LNG truck sales affect Chinese road diesel demand

30 July 2024

China’s sales of heavy-duty trucks powered by liquefied natural gas (LNG) rose from below 10% to 30% of the market in the latter months of 2023 resulting in the displacement of over 8% of road diesel demand in the country, according to a report by Wood Mackenzie.

The report: ‘The threat to diesel from LNG trucking in China’, states that around 220,000 barrels a day of road diesel demand has been replaced by LNG as end-users take advantage of government policies to promote LNG trucks and the lower natural gas prices compared to diesel.

Heavy-duty trucks account for over a quarter of the commercial vehicle fleet in China, reaching 8.76 million vehicles by 2023. The number of diesel trucks peaked in 2021 and has been declining thereafter, resulting in LNG’s share of the heavy trucking fleet to increase to over 9% by 2024.

LNG trucks are suitable for inter-city medium- and long-distance freight transport. Favorable pricing conditions for natural gas compared to diesel has bolstered sales of LNG vehicles. Since 2023, the price spread between LNG and diesel has widened, as natural gas prices fell while diesel prices increased due to global crude pricing.

While LNG-powered trucks are gaining in popularity, they should only be seen as a bridging solution—according to the authors of the report. As battery technologies advance, electric vehicles are expected to displace LNG as the main threat to diesel in the long term.

It may be noted that Westport Fuel Systems, who has been cooperating with Weichai for many years to commercialize natural gas truck engines in China, has been unable to cash-in on the trend. During the Q1 2024 earnings call, Dan Sceli, Westport’s CEO admitted: “We don’t have any orders right now from Weichai for production. We’ve been shipping them development parts for trials,” according to a transcript by The Motley Fool.

Source: Wood Mackenzie