Government regulation has been crucial to the electrification of light commercial vehicles (LCVs). It has led to electric LCVs (eLCVs) making up over 5% of annual sales.
IDTechEx’s new report, “Electric Light Commercial Vehicles 2025-2045: Markets, Players, Forecasts,” expects this trend to continue. Regulation is a key driver for eLCV market growth in the short—and medium-term. IDTechEx forecasts that eLCVs will constitute the bulk of the market and total over 11 million units by 2045.
As governments work to meet their Paris Agreement goals and other sustainability targets, global demand for light-duty road freight will double between 2020 and 2050. A growing global population, rising income levels, and a booming e-commerce industry all contribute to this increase in demand.
As such, there is an imminent need for zero-emission logistics solutions to be rolled out quickly. While an eLCV is still more expensive than a diesel variant and thus less desirable for end-users, governments have responded by passing a whole host of measures to foster eLCV adoption.
Standard regulations for this purpose include purchase grants/subsidies, local restrictions on emitting vehicles entering designated areas, and mandating outright bans on the sale of fossil fuel LCVs. All three are used to some degree worldwide, but IDTechEx’s new report lays out how a handful of regions have been far more proactive than others in fuelling the EV transition.
Europe
Europe has been the most enthusiastic about legislating LCV emissions out of all global regions. Its most well-known measure is the EU’s planned 2035 ban on all combustion engine cars and LCVs. The UK is considering moving its ban forward from 2035 to as early as 2030! Both these policies will place significant pressure on OEMs, LCV operators, and fleets to electrify quickly.
Fossil fuel bans will accelerate the fast adoption rate in the European market, which has grown much due to regulation. Individual European countries institute purchase grant programs, varying from €3,000 to €10,000.
Most major cities also have local bans on fossil fuel LCVs operating within designated areas, often the city centres. LCV operators are, therefore, forced to use zero-emission models, with any additional upfront cost having to be attributed simply to the cost of doing business.
China
Despite its more relaxed regulations than Europe’s, China is the world leader in eLCV adoption. This stems from the country’s strong track record in electrification across virtually all mobility sectors. The Chinese eLCV market is now incredibly populated, with all the major automotive groups and LCV OEMs having models in production.
IDTechEx’s “Electric Light Commercial Vehicles 2025-2045: Markets, Players, Forecasts” report dives into these models with detailed information and market data.
Its government is still strengthening its already advantageous position through new regulations. It has long discussed plans to ban combustion engine vehicles, although the government has stated that up to half of cars could still be hybrids.
While this has yet to happen and would be targeted for a later year than Europe’s ban, it indicates continuing growth in the future. Just like Europe, China has its own purchase grant programs and local zero-emission zones to further the transition.
US
Compared to Europe and China, the US market has no combustion engine ban on the horizon. This follows an extended period of slower electrification in the country, with governments hesitant to invest in technological or infrastructure development (California being the exception).
This is beginning to change, though, and the Inflation Reduction Act of 2022 was a significant step in the right direction for eLCVs.
For the first time, the federal government provided grants to purchase or lease a non-combustion LCV. This should offer the boost that US-based fleets require to kickstart adoption – as the US lags behind the rest of the developed world at <1% eLCV penetration.
That being said, the Inflation Reduction Act also provides financial incentives for plug-in hybrid LCVs. These cannot generate the identical emissions reductions as a battery-electric vehicle, and the IDTechEx report expects that they will unlikely be the dominant long-term powertrain option.