BCG

EmissionsMandatesWillRemakeEurope’sTruckingIndustry

OCTOBER2023

Theswitchtozero-emissionvehicleswillbene?tthesector’soverallGDPand

employmentbutwillshiftvalueamongindustrysegments

Suppliers

GDP(€BILLIONS)

36

JOBS(MILLIONS)

13

Increasedbatterycellproduction

fromnewentrantswilldriveGDP

andjobgrowth

OEMs

23

–18

–35

Phasingoutinternalcombustion

engineproductionwilladdtoGDP

butreduceemployment

Infrastructureplayers

0.30.6

36

Buildingchargingnetwork

infrastructurehardwarewill

boostGDPandjobs

MHDT-relatedutilities

1122

2555

Shiftingfromforeignfossilfuelsto

domesticelectricitywillincrease

GDPandemployment

BasecaseBCGmarketperspectiveT&Ecase

Source:BCGanalysis.

Note:OEMforecastassumesthatautomakerswillnotmakestrategicchangestotheircurrentbusinessmodel.MHDT-relatedutilitiesforecastassumesthat,by2035,theshareofrenewablesfromtotalelectricityproductionwillexceed88%.MHDT=medium-andheavy-dutytruck;T&E=Transport&Environment.

+6

29

–2–1

16344

235

–11

–13

Overallimpact

+€7B

GDP

AdditionalGDPwillcomemainlyfromproductionofbatterycells

+3,000

jobs

NewjobsmakingEV

componentswill

compensateforlossofICE-relatedpositions

Supplierswillbene?tinGDPandjobs,buttheywillneednewcapabilitiestomakebatterycellsandrelatedcomponents

T&Ecase:ElevatedCO2standards(beyondthosesetbytheEUCommission)

GDP(€BILLIONS)

7

112

35

ICEengineperiphery

ICE

transmission

Batterycells

EDU

Power

electronics

2022

2035

Fuelcellstackandtank

EMPLOYMENT(THOUSANDS)

+3

238

2022ICEICEengineBatteryEDUPowerFuelcellstack2035

transmissionperipherycellselectronicsandtank

Source:BCGanalysis.

Note:Excludesbuses,coaches,andlight-dutyvehicles.EDU=electricaldriveunit;EV=electricvehicle;ICE=internalcombustionengine;T&E=Transport&Environment.Becauseofrounding,notallsumsofcomponentnumberslistedmatchthetotalsgiven.

+3

29

–4

–35

7

244

–42

Overallimpact

+€3B

GDP

Thehighervalue-addinthe

batterysegmentwill

compensateforlossesfromthedeclineinICEengines

–35,000

jobs

Despiteyieldinghigher

GDPvalue,batterymoduleandpackassemblywillbelesslaborintensive,

resultinginjoblosses

ForOEMs,thephaseoutofICE-poweredtruckswillleadtoanetlossof35,000jobs

GDP(€BILLIONS)

6

32

ICEengine

2022

Batterymoduleandpack

2035

EMPLOYMENT(THOUSANDS)

209

2022ICEengineBatterymodule

andpack

2035

Source:BCGanalysis.

Note:AssumesnostrategicchangestocurrentOEMbusinessmodel.ICE–internalcombustionengine.

GDP1

(€BILLIONS)

+0.6

1.7

EMPLOYMENT(THOUSANDS)

+6

17

Overallimpact

+€600M

GDP

Thebuildoutofcharginginfrastructurewilladd

signi?cantlytoGDP

+6,000

jobs

Thecontributionof

charginginfrastructuretoemploymentwilldependonBEVadoptionrates

ZEVinfrastructureplayerswillbene?tfromarapidbuildupofchargingstations

0.3

0.2

0.1

1.0

2022DepotsLoadingareasTruckstops2035

6

11

2022Infrastructureemployment2035

Source:BCGanalysis.

Note:2035numbersbasedonZEVadoptioninT&Escenario.BEV=battery-electricvehicle;T&E=Transport&Environment;ZEV=zero-emissionvehicle.Becauseofrounding,notallsumsofcomponentnumberslistedmatchthetotalsgiven.

1Includingconnectedandplatformservices,transportsolutions,andresale,reuse,andrecycling.

