Life Cycle and Total Cost of Ownership (TCO) Analysis of Heavy, Medium, and Light Duty Trucks in Europe

Life Cycle and Total Cost of Ownership (TCO) Analysis of Heavy, Medium, and Light Duty Trucks in Europe

During the 15-year lifetime of a truck, the total cost of ownership is lowest for battery electric trucks, followed by natural gas and diesel powertrains across light, medium, and heavy duty segments. As the truck gets older, maintenance cost increases with decrease in mileage, resulting in increasing total cost of ownership (TCO) per mile. Miles travelled is a big factor for battery electric trucks to achieve TCO parity with diesel and natural gas trucks, with higher miles travelled achieving TCO parity faster. Battery electric also depreciate faster than diesel and natural gas trucks, however, during the lifetime, with battery replacement, they tend to offer higher residual value.

Acquisition cost is the highest for battery electric trucks due to high battery prices, which make up more than 30% of the vehicle cost in the case of light duty and medium duty trucks and more than 55% in the case of heavy duty trucks. Across all powertrains though, during the entire lifetime of the vehicle, a majority of acquisition cost of around 60% is borne by the 1st ownership, as the truck loses 50%, 30%, and 50% of its value after 5 years in case of diesel, natural gas, and battery electric trucks, respectively. With fewer moving parts, the maintenance cost is the lowest for battery electric trucks with tires and brakes, making up most of the cost, as they are replaced at regular intervals. However, for diesel and natural gas trucks, apart from the regular maintenance and replacement of parts, there is an engine and transmission overhaul, which usually happens at around year 8 during 2nd ownership which ends up paying the most on maintenance on a per-mile basis. With rising diesel and natural gas prices and falling fuel efficiency of these trucks with age, fuel costs are only expected to increase going forward, with a majority of this cost expected to be borne by 2nd and 3rd ownership. Electricity prices, on the other hand, are expected to remain stable in the future and hence have no significant difference over the truck’s lifetime.

Alternate powertrain solutions that can reduce the operating cost through lower maintenance and fuel costs will gain more traction in the future. Desspite higher initial capital costs currently, these solutions will help fleets cut down on the overall operating costs in the long run and help achieve lower total cost of ownership. With high initial acquisition cost for electric trucks, OEMs will have to find newer ways to make truck ownership easier and smoother through leasing or ownership, based on a per-mile basis.

Alternate powertrain solutions especially, battery electric are seen as disruptive technologies evolving as a substitute to traditional internal combustion engines. Apart from being cleaner and safer, these solutions also help in reducing operating cost through lower maintenance and fuel costs. These disruptive solutions will only gain more traction in the future.

The biggest challenge in adoption of electric trucks is the initial acquisition cost, largely due to high prices of batteries, which can discourage potential buyers. However, OEMs will need to overcome this challenge by offering newer ownership models, such as leasing or ownership on a =per mile basis.

It is imperative that the entire trucking ecosystem is on the same page with respect to alternate technologies (e.g., battery electric). OEMs need to look beyond just the product and offer solutions by promoting TCO advantages of electric vehicles. Fleets need to shift their focus away from short-term profitability to long-term sustainability