Diesel engine maker Cummins, along with truck builders Daimler Truck and Paccar are making a $2 billion bet that the freight industry is ready to move from diesel fuel pumps to battery chargers, The Wall Street Journal reports.
The companies plan to build a multi-billion-dollar battery factory in Mississippi to produce batteries for commercial electric vehicles (EVs). The plant, the largest one dedicated to commercial vehicle batteries in the U.S., is expected to start producing battery cells in 2027. Projected output is enough batteries to power 40,000 medium and heavy-duty trucks a year.
The investment comes as somewhat as a surprise, given the trucking industry’s hesitancy to shift to EVs. The companies are banking on the fact that the industry will shift to electric quickly due to new government standards for engine exhaust, which will make it more costly to purchase and operate diesel trucks.
While electric commercial vehicles like trucks and buses have been available for years, truck makers have not been as quick to embrace electric battery vehicles as the passenger vehicle industry has been in terms of moving towards EV model production. Truck manufacturers and hesitant truckers are starting to feel pressure from state and the federal government to move towards zero-emissions vehicles, however, The Wall Street Journal reports.
“The timing of this plant is intentional,” Cummins Chief Executive Jennifer Rumsey said during an interview. “The demand is going to grow as the regulations continue to drive a reduction in emissions.”
Regulations might increase electric commercial vehicle demand, but by how much remains to be seen. EV truck sales make up a small portion of the 600,000 commercial vehicles sold in the U.S. and Canada. Concerns about cost, durability and a shortage of EV charging infrastructure has made trucking companies hesitant to purchase electric vehicles.
Range anxiety has been an especially big deterrent for trucking companies when it comes to commercial EVs because they need to be certain vehicles have enough power to successfully complete a long haul. Additionally, there’s not much of a used market for electric trucks, which is unappealing to trucking companies because the often rely on selling their vehicle to recover some of their costs.
EV requirements could make battery plant investment worth it
A number of upcoming EV-related government requirements may leave truck manufacturers with no choice but to add more electric commercial vehicles to its inventory. For example, California will require that truck manufacturers make five percent of their heavy-duty tractor sales and nine percent of its other trucks sold in the Golden State be zero-emissions vehicles.
Meanwhile, 10 other states are expected to do the same, with sales requirements to increase during the next three years. The Environmental Protection Agency (EPA) will also require diesel engine makers to further reduce nitrogen oxide emissions by approximately 80 percent beginning in 2027, The Wall Street Journal reports.
The EPA’s requirement is expected to lead truck manufacturers to double the treatment and filtering systems that they currently apply to diesel engine exhaust. Industry analysts estimate this move will likely add about $30,000 to the cost of a new heavy-duty tractor truck.
The agency is considering requiring commercial trucks to significantly reduce their carbon-dioxide emissions by the early 2030s. This would effectively force the trucking industry to switch to more EVs, according to analysts.
Commercial EVs could be on the rise
Electric-powered trucks could make up 10 percent of all trucks sold in the U.S. and Canada by 2027, but the share could surpass 30 percent by early in the next decade, according to ACT Research, an Indiana-based truck market forecaster.
The projection is good news for Daimler, Paccar and Cummins, which will each own 30 percent of the battery plant, according to Cummins. More good news came for the companies after the Mississippi Legislature approved a package of public-infrastructure investments, grants and tax incentives to build the planned battery plant, The Wall Street Journal reports. The plan is expected to employ approximately 2,000 people.
China-based battery maker EVE energy will own the last 10 percent stake in the plant. EVE Energy will provide the materials and tech for the plant to make lithium iron phosphate batteries. These batteries are mostly used in China, but have seen increased use in the U.S. because they are less expensive to produce for the more commonly produced nickel and cobalt batteries used in EVs.
The combination of more available materials and a U.S.-based plant making batteries meant for electric trucks will help reduce the vehicles’ cost—which can be two to three times more than diesel trucks, according to Rakesh Aneja, head of eMobility for Daimler Truck North America.
“Batteries are the single most expensive part of an electric truck,” he said.
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