In 2024, and beyond, road transportation faces a number of complex challenges. Transportation and logistics companies will need to adapt, to innovate and be proactive to ensure long term viability.
Much has been written about the numerous challenges already so, in this blog I’ll focus more on potential solutions rather than going over old ground.
The challenges addressed here are also not an exclusive list. There are many more, but I would like to concentrate on those that are addressable not only for the major players in the industry but by any size of transportation business. Lobbying governments for changes in legislation may well be a solution for some of the challenges however, this is unlikely to deliver results in 2024 and it may not be a route open to small and medium sized operators.
In this blog I will focus on:
· Fuel price fluctuations. (part 1)
· Transition to cleaner vehicles. (part 1)
· Digitalisation and route optimisation. (part 2)
· Managing driver shortage. (part 2)
Fuel price fluctuations.
Unpredictable fuel price fluctuations are a serious challenge for the road transportation industry. We still call it ‘fluctuations’ and looking at diesel prices over the last 24 months one might think that major increases are driven mainly by unpredictable events such as the start of the war in Ukraine in February 2022 or, more recently, by the events in the Red Sea.
True; these events did cause spikes in fuel prices, but I think the term ‘fluctuation’ is misleading as it suggests that, over time, some kind of ‘normalisation’, i.e. return to a much lower level and then the usual gradual increase, will occur.
I think we need to say “good bye” to ‘fluctuation’ and get used to the idea that ‘normalisation’ will mean just much higher diesel prices. The CO2 “taxes”, which we already have in 19 European countries, will take care of that.
If we take diesel prices in Germany as an example, then the price development is predicted to look like in the table[1] below:
Year | Price CO2/ton | Price Increase/Litre |
2024 | €45 | €0.142 (approx.) |
2025 | €55 | €0.173 (approx..) |
2026 | €55-65 | €0.189 (approx.) |
The average diesel price (in Germany) in January 2024 was €1.71 so, without any other price increases, diesel in 2026 would be around €1.90. Add to that general price increase and it will be not far off €2.00.
The solution (at least one of them) is as simple as it may sound drastic:
Don’t use diesel !
(Before you start chanting “He’s lost it now” – read on)
First of all: History is full of examples where the prediction was ‘It will take 10 years’ and then it was only 5. So, the migration to EV trucks might happen much faster than we now may anticipate.
[1] ADAC 01/10/2024
Secondly, let’s have a look at electricity as ‘fuel’.
A recent study by Karlsson and Grauers at the Chalmers University of Technology [2](Sweden) showed that electricity as “fuel” can be viable even today.
Their use case was a transport company that transported goods between Helsingborg and Stockholm on a daily basis. That’s 553 km one-way.
For the diesel truck the result was €0.30/kwh whilst for the EV truck the “fuel” cost was €0.24/kwh and the calculation considers €0.06 for the batterie, €0.07 for charging at the company’s own station, €0.05 for slow charging at start and finish and €0.06 for fast charging at a public station with a kwh price of €0.17.
They also investigated the cost effect of different battery capacities (see below).
[2] Johannes Karlsson & Anders Grauers published by scinexx.de 12/06/2023
So, electricity as “fuel” can be competitive.
One “just” needs a vehicle to charge and with that I get to the next point.
Transition to cleaner vehicles.
I will not cover Bio LNG here, as I have done that in a previous blog already and focus on EVs. Hydrogen may be a longer-term alternative but that’s not really a 2024 topic.
Only a few years back someone trialing an EV was fairly big news and was considered as progress.
We’re beyond that now !
Trying and testing is no longer enough and needs to be replaced by firm transition plans.
Whether an EV truck can be commercially viable now, in 1 year or only in 5 years depends much on the type of transportation work undertaken. Long distance and heavy? Short distance and light? Etc.
The choice of truck and with that the total cost of ownership (TCO) is not dissimilar from diesel trucks and the same is true for the parameters influencing the choice.
Hauling 40 tons gross weight over the Alps every week with a 500 hp vehicle will result in operating costs much different from the same vehicle moving 25 tons (gross weight) in a flat geography. In fact, you wouldn’t acquire a 500 hp truck for that kind of work anyway. Same for EVs; for heavy work a large, expensive battery is required and for lighter work not. Just as diesel does not = diesel; EV does not = EV. There might be the right one for your business right now.
Whilst only a short while ago the consensus seemed to be that EV trucks will reach cost parity with diesel powered ones only by 2030 [3] some reckon that EVs can already compete now or by 2025 [4] (depending on the type of work).
By 2030 according to Traton Group (and other independent parties agree) the TCO comparison between diesel and EV will look like this [5]:
[3] Partners in Performance consultancy in driven.io August 2023
[4] Traton Group July 2022
[5] Traton Group July 2022
To be clear; this blog is not recommending that you buy an EV truck now.
What I am saying is: Plan now.
TCO calculators like https://apps.dana.com/commercial-vehicles/tco/ can help educating the decision based on the nature of the business and the type of work and some truck manufacturers will run simulations based on data supplied by the transportation business.
If the result of the planning was “not buying in 2024 but in year X” then at least there is a plan and, I’m sure, customers, shareholders and lenders will appreciate that already in 2024.
Next time in part 2 of the blog: Digitalisation / Route Optimisation and Driver Shortage.