North American Light Commercial Vehicle Growth Opportunities

The overall light commercial vehicle (LCV) market in North America was at 3.74 million units in 2020 with pickups contributing 88% of those volumes. Within the LCV segment, the lower weight segment, class 1/2a (<=8,500 lbs.) made up 57% of the market while the higher weight segment, class 2b/3 (8,501-14,000 lbs.), made up the rest. Ford was the market leader with a 33% market share, followed by Chevrolet and RAM at 21% and 19%, respectively. Over the next 5 years, the LCV market in North America is expected to have a CAGR of 5.8% to 4.95 million units.

Nearly 95% of class1/2a vehicles are powered by gasoline. However, in class 2b/3, this reduces considerably to just 45% as most of them are powered by diesel as these vehicles require higher power and torque to haul heavier loads. Within the LCV market, pickups are predominantly used in construction and jobsite applications, whereas vans are mainly used for delivery applications. A pickup would clock anywhere between 12,000 to 15,000 miles annually, depending on the application, whereas a van has a wider range of 12,000 to 25,000 miles annually, depending on the application and size of the vehicle. Larger vehicles typically travel longer and farther.

In recent years, the market has experienced a slew of announcements on the electric vehicle (EV) front from close to 8 new companies, all pure-play electric vehicle startups, in addition to the existing legacy players. Mandates at the government level to reduce emissions and decreasing the cost of key EV components, making the total cost of ownership (TCO) of EVs more favourable, have been the biggest drivers for this growing interest in EVs. As of now, close to 20 electric LCV models are expected to be launched in the next 3 to 4 years. Certain applications will see early adoption of EVs depending on the duty cycle and operating environment. Delivery application and utilities and mobile services make the strongest case for electrification in the short term, given the limited daily range, frequent start-stops, and access to a depot and public charging.

In the next five years, EVs may achieve TCO parity with their diesel and gasoline counterparts at the current level of pricing and costs with help from federal incentives. Without incentives, however, the time required to achieve TCO parity gets pushed further away by another 3 to 4 years. As far as external factors are concerned, TCO is highly dependent on incentives and annual mileage. Applications with higher annual mileage achieve TCO parity with diesel and gasoline much faster. Given this scenario, EV penetration in LCVs in North America, which is currently nil, is expected to reach 6.2% by 2025.