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Alternative Fuel Vehicles to Gain Traction Over the Next 10 Years, According to Fuels Institute


News provided by

Fuels Institute

Nov 19, 2013, 08:42 ET

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ALEXANDRIA, Va., Nov. 19, 2013 /PRNewswire-USNewswire/ -- The growth of vehicles running on alternative fuels will accelerate over the next decade, but diesel fuel- and gasoline-powered vehicles will continue to dominate market share, according to "Tomorrow's Vehicles: What Will We Drive in 2023?" a new report released by the Fuels Institute.

For light-duty vehicles (passenger vehicles and light trucks), gasoline-powered vehicles will continue to dominate the market, although overall market share could decline from 93% in 2012 to as low as 82% of vehicle inventories in 2023. Diesel-powered vehicles will potentially comprise nearly 7% of the market while flexible-fuel vehicles capable of using E85 could grow to more than 9% of the market.

Meanwhile, for medium- and heavy-duty vehicles (commercial vehicles like trucks and buses), diesel-powered vehicles will prevail, representing at least 94% of the vehicle fleet in 2023.

"On the surface, it may not seem that significant change is occurring, because gasoline and diesel fuel-powered vehicles will continue to dominate the vehicle fleet in 2023, but alternatives are gaining traction," said John Eichberger, executive director of the Fuels Institute.  "Consumers appear to be more open to alternatives than ever before and vehicle manufacturers are offering a wider variety."

Given that there are more than 250 million vehicles on the road today, it will take years of strong sales of alternative fuel vehicles to reshape the country's vehicle fleet. In addition, a variety of developments — including cost reductions for alternative-fuel vehicles, conveniently available refueling options, expanded vehicle range and overall consumer familiarity and confidence with new fueling options — will need to occur before alternative-fueled vehicles can capture significant market share.

"We need to ask — and answer — some tough questions so that the vehicles and fueling markets can develop together and convert consumers to new type of vehicles, said Eichberger."

The Fuels Institute, founded by the National Association of Convenience Stores (NACS), is a non-profit, research-oriented think-tank dedicated to evaluating the market issues related to consumer vehicles and the fuels that power them. It commissioned Navigant Research to provide a forecast of the vehicles market through 2023 that captures approximately two generations of vehicle development, providing a reliable look into the future but not reaching so far into the future as to be rendered unreliable.

Gasoline Will Dominate the LDV Market
The report forecast the makeup of the vehicle fleet in 2023 based on two scenarios: a "base case" that incorporates current forecasts and an "aggressive case" that assumes more robust world economic conditions that further spurs demand and prices for petroleum products.

In both projections, gasoline-powered vehicles will continue to dominate the LDV market but lose significant market share, dropping from 93.2% of LDVs on the road in 2012 to between 82.6% to 86.0% in 2023. This decline in market share is driven by a shift in the sale of new vehicles, with gasoline-powered vehicles' share of sales falling from 83.4% in 2012 to between 67.6% to 78.9% in 2023, a potentially dramatic change in consumer purchasing behavior.

Diesel Fuel Will Gain LDV Share and Maintain Medium and Heavy-Duty Share
Diesel-powered vehicles are expected to see strong growth in the LDV market, growing from 2.0% of all LDVs in 2012 to between 3.7% to 6.7% of the LDV fleet in 2023. This surge in market share will be led by the sales of new vehicles hitting the market. Diesel-powered LDV sales are expected to comprise between 7.2% to 17.8% of new LDV sales in 2023.

With respect to medium- and heavy-duty vehicles (M/HDV), diesel fuel will see a slight decline, with its market share dipping from a near-ubiquitous 99.4% in 2012 to between 94.6% to 97.5% in 2023. The primary competition to diesel fuel in the M/HDV market will be natural gas.

Even With Dramatic Sales Increases, Others Will Lag Behind
Despite increased attention from policymakers and public-opinion leaders, there are many hurdles to overcome before a robust market emerges for other types of vehicles. But some growth in the next ten years is projected:

  • Flexible-fuel vehicles: Flexible-fuel vehicles (FFV), which can use both gasoline or E85, show the most promise for growth. In 2012, only 4.7% of LDVs were flexible-fuel vehicles; however, automaker production is forecast to double FFV's share of the market to 9.3% of the fleet by 2023. However, the potential for this alternative fuel is tempered by lackluster existing demand and limited availability of E85.
  • Natural gas vehicles: The number of light-duty natural gas-powered vehicles (NGV) is expected to see at least a ten-fold increase over the next decade, but will still only represent 0.43% in the aggressive case. However, in the M/HDV market, compressed natural gas is projected to capture up to 3.8% of the market in the aggressive case. The high cost of installing natural gas facilities at retail and the cost of vehicle conversion or production will be factors limiting additional growth by 2023.
  • Propane-vehicles: Propane-powered LDVs are expected to double market share, but will grow from only 0.04% to 0.07% of all LDVs by 2023. For M/HDVs, propane is currently the second-most-popular option after diesel fuel, capturing 0.38% of the market in 2012. However, its growth is considered limited to mainly medium-duty vehicles and will account for no more than 0.76% of the M/HDV fleet in 2023.
  • Battery-electric vehicles: Unless there are significant breakthroughs in battery-charging technology, battery-electric vehicles (BEVs) will not break out of the niche category of LDVs over the next decade. Even with a projected 22- to 26-fold increase in annual sales over the next decade, BEVs are forecast to be no more than 0.72% of the LDV market in 2023.
  • Fuel cells: Fuel-cell vehicles (FCVs), electric vehicles that use an external fuel source like hydrogen, are also expected to remain a niche category. Sales are expected to increase significantly over the coming decade, but the reality is that there were only 500 FCVs on the road in 2012. Even in the most aggressive forecast, registrations are only expected to reach 70,000 vehicles — 0.02% of the LDV market — in 2023.

"Without coordination between the vehicle and fueling industries, successful market introduction of these systems will be characterized by starts and stops, booms and busts and a protracted — and potentially painful — market development phase that may or may not result in consumer acceptance," said Eichberger. "Consumers have more vehicle options than ever and where they choose to invest their money will determine the future."

SOURCE Fuels Institute

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