+22

38

EMPLOYMENT(THOUSANDS)

+55

143

Overallimpact

+€22B

GDP

Newdemandfor

electricityandhydrogen

willcompensateforlossesfromphasingoutdiesel

+55,000

jobs

Theneedtoprovide160

TWhofelectricityperyearwillcreatejobsinthe

electricitysector

MHDT-relatedutilitieswillreapthelargestgainsinjobsandGDP,mainlyfromdomesticallyproducedelectricity

GDP(€BILLIONS)

21

–4

5

16

2022DieselElectricityHydrogen2035

14

72

–31

88

2022DieselElectricityHydrogen2035

Source:BCGanalysis.

Note:Assumesthatrenewableswillproduce88%oftotalEuropeanelectricityproductionby2035.MHDT=medium-andheavy-dutytruck;TWh=terawatt-hours.

TheswitchtoZEVswillhaveanetpositiveimpactonEuropeanGDPandemployment,butitwillshiftbene?tsalongthevaluechain

GDP(€BILLIONS)EMPLOYMENT(THOUSANDS)

Suppliers

OEMs

ZEVinfrastructure

MHDT-relatedutilities

Total

2022

2035

29

+11%to+22%

32to35

29

+5%to+9%

31to32

<1

+32%to+63%

1to2

16

+75%to+144%

27to38

29

+22%to+43%

91to107

2022

2035

235

+1%to+2%

236to238

244

–7%to–14%

–226to–209

11

+29%to+58%

14to17

88

+29%to+63%

113to143

577

+2%to+5%

589to607

Source:BCGanalysis.

Note:CalculationofEuropeanGDP:e.g.,Truckvalue–VAT–non-Europeanvalueadded.CalculationofEuropeanemployment:e.g.,Employeespertruckcomponents–Shareofnon-Europeanproduction.MHDT=medium-andheavy-dutytruck;VAT=value-addedtax;ZEV=zero-emissionvehicle.

ImplicationsforplayersalongthevaluechainthatareattemptingtomastertheshifttowardZEVs

Suppliers

ThephaseoutofICEcomponentsshiftsvaluefromtraditionalICEtonew

ZEVsuppliers,withbatterycellsservingastheprimarydriveroffuture

value;inthehigh-adoptionscenario,batterycellcapacityofupto230GWhwillberequiredfor400,000BEVtrucksin2035

OEMs

Alongwithsuppliers,OEMswillexperiencethebiggestdisruptionstotheir

businessmodel.Theycouldloseupto35,000positionsrelatedtomakingICEandrequireasubstantialworkforcetransformationtowardnewcapabilities,alongwithbuildupofanewpartnershipecosystem.

ZEVinfrastructure

Infrastructureproviderswillneedtoestablishupto185,000chargingpoints

by2035andmustovercomehighimplementationhurdlestoensuresu?cientchargingnetworkcoverage

MHDT-relatedutilities

Energyprovidersneedtorampuprenewableelectricitygenerationfromlessthan1TWhin2022tomorethan160TWhin2035tofuel1.8millionBEV

trucks—amajordriverofpositiveeconomicimpactduetohighEuropeanvalue-addforrenewableelectricity(comparedtofossilfuels)

Prepareforradicalchangein

businessmodels

De?neapathwaytowardtheZEV

space,andstartthinkingabout

windingdownICEbusiness

Prepareforcapabilitytransformation

Conductacapabilityshifttoproduceand

marketZEVs,andseekbusinessmodel

extensionsandstrategicpartnershipsto

establishaZEVecosystem

Ensurebuildupofinfrastructure

components

Includesuchkeyelementsasaharmonized

chargingsystemandsu?cientconnection

tothegridatcorenetworkcorridors

Acceleratebuildupofrenewable

energygrid

Inadditiontoundertakingthisbuildup,

ensureseamlessaccesstocharging

locations(e.g.,truckstops,loadingareas)

Source:BCGanalysis.

Note:BasedonT&Ecase.BEV=battery-electricvehicle;GWh=gigawatt-hours;ICE=internalcombustionengine;MHDT=medium-andheavy-dutytruck;T&E=Transport&Environment;TWh=terawatt-hours;ZEV=zero-emissionvehicle.

