Four Key Recommendations to Gain a Competitive Edge in the Classes 6 and 7 Commercial Vehicles Market

In part 1 of this miniblog series, we explored the overall state of the classes 6 and 7 commercial vehicles market and dove into the top manufacturers, uses cases, and OEM and upfitter collaboration in Conventional and Low Cab Forward (LCF) Trucks.

In this blog, we’ll cover the current landscape of and outlook for School Buses, Strip Chassis and Recreational Vehicles (RVs). By the end of this two-part blog series, you’ll take away strategic recommendations you can use to enhance your classes 6 and 7 vehicle offerings and sharpen your competitive advantage.

The Current State of School Buses

Because of the presence of School Buses in the segment, we expect to see electrification grow in the overall classes 6 and 7 market. While traditionally powered by diesel, School Buses are seeing a shift to alternative fuels and electric vehicles (EVs) in recent years due to their short-route and return-to-base operations. IC Bus, Thomas and Blue Bird are the market leaders in this segment, with new entrants Lion (100% EVs), BYD and GreenPower making headway in the EV space.

Another major reason School Buses are prime candidates for electrification is the emotional aspect we tie to vehicles carrying “our most precious cargo.” Designed to keep children safe, the thought of students breathing in emissions from a diesel-powered School Bus is becoming less acceptable.

With the strong push for government incentives from school districts, school boards and private citizens, and the need for clean vehicles around children, School Buses have experienced faster adoption of zero-emissions vehicles (ZEVs) compared with other vehicle segments.

What Lies Ahead for School Buses

According to our Commercial Vehicle Competitive Landscape—Powertrain Build Plan, we expect to see 47% electrification of School Buses by 2030, with EV models available from all major players. Conversions to alternative fuels are more prevalent in the School Bus segment, with many fleets opting for propane and natural gas vehicles over diesel due to the former’s lower emissions and quicker warm-up times in colder climates.

The Current State of Strip Chassis

Strip Chassis are mostly used as Step Vans that operate limited-mileage and standard routes, and are a suitable segment for electrification. They are used for parcel delivery, linen delivery, tool trucks and food trucks. Key players in this subsegment are Ford and Freightliner.

However, a few EV startups such as Workhorse, REE and Xos have recently entered this space. REE has developed innovative electric drivetrains by incorporating drive-by-wire technology and hub motors on all four corners of the vehicle.

What Lies Ahead for Strip Chassis

Our Commercial Vehicle Competitive Landscape data suggest that 8.5% of Strip Chassis are electrified in 2023, which is expected to rise to 52% by 2030 with the implementation of EPA regulations. Many of these vehicles also require low mileage in urban areas, making them good candidates for electrification.

The Current State of RVs

A small portion of classes 6 and 7 vehicles are RVs for personal use. Diesel and gasoline are the preferred powertrains for these vehicles due to the fuels’ widespread availability and, conversely, the lack of infrastructure needed to charge EVs. Key truck OEMs, such as Ford and Freightliner, continue to focus on conventional fuel options, with Ford offering 100% gasoline and Freightliner 100% diesel.

What Lies Ahead for RVs

As RV use in this segment is more unpredictable, manufacturers aren’t considering electrification in the near future. Used mostly as personal vehicles by people who want to travel in comfort, most of the gross vehicle weight (GVW) is taken up by amenities such as showers, granite countertops and other luxuries, leaving little to no room or weight capacity for a battery pack.

In addition, travellers in remote and other areas don’t have access to electric charging stations. Overall, internal combustion engine (ICE) RVs are expected to remain dominant, particularly in areas where access to power sources is limited.

Rise of Alternative Fuel Adoption

Currently, California is at the forefront of ZEV adoption in the medium- and heavy-duty segment, holding 18.4% share of the US market. This is driven by stringent policies and environmental regulations. California Air Resources Board (CARB) regulations such as Advanced Clean Fleets (ACF) and Advanced Clean Truck (ACT) are mandating use of ZEVs in fleets.

Applications that don’t require high-mileage vehicles, such as school buses, step vans, waste trucks, beverage trucks, service utility trucks and boom trucks, are seeing a rise in ZEV adoption. In contrast, businesses that require long-distance travel or quick-turnaround times are struggling to adapt to these regulations due to limited range, high costs of installing and maintaining private infrastructure, and vehicle suitability.

Some smaller businesses may choose to rent rather than deal with the complexities and overhead of owning a fleet, especially in class 6. While this won’t be a viable choice for everyone, we see rental and leasing becoming significantly more important in class 6.

Fleets are also opting for biofuels and natural gas/propane conversions, which give them the flexibility to service longer distances without range anxiety. California leads the biodiesel consumption in the US, with biodiesel accounting for more than 60% of the diesel consumed. As the infrastructure for hydrogen grows, fleets that run longer distances and operate continuous cycles are likely to opt for fuel cell or hydrogen ICE powertrains by the 2030s.

Our Commercial Vehicle Competitive Landscape data indicate that the share of ZEVs in classes 6 and 7 will rise to more than 35% by 2035. Another alternative route that fleet managers might opt for is hybrid EVs. We expect these to gain market share of more than 20% by 2035.

Four Recommendations to Excel in the Changing Classes 6 and 7 Commercial Vehicles Market

OEMs and body manufacturers should embrace the changing market landscape of classes 6 and 7 medium-duty vehicles and adopt business practices that support evolving technologies.

1. Collaborate with technology firms to develop autonomous solutions: Although such collaborations have existed in the heavy-duty space for years now, they have only started to gain traction in the medium-duty segment for mid-mile autonomy. For instance, Isuzu has partnered with Gatik AI to develop autonomous vehicles in the medium-duty truck space.

2. Develop captive telematics and connected services suites: There has been a noticeable shift in the focus of telematics solutions from being vehicle-focused to being driver-oriented. We expect OEMs and third-party solution providers to collaborate and develop bundled solutions to help fleets achieve efficiency, safety and maintenance goals without deploying multiple solutions from different vendors on their fleets. OEMs such as Ford offer services and position them as productivity enhancement tools, but users must understand how these services benefit them. Amid driver shortages, comfort and health monitoring solutions have helped fleet managers attract and retain drivers.

3. Reduce acquisition and operational costs: Developing cost-effective solutions that meet diverse customer needs with multiple powertrain options can be the key to reducing emissions. OEMs should make consistent efforts toward lowering the acquisition cost of EVs and other alternative fuels. Operational costs, such as preventive maintenance and fuel costs, are lower with EVs compared with ICE vehicles. However, fleet operators are concerned about battery replacement costs that could run up to more than 50% of vehicle costs and significantly impact total cost of ownership (TCO) in the long term.

4. Increase R&D investment in charging infrastructure and battery technology: The primary concern for fleets with classes 6 and 7 electric trucks is that the distance vehicles can travel on a single charge decreases with heavier payloads. This means more energy is needed to travel longer distances, resulting in the loss of driving distance—also known as range anxiety. OEMs should invest significantly in developing the charging infrastructure and the research and development of advanced battery technologies that bring down battery costs, increase charge density and improve safety. Partnerships, such as the one between Daimler Truck North America (DTNA) and Hexagon Purus to develop battery systems and software, can drive the growth of alternative fuel vehicles. OEMs should also consider battery-swapping technologies that can lower wait times and improve vehicle use.

As more EVs and other alternative powertrains are produced, the infrastructure required to support these vehicles should proportionally grow. Therefore, OEMs and energy companies need to work together to address the evolving needs of their customers. OEMs must develop powertrains that are compatible with biofuels and natural gas while fuel companies need to supply green and clean fuels to customers.

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