVs. Many countries around the world offer generous grants for the purchase of an eLCV. These vary widely between countries but are most often between US$3,000.00-10,000.00. They aim to not only do away with the upfront cost barriers of an eLCV but also help to achieve TCO equality down the line.
Many local governments additionally have local emissions restrictions – where only low- or zero-emission vehicles are allowed to operate, usually in the centers of major cities. Some of these zones allow for non-compliant vehicles to enter them, but only for a given fee. This further shifts the TCO balance between diesel and electric options, with zones such as London’s Ultra Low Emissions Zone charging £12.50 per day per vehicle. There are now six European countries that have zero-emission zones of some kind (including two of the largest LCV markets in the UK and France).
While all the separate factors mentioned above will help eLCVs achieve TCO parity with diesel, IDTechEx’s new report also finds that universal TCO parity will rely on changing longer-term market dynamics. As eLCVs evolve and become more commonplace in the wider market, customer perceptions around their performance, reliability, and battery lifetime will change too, helping to shift resale values and decrease the impact of depreciation on TCO. With more eLCVs on the road also comes a reduction in insurance premiums, bringing them closer to those of diesel LCVs.
IDTechEx’s “Electric Light Commercial Vehicles 2025-2045: Markets, Players, Forecasts” provides a detailed TCO analysis for LCVs and eLCVs across different regions and financial scenarios, highlighting the main financial challenges encountered by eLCVs and the changes taking place as mentioned above that are working to promote further EV uptake. It also provides an in-depth analysis of key players, sales trends, and technologies. 20-year granular forecasts broken down by region and powertrain provide critical insight into the key markets driving the change within the industry.
