Zero-emissions technology is spreading beyond the passenger car market and into the world of commercial vehicles as regulators make tougher demands of manufacturers on pollution reduction and haulers eye potentially lower fuel and maintenance costs.

Along with buses, trucks dump roughly a quarter of the world's transport-related CO2 emissions into the atmosphere, and forecasts suggest that road freight will double by 2050. Commercial vehicle decarbonization is becoming a two-horse race between battery-electric, the standard for new cleaner passenger cars, and hydrogen, which many see as the preferred option for heavier, long-distance trucks.

"There will be a division of labor, but not actually so simplistic that big trucks just go hydrogen and small trucks go battery. I truly believe there will be a coexistence of both these technologies," said Bernd Heid, senior partner and member of the global automotive team at consultancy McKinsey.

"The beauty about commercial vehicles is that this is not an emotional business," Heid said, given that fleet buyers are immune to the styling and gadgetry that often clinch a passenger car sale. "You care just about costs so it's far simpler to project the future of commercial vehicle powertrains."

Breaking the dependency on fossil fuels, while costly and disruptive, brings potential benefits that extend far beyond reduced pollution. The near-silent powertrains could cut the cost of road haulage, and therefore the goods that they carry, and pave the way for autonomous driving technology that is incompatible with current models. With some legislators limiting or banning fossil fuel trucks in cities and on highways, avoiding tightening regulations with cleaner technology could also become critical to operational efficiency in the thin-margin road freight industry.

The road to zero-emissions will prove the most torturous for the heaviest trucks. Bloomberg New Energy Finance predicts only one in five heavy goods vehicles will be electric by 2040 and that natural gas, which has lower emissions than diesel, will have a role to play at least in the interim.

Mountain to climb

At the forefront of the shift are the world's biggest truck-makers. Daimler AG, which says it has largely exhausted scope to improve diesel fuel economy, has formed a joint venture with Volvo Trucks Corp. for mass hydrogen fuel cell production.

Hyundai Motor Co. has beaten them to the road with its XCIENT hydrogen truck, 50 of which are bound for Switzerland in 2020, an achievement that highlights South Korea's robust support for this energy form.

Volkswagen AG's trucking division Traton SE, owner of the Scania and MAN brands, is developing battery-powered trucks with an eye on hydrogen. It comes as the wider group makes one of the automotive industry's most aggressive pushes into electrification that includes in-house battery cell production, whose scale and competitiveness would benefit by extending end uses from cars to trucks.

Newcomers to the field such as Tesla Inc. and Nikola Corp., which went public in June, are hopping over the lower barriers to entry that simpler electrified powertrains bring.

Tesla has unsurprisingly turned to batteries for its semi tractor-trailer. Now available to preorder with a touted range of 300-500 miles, Tesla says it would take two years to recoup the greater initial outlay over a diesel truck. Nikola is developing a hydrogen solution up for trucks up to class 8, the heaviest U.S. truck classification.

Experimental overhead catenary lines being piloted in Germany and Sweden are another technological effort that could bolster the case for battery trucks, offering the possibility of charging while on the move.

The European Union has mandated a 30% CO2 cut from trucks by 2030 and an interim 15% cut by 2025, while California has new requirements for up to 9% of trucks sold in 2024 to be zero-emission and incremental increases through 2045, when diesel trucks will be banned. Such regulations give manufacturers the confidence they need to invest in what is at present a very nascent market.

"When these manufacturers are forced to do something, they are surprisingly good at doing it," said Fedor Unterlohner, freight and investment officer at Brussels-based think tank Transport & Environment, reflecting on the flurry of zero-emission passenger cars in the pipeline to meet tighter pollution rules for cars backed up with fines.

Cost parity ahead

While battery-electric is considered the go-to option in the smaller vans segment, hydrogen is seen as preferable for large tractor-trailers due to the fact that refueling times are similar to diesel but the vehicles weigh much less than those powered by batteries, leaving more revenue-generating payload capacity.

The drawback is the quantity of energy needed to make hydrogen and the amount lost when turning it back into electricity in the fuel cell. An eventual abundance of renewable energy could render this point moot, but that could take two decades or more, according to Unterlohner. The intervening squeeze of green hydrogen made from renewable power would have a bigger impact on cutting CO2 if reserved for maritime shipping and aviation where batteries are not an option at all, he added.

"For hydrogen vehicles, what's going to be difficult is the fuel," Unterlohner said, pointing out that if made from natural gas-derived electricity, hydrogen has higher overall CO2 emissions than diesel. "That doesn't make sense."

To push hydrogen faster through its cost pain barrier to a virtuous circle of growing scale and falling prices, the EU on July 8 unveiled a hydrogen roadmap to boost production and set a course for a cross-industry transition toward this energy source. McKinsey's models calculate that hydrogen trucks could undercut both diesel and batteries on a per-mile cost basis by about 2027.

Offering what some might refer to as a bridge technology, U.S. startup Hyliion Inc. has begun offering a bolt-on electric axle hybridization kit for trucks that increases fuel economy by 5%-10%, using power supplied to a battery via regenerative braking. CEO Thomas Healy told S&P Global Market Intelligence that haulers can typically recoup the $14,000 outlay within two years with the savings it generates.

Hyliion is also offering a fully electric Hypertruck powertrain with a larger battery pack also charged by gas. The company reached a significant milestone on June 19 when it announced a $1.5 billion deal to go public on the NYSE via a reverse merger with special purpose acquisition company Tortoise Acquisition Corp.

However, in the absence of more burdensome emissions rules, persuading buyers to adopt this technology will remain dependent on presenting a strong economic case, Healy said.

"When we're able to come in with a vehicle that actually can reduce your operating costs, then any government mandate is obviously a big help," Healy said. "But the fleets are really going to adopt because you're saving them money."