Global transition towards alternative fuels to diminish dependency on depleting and economically volatile gasoline along with increasing awareness regarding ramifications of unrestrained CO2 emission bolstering CNG & LPG vehicle market demand
Since the inception of motorized vehicles, gasoline has been the predominant source of fuel for transportation. Creating a scenario of monopoly, petroleum being the only source of power had created for itself a lethal influencing authority that can adversely affect any economy dependent on it. Hence to alleviate itself from economically volatile petroleum and stagnant reserves of fossil fuels, economies across the globe are immensely occupied in crafting a transition towards alternative fuels powered vehicles. As a consequence, CNG & LPG vehicle market is gaining substantial traction from developed as well as developing economies, since its cost-effectiveness and fuel efficiency along with hazardous ramifications of unrestrained global warming and carbon footprints are well versed globally. The dual-fuel alternatives delivered by these substitute fuel vehicles have persuaded the automotive users as noble replacements when tallied with the contemporary gasoline and diesel vehicles. Moreover, major governmental initiatives and enforcements such as Corporate Average Fuel Economy (CAFÉ)-United States, California Air Resources Board Zero-Emission Vehicle Mandate, and Federal Emissions Standards by the US Environmental Protection Agency (EPA) are mandating innovations in the automotive industry to accomplish fuel economy and decrease the share of carbon footprints from automotive sector. Such developments are eventually bolstering the demand for autogas and natural gas-powered automotive fleet, thereby augmenting the Global CNG and LPG Vehicles Market size. Increasing annual trade of natural gas in liquefied, as well as gaseous form, is also an indicator of the propulsion in the market. The global CNG & LPG market size as of 2018, was evaluated to be $2.7 billion. And with leading automotive manufacturers such as General Motors, Maruti Suzuki, Hyundai Motor Company and Toyota Motor Corporation investing into LPG and CNG variants along with dual-fuel models, growth of opportunities in the market recorded in the form of global CAGR is estimated to be 8.8% during the forecast period of 2019-2025.
According to the International Energy Agency, transportation is responsible for 24% of direct CO2 emissions from fuel combustion as of 2018. A sense of alarm can be determined by the fact that in 2016 itself transport sector’s emission grew 71% higher than what was observed in 1990. The further analysis stated that road transport, including cars, trucks, and buses had a major share of nearly 75% of the overall emissions sourced by transport sector that includes air and water transport as well. Such epidemic ecological circumstances have initiated a paradigm shift towards alternative fuels in the automotive sector, which is a major factor driving the market. The transition can be documented and supported by the data released by Natural Gas Vehicles for America (national natural gas vehicle association of the United States), which depicts the number of natural gas vehicles on the road to be 25 million globally with 1,600 CNG fueling stations available only in the United States. America holds the apex spot as the producer of natural gas in the world, but out of 23 million natural gas vehicles globally, only 200,000 NGVs reside in the United States. Hence, to capitalize its indigenous production and expand its fleet of alternative fuel vehicles, the United States Environmental Protection Agency (EPA) in 2018 legislated to incentivize natural gas vehicles (NGV). Considering the sheer affluence of the U.S in natural gas production, if capitalized rightly the region has the requisite potential to have leading demand share in the CNG vehicle market that is presently dominated by APAC.
Development of LPG Vehicles – From Unsafe Aftermarkets Kits to Leading Automotive OEMs:
During the yesteryears, mainly in the developing markets, the aftermarket kits were major installations for the majority of functional liquefied petroleum gas vehicles. Shortage of safe and certified LPG-equipped models by carmakers contributed towards the high share of the aftermarket conversion parts that were deemed unsafe, and a major factor restrictive towards the expansion of LPG vehicle market size. But certain manufacturers, like Maruti Suzuki in India, have initiated manufacturing of LPG-equipped models, adding substantial impetus to the market size. The major issue with models was safety and certification, which has been successfully removed by the intervention of leading automotive makers. Some of the successful variants of LPG and CNG cars by Maruti Suzuki in the Indian market are Maruti Suzuki Alto, Maruti Suzuki Wagon R and Maruti Suzuki Celerio. Tracing the untapped opportunities in the alternative fuels automotive market, globally various automakers such as Tata Motors, Chevrolet Motor Car Company, and Hyundai Motor Company are manufacturing factory-fitted CNG-LPG cars. Majority of the carmakers developing an alternative fuel front are manufacturers of passenger cars vehicles as the heavy vehicle segment is yet to rely on clean fuel completely; hence the passenger vehicle is the fastest-growing segment in CNG & LPG vehicle market, progressing at an application CAGR of 12.34% going through to 2025.
