Study: Liquid Fuels Will Continue Dominating U.S. Vehicle Fleet in 2025

While car companies and even countries have recently pledged to go all-in on EVs, market conditions will make it difficult for them to gain 2% share of vehicles on the road by 2025, according to Tomorrow’s Vehicles―Projections Through 2025, a new study released this week by the Fuels Institute with analysis prepared by Navigant Research. Yet, projected consistent growth in sales indicate the potential for greater market impact in the years that follow. Even using the most optimistic scenario for EV sales—assuming high oil and low battery prices—EVs will comprise at most 5% of new car sales by 2025.

Through 2025, vehicles powered by liquid fuels (gasoline, diesel, flex-fuel vehicles and traditional hybrids) will still account for more than 96% of vehicles on the road in the U.S., with the balance comprised of battery electric, plug-in hybrids and a mix of hydrogen, natural gas and propane powered vehicles. While this represents a slight drop in overall market share, it remains an overwhelmingly dominant share of consumer demand. Moreover, innovation in powertrain technology will progress more rapidly in the light duty market than in the heavier segments, although even that transition will be relatively slow, according to Fuels Institute.

The Light Duty Market

Navigant Research projects the light duty vehicle (LDV) market in the U.S. will increase by 17.1% between 2016 and 2025, culminating in total sales reaching nearly 19 million annual units in 2025. The powertrain mix, however, is expected to change quite a bit, although (due to the slow rate at which the vehicle fleet turns over) much more demonstrably in projected vehicle sales compared to projected vehicle registrations.

The following charts present Navigant’s Aggressive scenario forecast for LDV sales and registered vehicles from Navigant and Fuels Institute. The Aggressive scenario assumes that battery pack prices will fall 50% over the next 10 years, while oil prices spike at over $100/barrel by 2025. The sales graphics demonstrate that in this scenario, the number of vehicles sold in 2025 that operate on non-petroleum powertrains will increase market share. In fact, battery electric and plug in hybrid vehicles in this scenario are projected to secure approximately 8% of new vehicles sold.

However, flexible fuel vehicles (FFVs) are projected to decline to less than 1% due to the expiration of the fuel economy credits afforded to automakers in the past. Diesel remains a niche market at about 3%, but the average blend ratio of biodiesel will increase to 3.9%. Hydrogen, according to Navigant, is projected to secure less than 0.15% market share of new vehicle sales in 2025. The cumulative effect of fuel cell vehicles (FCV) sales will equate to .02% of registered vehicles in 2025. Reflecting the limited availability of OEM-delivered CNG vehicles, Navigant projects them to represent less than 0.2% of new vehicles sold in 2025. Similarly, CNG is projected to represent 0.07% of registered LDVs in 2025. Natural gas consumption in LDVs, however, is expected to increase 89.8% and 80.8% in the Base and Aggressive scenarios, respectively.

Overall, gasoline and diesel-powered vehicles are projected to lose modest market share in the Aggressive scenario, dropping from a combined share of 89.2% in 2016 to 88.4%.

The Medium and Heavy Duty Market

The medium and heavy duty market, or commercial vehicle market, is also subject to new fuel economy requirements that are forcing a change in market strategies requiring a 23% improvement in efficiency. According to Navigant, even in the Aggressive scenario most of these advancements will take place within the market of the internal combustion engine operating on gasoline and diesel fuel.

Gasoline and diesel will maintain their dominant share of the fleet with 92% of medium and heavy duty vehicle sales and 96.2% of vehicles on the road. By 2025, in the Base scenario gasoline loses more than 3.0% market share while diesel and CNG remain stable. Electric powertrains, led by diesel hybrid and diesel plug in hybrids, plus battery electric vehicles, capture the lost gasoline market. In the Aggressive scenario, gasoline loses 3.5% of share of new sales in 2025, diesel yields more than 1% and CNG gains 0.5%. Growth is experienced in most alternative powertrain markets, with diesel hybrids and plug in hybrids, battery electric and propane picking up market share. The figure below shows commercial alternative powertrain sales and registrations under the Aggressive Scenario developed by Navigant.

In summary, Navigant says achieving a modest 8% market share of light duty sales could position electric powertrains to gain momentum that could lead to a significant change in the fleet by the early 2030s. In the commercial sector, a shift could likewise be possible beyond the forecast period. The vehicles market is unlikely to undergo revolutionary change by 2025, but the seeds may be forming to enable rapid expansion of alternatives in the years beyond the forecast, according to both Navigant and Fuels Institute.