The Long and Winding – Yet ‘Inevitable’ – Road to Electrification

The road to electrification for the heavy-duty truck industry will be long and challenging but ultimately inevitable, Navistar CEO Mathias Carlbaum told a group of 175 utility fleet professionals in June.

Speaking at the 71st Electric Utility Fleet Managers Conference in Williamsburg, Virginia, Carlbaum outlined a vision for the next decade and beyond, highlighting key milestones, hurdles and opportunities in the transition to electric vehicles.

Here are eight significant takeaways from Carlbaum’s keynote address.

1. The Class 8 truck market continues to face headwinds in 2024.
The Class 8 on-road truck market is expected to remain soft this year due to an extended freight recession and persistent supply chain constraints.

“The Class 8 on-road [market] is going through an extended severe freight recession. It’s been about 20 months where freight prices are down out there and have started to take a toll on [truck] acquisitions,” Carlbaum said. “As you know, all sectors have been, in the past years, a little bit handicapped by supply. And there was a very big spillover this year … We don’t see, short term, something coming up that would drive sales significantly [this year].”

2. Prepare for the EPA 2027 pre-buy surge to start as early as 2025.
Carlbaum expects a pre-buy surge in Class 8 truck orders starting in 2025, driven by the impending EPA 2027 emissions standards and the memory of supply shortages from 2021-2022.

“Not just because we hope that ’25 [sales are] going to get stronger, but here we see that the pre-buy effect of the EPA ’27 is already starting to show up in ’25,” he said.

Why so early?

“Some manufacturers might be putting out new [EPA 2027-compliant] vehicles already in ’26. So, we see some [fleets] will [pre-buy] already in ’25. The most important reason is that everybody remembers how hard it was to get vehicles back in ’21 and ’22.”

3. Supply chain challenges will continue.
While the supply chain issues are easing in some areas, constraints persist due to limited production capacity and supplier hesitancy to invest in traditional technologies amid the transition to electric vehicles.

“One would say, ‘Aren’t we through with supply issues?’ To some extent, yes. Some areas, not. But most importantly, the sector’s a little bit capped,” Carlbaum said. “There is just not more capacity right now. Some suppliers are reluctant to invest because of the transition to battery-electric vehicles. So, more traditional suppliers will most likely stick to what they have in capacity and start investing in new technology, which will only start to be relevant more toward the end of the decade in [production] volumes.”

4. The battery-electric vehicle transition is inevitable but will take time.
Carlbaum expressed confidence in the eventual transition to BEVs, recognizing it as an inevitable shift for the heavy-duty truck industry. But he tempered this optimism by emphasizing the significant challenges that lie ahead, particularly in the initial phases of the transition.

“I believe in the [BEV] transition, but the first years will be the most challenging,” Carlbaum said. “You will not hear me say that we need incentives nor regulations long term. [But] in the early years, it’s fundamental.”

5. Combustion engines aren’t going away in the foreseeable future.
While Navistar is actively pursuing BEV solutions, Carlbaum emphasized that the company is not abandoning combustion engine technologies. In fact, the company recently launched a brand-new combustion engine platform, underscoring its belief that these traditional powertrains will continue to play a significant role for an extended period during the transition to BEVs.

“At International, we actually launched an engine this year. We are convinced and certain that combustion engines will be around us for a long, long time. You don’t do this unless you see a 15-year, at least, period ahead of you. … This is not ‘all-in-or-nothing’ [with BEVs]. It’s about technologies that have to be available for the convenience of our customers at the right moment,” Carlbaum said.

6. Hydrogen is still a distant prospect.
Navistar views hydrogen fuel-cell technology as a distant prospect due to its energy inefficiency, high costs and the lack of a nationwide fueling infrastructure, making BEVs the more viable and financially sensible path for electrification in the near future.

“I always get the question, ‘Well, is it only BEV?’ What about fuel cells? What about hydrogen?” Carlbaum said. “I’m not here trying to pretend to be the owner of truth. But two facts speak for themselves. The energy efficiency of a [BEV] compared to fuel cells – there is a lot of lost energy in [fuel cells] … Energy efficiency on BEVs beats diesel by far. And compared to fuel cells, it’s a factor of three. Plus, the initial investment around the fuel cell is close to three times what a BEV would be. So, this is a hard case. The technology is great; it’s complex, it’s advanced. But it doesn’t make financial sense over time.”

7. The BEV transition requires large-scale collaboration.
Carlbaum emphasized that the shift toward electric vehicles is not a short-term endeavor that can be accomplished by any single entity alone. Instead, he envisions a collaborative effort spanning the next two decades, involving a diverse range of stakeholders, each playing a crucial role in enabling and accelerating the transition.

“This [transition] needs to be done together. It’s [the utility] sector, it’s the government, it’s us, it’s our customers, it’s the final consumer,” Carlbaum said. “And there is a business case that will drive this in the coming 15 to 20 years. Forget this two-, three-year thing.”

8. There’s a business case for being an early adopter.
Carlbaum urged fleets to proactively “dip their toes” into electric vehicle technologies now, despite the initial challenges, to gain valuable experience and position themselves for the inevitable industrywide transition to EVs.

“Those [fleets] that can afford it need to dip your toes into the new technology and see how that impacts your business and how that can be optimized … so when everything is mature enough, you’ll be in a completely different position from the ones that haven’t. You can’t just wait until then,” Carlbaum said.

The Bottom Line
Carlbaum’s overall message?

Embracing the path to electrification is not just about preparing for future mandates; it’s about positioning your fleet for long-term success in an evolving industry. By starting early on a small scale, facing the challenges head-on and staying informed about key developments, you can lead the charge in the transition to BEVs, ensuring your fleet is ready to capitalize on the potential opportunities that lie ahead.