100%=COSTFOREUROPEANPLAYERS

Non-EUplayerscouldenterthemarketviaimports,graduallymovingtowardlocalization

TOTALCOSTSCOMPAREDTOLOCALPRODUCTIONINEUROPE(%)

130

120

110

100

90

Importingfromhigh-costcountriessuchas

theUSputscompaniesatadisadvantage

comparedwithEuropeanincumbentsdueto

importtari?s(10%)andlogisticscosts(3–5%)

Alocalizedsupplychain

willgiveoutsidersacost

structuresimilartothat

ofincumbentOEMs

Importingfromlow-cost

countriessuchasChinaputs

companiesclosetoEuropean

incumbentsintermsofcosts

Increasedlocalizationyieldssigni?cantcostbene?ts

Low

VehiclesimportedafterassemblyLocalassemblywithimportedparts

Fullylocalizedproductionwithlocalassemblyandsupplychain

High

Degreeoflocalization

Source:BCGanalysis.

Threescenariosassesstheimpactofnon-Europeancompetitorsenteringthemarket

Assumption

GDP

(€billions)1

Employment(thousands)

Fullylocalizedproduction

Twoplayersmoveintothe

Europeanmarketandtransition

tofullylocalizedproduction

Negativeimpact2

Peak(2028)

2035

–1.6

–0.4

Negativeimpact2

Peak(2028)

–11.3

2035

–1.6

Localassemblywith

partiallocalsourcing

Twoplayersmoveintothe

Europeanmarketandassemble

vehicleslocally,using

componentsbuiltelsewhere

Negativeimpact2

Peak(2029)

2035

–1.8

–1.4

Negativeimpact2

Peak(2029)

–12.3

2035

–7.4

Import-basedcompetition

Competitorsimportfully

assembledvehicles

Negativeimpact2

Peak(2028)

2035

–1.2

–1.2

Negativeimpact2

Peak(2028)

–7.6

2035

–7.6

Source:BCGanalysis.

1IncludingonlysuppliersandOEMs.

2Throughtheyear2035;thenegativeimpactoftheimport-basedcompetitionscenariowillcontinuetoincreaseovertime.

–0.9

–0.7

–6.2

–5.1

–0.4

–0.6

–0.4

–0.3

–0.5

–0.5

–0.6

–0.6

–0.6

–0.6

–0.9

GDP

(€BILLIONS)

–0.1

–0.2

–0.7

–3.8–3.0

–4.1

–3.4

–4.0

–3.2

–5.9

–3.1–2.4

JOBS

(THOUSANDS)

–0.7

–1.3

–1.5

–4.8

Fullylocalizedproductionwillcauseamedium-termdipinGDPandemployment,followedbyamodestrecovery

Fullylocalizedproduction

SHAREOF

TOTAL

MARKET(%)

1

3

2

3

5

3

7

3

8

3

9

2

9

10

1

1

1

1

3

Localized(non-EUOEMs)

DomesticOEMs

Imported(non-EUOEMs)

–0.3

–0.1

–0.1–0.3

–0.7

–0.6

–1.6

–0.9

–0.5–1.9

–4.5

–3.6

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

OEMs

Suppliers

Sources:IHSAutomotive;BCGanalysis.

Note:Analysisoftheimpactfromnon-Europeancompetitorsisbasedonthemarketperspectiveofzero-emissionvehicleadoption.

Overallimpact

2028

–€1.6billion

2035

–€0.4billion

Duringtheimportpeak,GDP

willtemporarilydecreaseby

upto€1.6billion

2028

–11,300jobs

2035

–1,600jobs

Annualemploymentlosses

duringimportphaseupwill

peakat11,300in2028

0

6

2

4

2

4

6

3

6

2

7

1

7

7

1

SHAREOF

TOTAL

MARKET(%)

1

1

GDP

(€BILLIONS)

–0.6–0.4

–0.8

–0.6

–1.1–1.0–1.0

–0.4–0.4–0.4

–1.2–1.2–1.2

–0.6–0.6–0.5

–7.8

–3.3

–6.7

–3.7–3.1

–5.6

–4.7

–8.0

–2.8

–7.6

–7.0

–6.5

JOBS

(THOUSANDS)

–0.9

–1.6–1.3

–2.3

Localassemblywillleadtoasubstantialshort-termdipinGDPandemploymentifthesupplychainisnotlocalized

Localassemblywithpartiallocalsourcing

3

DomesticOEMsImported(non-EUOEMs)Localized(non-EUOEMs)

–0.1–0.3

–1.1

–0.7

–0.5–1.6

–7.5

–4.8

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

OEMs

Suppliers

Sources:IHSAutomotive;