Dow Jones - Natural Gas Powered Truck Sales Growing

DJ Natural-Gas Powered Truck Sales Inch Ahead

By Bob Tita

     In the midst of the strongest market for commercial trucks in eight years,
North American sales of natural-gas-powered haulers are just crawling along.

     Their higher purchase price compared with diesel trucks, improved diesel
fuel economy and continued scarcity of fueling stations are damping
natural-gas-powered truck demand. About 10,480 of the heavy-duty trucks are
expected to be sold this year, up 20% from the 8,730 sold last year, according
to Power Systems Research. However, some forecasters had expected sales to
about double to 16,000 vehicles this year amid the trucking industry's
enthusiasm for natural gas a year ago.

     What happened? A big roadblock remains the premium for a heavy-duty gas
truck--$50,000 more than the about $150,000 for a new diesel-powered truck. In
theory, the payback for that higher price is recovered from fuel savings of
between $1.60 and $1.70 for the gas equivalent of a gallon of diesel. Paybacks
can average four years considering the average truck travels 125,000 miles a
year.

     But truckers say the fuel savings isn't all it seems. Mileage from a
natural-gas-powered truck is about 20% less per energy equivalent than a diesel
truck, meaning a gas truck consumes the same amount of fuel for 200 miles as a
diesel truck uses for 240 miles. Moreover, fuel costs--as well as any
natural-gas fuel savings--are typically passed on to a trucking company's
customers.

     "If you're paying $1 per gallon less for fuel, they'd want that money for
themselves, but you need that to pay off the equipment," said Mike Card,
president of Combined Transport Inc., which operates a fleet of 500 diesel
trucks specializing in hauling heavy or wide cargoes, such as wind energy
towers.

     At current fuel prices, it takes about four years to recover their
investment. "That's tough for a lot of fleets. They want their investment
returns a lot faster," said Mike DelBovo, transportation president of Saddle
Creek Logistics Services in Lakeland, Fla., which has 175 gas-powered trucks in
a fleet of 550.

     Large fleet operators typically replace their vehicles every three to four
years, leaving little time for them to benefit from the lower fuel costs of
natural-gas-powered trucks.

     Another factor limiting natural-gas-powered sales is the arrival on the
market of new, more efficient diesel engines. The first phase of a federally
mandated 6% improvement in fuel economy by 2017 took effect this year, pushing
heavy-duty truck mileage closer to 7 miles per gallon from about 6.5 mpg.

     Indiana-based Cummins Inc. delayed indefinitely a 15-liter natural-gas
engine for high horsepower long-distance trucks carrying heavy loads. And a
joint venture with Vancouver's Westport Innovations Inc. also ceased production
of a 15-liter natural gas engine last fall. That venture still makes
smaller-size natural-gas engines used in cement trucks, garbage trucks and
delivery vehicles that spend just a day on the road.

     All this comes as the market for new commercial trucks is booming. Demand
for heavy-duty trucks--those weighing more than 33,000 pounds and used for
long-distance travel--is strong. A stronger economy has pushed up freight
volumes, and fleet replacements are expected to push production of heavy-duty
trucks in North America this year up 21% from 2013 to 297,400 vehicles, the
highest volume since 2006, said Columbus, Ind., market forecaster ACT Research
LLC.

     For-hire trucking companies such as Con-way Inc. and Schneider National
Inc. say they continue to test small numbers of natural-gas trucks. But the
limited number of natural-gas refueling stations limits the switch to gas. Just
slightly more than half of the 1,500 natural-gas fueling stations in the U.S.
are public-access sites, and not all of these can accommodate large trucks.

     Kenny Vieth, president and senior analyst for ACT Research, which had
forecast as much as a doubling of demand, said a key constraint has been "the
need to build out the [gas fueling] infrastructure."

     Of course, those trucking companies committed to using alternative fuels
or that handle deliveries for customers looking for a greener profile are
moving ahead on natural-gas vehicle acquisitions.

     "There's not a huge savings today with natural gas," said Jeff Shefchik,
president of Paper Transport Inc., 430-truck regional fleet Green Bay, Wis.,
with about 100 natural-gas trucks. "But we're content to invest in it because
it's going to grow over time."

     United Parcel Service Inc. this year has ordered about 300 gas-powered
heavy-duty trucks and bought 700 gas tractors last year. The trucks operate
mostly in corridors in the West and South that have plenty of natural-gas
stations, some of which UPS helped to finance. By the end of the year, about 2%
of UPS's 100,000 vehicles world-wide will be powered by natural gas.

     Meanwhile, Wal-Mart Stores Inc., Office Depot Inc. and Lowe's Cos. and
consumer products manufacturer Procter & Gamble Co. are among the companies
requesting their trucking suppliers use natural-gas vehicles to comply with
corporate policies to reduce carbon dioxide emissions and pollution caused by
burning diesel fuel.

     Saddle Creek, which offers trucking to those retailers, is racking up 1.5
million miles a month on its 175-vehicle natural-gas fleet and plans to buy 25
additional Freightliner gas trucks by the end of the year.

     Still, those purchases are dwarfed by the sheer number of new
diesel-powered trucks being sold. North American sales of diesel-powered trucks
are forecast to rise 17% to 281,620 this year. Two ago, forecasters expected as
much as 20% of the heavy-duty trucks sold annually in North America by the end
of the decade would be natural-gas powered, a more abundant, cheap and
cleaner-burning fuel than diesel.

     "We're still growing [natural-gas-powered trucks], but all the hype is
gone," said Robert Carrick, sales manager for natural gas for Freightliner, a
unit of Germany's Daimler AG. "Long-haul, over-the-road trucking is not going
to adopt natural gas for a long time."


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  August 25, 2014 15:42 ET (19:42 GMT)

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