Money in your pocket and a good night's sleep

Posted Friday, 4 March 2016, 09:57

Mike Roeth at the North American Council for Freight Efficiency told me a story last week about a U.S. husband-and-wife trucking team. The husband was reluctant to give up his 12-year-old truck, certified to US 1998 heavy-duty vehicle standards, because it got such great fuel economy. These were the pre-EGR trucks that were known to be significantly more efficient than US 2004 certified vehicles. After he finally broke down and bought a new US 2010-certified truck, it turned out that the savings on fuel and maintenance alone covered the payments. Not only that, but with the quiet engine, his wife could now sleep at night as he logged more miles.

For those unconvinced by anecdotal evidence (good for you!), Kenny Vieth at ACT Research analyzed a data set of 15,000+ long-haul, class-8 trucks operating on regular routes throughout the continental United States. The results, included in their North American Commercial Vehicle Outlook, clearly showed the fuel economy penalty for the US 2004 vehicles. The data also demonstrated how US 2010 technologies allowed manufacturers to get back to pre-EGR levels and improve upon the efficiency of those old, well-loved US 1998-certified trucks. Indeed, the data shows an 11% leap in new vehicle fuel economy for the US 2010 standards over US 2004.

Our latest technology cost assessment details the incremental costs of all the U.S. and European regulatory steps starting from a Euro II and US 1994 baseline. Going from US 2004 standards to the well-aligned Euro VI and US 2010 standards, as proposed by Mexico, has an incremental cost of ~$5,500 for a Class 8 truck with a 12.0 liter engine. (That cost is likely already too high and is dropping as manufacturers continue to innovate new technologies, such as combining SCR and DPF in a single system.) With an 11% increase in fuel economy, that incremental cost would be paid back in less than two years, even with high interest rates and at current extremely low diesel prices. After that, the truck owner gets to pocket or reinvest the $12,000 to $26,000 in savings (over 10 years). And these standards are necessary to enable the much greater fuel savings possible with harmonization of US GHG regulations, both the current rule and the Phase 2 proposal due to be finalized this summer.

The cost assessment may not seem like big news: after all, our cost-benefit analysis for Mexico, using slightly higher incremental costs, already demonstrated that the health and climate benefits were at least 10 times greater than the costs. But going through the nuts-and-bolts details may help correct some of the misinformation within the trucking world. In Mexico, as an anti-collusion measure manufacturers are restricted from discussing pricing or costs within ANPACT, the industry association, so they turned to a 2012 report by the American Truck Dealers to support a request for incentives. The ATD report adds up the “EPA surcharges” that manufactures had included in their pricing plans as evidence to demonstrate an average incremental cost of $17,000 to go from US 2004 to US 2010 standards. More than three times our estimate, the ATD costs are also almost three times the average manufacturer's suggested retail price increase over this time period (see our cost analysis for details). And anyone who has ever paid a surcharge knows that there is no guarantee how closely the surcharge is related to what it is named after.

It turns out that the new trucks offer their own incentives. For a reasonable cost they provide a tremendous return on investment. With real-world reductions in PM, black carbon and NOx emissions of more than 95%, these trucks will save lives and allow Mexico to breath easier. These standards are a great investment in the Mexican economy and people, and they might even allow truck owners to sleep better at night.