Back in May, we discussed how there is essentially no secondary market yet for used natural gas trucks. With last year’s announcement by Westport that they had ceased production of their 15L engine – and Volvo’s announcement last week that they have stopped work on a compression ignition LNG engine for North America – it appears that interest in natural gas power has moderated. What are the factors currently impacting the new and used natural gas truck markets?

With no change in economies of scale, the price of new NG engines and tanks is still a primary issue. The premium of $30,000-$70,000 over diesel power remains in place, and the cost/benefit only works out in limited cases. In a classic chicken/egg scenario, production needs to ramp up for price to come down, but until price comes down demand won’t increase.

The “low” price of diesel fuel is another primary issue. Thanks to fracking, the US is now the world’s largest producer of crude oil, and export restrictions keep all but a fraction of that crude in the US. This is not a temporary trend, either – domestic production is forecast to increase through 2019, and the US should remain the top producer into the 2030’s. This ample domestic supply keeps pricing lower and more stable than crude sold on the global market. Significantly, the US is also the world’s largest producer of natural gas, but the low price of NG alone is not sufficient to make the math work out for most trucking operations. 

Looking forward, there is one major factor that could rekindle interest in NG. Specifically, there’s a moderately good chance that the Commerce Department will relax export restrictions on domestic crude. The agency has already lifted restrictions on a specific type of condensate, and lobbying for further relaxation is intense. This change would drive up the price of diesel, as domestic crude would move from a captive to global market. In this scenario, the cost/benefit for NG improves.

Also, the natural gas fueling infrastructure continues to be built out, with about 740 public (and around 700 private) CNG stations and about 60 LNG stations currently in service. However, even with ongoing construction, access to even CNG is extremely limited compared to diesel – and don’t forget that not all CNG stations are fast-fill.

For these reasons, natural gas-powered trucks are still a fraction of the new truck market. 2014 should see 10,500 trucks sold, which is a 20% increase over 2013… but still only 5% of the market. Many analysts forecast sales to reach 25-30,000 by 2018 – still a small percentage.

The low number of trucks sold new will result in a low number returning to the secondary market. There are still essentially no natural gas trucks showing up in our retail or wholesale sales databases, and we don’t expect to see an actionable volume in the near term. 

NADA will continue to closely monitor our incoming sales data from Manheim, ADESA, regional auctions, individual dealers, dealer groups, and OEM’s for sales of NG trucks. If you are currently buying or selling used NG trucks, I would love to hear from you. Please drop me a line at cvisser@nada.org.