Government Initiatives and Bourgeoning Investments – Key Factors Responsible for APAC’s Dominance in Global CNG & LPG Vehicle Market:
After an acute analysis of the regional markets, in terms of demand for CNG & LPG vehicle, APAC is reckoned to be the most lucrative marketplace having a substantial 38.67% share in global uptake as of 2018. Key factors responsible for APAC’s dominance are affluent automotive center in economies including India, China, and Japan, amalgamated with natural gas resources and governmental interventions, including investments and enforcement for adoption. Country-wise analysis of developments with constructive effects on the market-
· CHINA- With world’s largest fleet of NGVs at 6 million units that accounts for nearly 3.7 % of the country’s total automotive fleet China is the prime contributor for the demand of CNG&LPG vehicle in APAC. With governmental initiatives such as Clean Vehicles Action to curb vehicular air pollution, China has set targets for the application of alternative fuels, including CNG in bus and taxi fleets amalgamated with provisions for buyers in the form of subsidies. China’s efforts in developing natural gas infrastructure, such as West to East Gas Pipeline Projects are also eventually a disruptive force in the market as these pipelines warranty the reach of natural gases to provinces facing dearth, supporting refueling infrastructure construction. In its 13th Five-Year Plan for Natural Gas Development, China has set an objective to extend its fleet up to 10 million natural gas vehicles, doubling its 2016 NGV population, and 12,000 refueling stations for vehicles by 2020.
· INDIA- According to the India Brand Equity Foundation (IBEF), India was the fourth-largest Liquefied Natural Gas (LNG) importer in 2017 with imports witnessing an increment towards 26.11 bcm (billion cubic meters) in 2017-18 from 24.48 bcm in 2016-17. And, the gas pipeline infrastructure in the country stood at 16,226 km at the beginning of February 2019. On the basis of such developments in the spectrum of natural gas amalgamated with governmental reform such as Gas4India campaign introduced by the Ministry of Petroleum and Natural Gas in 2016, the CNG&LPG vehicle market growth is well supported. In the year 1999, the Supreme Court of India approved to adopt pollution control program in the national capital of Delhi that was constructed by the Environment Pollution (Prevention and Control) Authority. This landmark decision directed the conversion of Delhi’s bus fleet to CNG and also listed CNG as certified clean fuel along with financial incentives to replace or convert an existing fleet of 3 wheelers and passenger cars with those operating on CNG. Following the trend, similar adoptions are being witnessed in several cities as the Supreme Court also cemented the role of NGVs in addressing air pollution by prioritizing CNG allocation for the transportation sector. The noteworthy cost compensations of CNG matched with diesel or gasoline is estimated to be estimated 41-62 %, and decreased proprietorship expenses of around 20 % is driving an economic incentive for consumers to switch to NGVs in India, directly adding impetus to CNG & LPG vehicle market share in the overall automotive sector. As a consequence, India is estimated to have a total of 10 million CNG vehicles on the road with 5000 new filling stations to be added by 2025.
A list of Investments in the Indian Market Pertaining to CNG and LPG-
· In 2018, State Government of Gujrat, India, selected Energy Infrastructure Limited (EIL, Netherlands to set up a Liquefied Petroleum Gas (LPG) terminal with an investment of US$ 104.42 million.
· $ 2.73 billion is set to be allocated by Oil and Natural Gas Corporation (ONGC) on drilling oil and gas wells in 2018-19.
· The Oil Ministry of India is under planning to set up bio-CNG (compressed natural gas) plants and associated infrastructure at an investment of $ 1.10 billion to promote the use of clean fuel.
CNG & LPG Vehicle Market Companies:
Tracing the global movement and trend towards ‘clean fuels’ for rising ecological concerns and ‘alternative fuel’ as a concern towards depleting fossil reserves and adverse economic effects of it, several automotive OEMs have developed a front towards capitalizing such situation. Some of the key players operating in the global CNG & LPG vehicle market are Ford Motor Company, Fiat Chrysler Automobiles NV, Suzuki Motor Corporation, Kion Group, Nikki Co. Ltd., Honda Motor Company, Hyundai Motor Group, Volkswagen Group, Landi Renzo S.P.A, and AC Spolka.
Volkswagen Group is the dominating leader amongst the carmakers in the field of CNG vehicles. Along with the evolving electrification of its convoy of automotive, Volkswagen Group is employing CNG (compressed natural gas) as an alternative drive technology for the purpose of decarbonizing road transport. With 17 variants in various vehicle segments, Volkswagen Group at present contains the widest selection of CNG vehicles by any OEM, by a considerable margin. The company is planning to add two more variants soon in the form of ŠKODA Scala and ŠKODA Kamiq. In the new CNG models such as the Polo TGI and Golf TGI, the fuel tank has been suggestively condensed in size, as an extra CNG cylinder has been installed along with a developed quasi-monovalent CNG drive system.
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