New players may have window to disrupt after trucks exit California emissions deals
'All your competitors just announced their strategy,' Craig Segall, former deputy executive officer and assistant chief counsel of the California Air Resources Board (CARB), told The Hill.
'How quickly can you ramp up to eat their lunch?' Segall asked.
This now unmasked strategy — an about-face on compliance with the Golden State's heavy-duty vehicle standards — came to light this week when four manufacturers sued California regulators over the matter.
Soon after, the Federal Trade Commission (FTC) declared that a voluntary 'Clean Truck Partnership' between the companies and the state was 'unenforceable.'
Then, Friday, the Department of Justice sued California about the same partnership, in a bid to 'advance President Donald J. Trump's commitment to end the electric vehicle (EV) mandate.'
The week's initial lawsuit, filed Monday by Daimler Truck, International Motors, PACCAR and the Volvo Group, alleged the federal government had deemed California's emissions rules 'unlawful' in June.
At the time, President Trump signed off on three congressional resolutions revoking a Biden administration waiver that had allowed the state to set these rules. Under the 1970 Clean Air Act, California can create emissions standards that are stricter than federal norms but must acquire a waiver from the Environmental Protection Agency to do so.
In Monday's filing, the truckmakers — also called original equipment manufacturers (OEMs) — argued California's demands have 'threatened' their ability to 'design, develop, manufacture and sell heavy-duty vehicles and engines.'
The lawsuit noted the Department of Justice had instructed manufacturers 'to immediately cease and desist compliance with California's preempted and unlawful mandates,' leaving the companies 'caught in the crossfire.'
CARB said it would not comment on pending litigation.
The FTC declaration that followed on Tuesday determined a 2023 voluntary agreement between truckmakers and CARB — the 'Clean Truck Partnership' — was 'unenforceable.' In that partnership, the companies had agreed to abide by California's emissions standards in exchange for certain concessions.
One such standard was the Advanced Clean Trucks rule, requiring 7.5 percent of heavy-duty vehicles to be emissions-free by 2035. A second, the Omnibus Regulation, focused on slashing nitrogen oxide releases by 90 percent and updating engine testing protocols.
Segall described Monday's lawsuit as 'an audacious move,' noting in a Thursday op-ed that truckmakers just two years ago supported the Clean Truck Partnership, which he helped negotiate.
He accused companies such as Daimler, which controls 40 percent of the country's truck market, of 'badly letting the trucking industry down.' Meanwhile, he warned, China is accelerating electric truck adoption.
A possible goal of the sudden turnaround is to move costs onto the industry and 'to drag out the transition from diesel as long as possible,' Segall told The Hill.
Because the companies haven't faced serious new competition yet — disruptors such as Tesla in the car space — and have the federal administration 'clearly on their side,' they 'can burn the regulators for the fourth largest economy in the world,' Segall observed.
Yet at the same time, Segall noted, the truckmakers are up against a billion-person market in China, where other manufacturers 'are rapidly eating their market share.'
The U.S. trucking giants, he continued, could jeopardize their presence in the world market while also getting the country 'stuck in diesel for a few years.'
'That's not a long-term win for them,' Segall said, arguing things may change when a new president enters office in 2029.
The new president might realize 'with horror, the U.S. is badly behind on EVs,' Segall said.
Policymakers at that point, he explained, could either revive CARB's rules or enact national-level legislation. Rather than leaving the freight system 'stuck in diesel' in 2040, Segall said he believes the industry will return 'hat in hand' to Congress and California.
Pointing to the fact that delivery firms such as Amazon have smaller EV trucks operating nationwide, Segall forecast that 'giant semitrailers' will make a similar transition soon.
With that in mind, he stressed there is 'an interesting opening' for other competitors, such as Chinese electric truck startup Windrose.
Industry veteran Rustam Kocher echoed these sentiments in a recent post on LinkedIn, calling upon Windrose, other Chinese e-truck manufacturers and Tesla Semi to fill in this gap and 'let the market-share eating competition commence.'
'This industry is changing, just like the light-duty industry is changing,' Kocher told The Hill.
While Kocher said he believes the companies made their decisions due to the short-term profit margins, he argued that 'the profitability they're going to gain off of combustion engines is going to change.'
'At some point, the resale value of those things is going to drop off the end of the Earth,' he added, noting Windrose or Tesla Semi are 'perfect examples' of market entrants that could perform better and cheaper.
Kocher, who is now semiretired in Portugal, worked in various electrification-related roles for Daimler Truck North America from 2011-19 and then served as transportation electrification manager for Portland General Electric.
During his time at Daimler, he said he helped launch the e-mobility group and worked on developing fast-charging standards 'with the full support of Daimler Truck, with the full support of everyone else in the trucking OEM world.'
Kocher acknowledged that from a business perspective, although electric trucks are viable, they are not currently as profitable as existing diesel trucks and cost more up front.
Yet they cost less to operate per mile and save money for fleets due to their reduced maintenance needs — needs that drive profits for truckmakers, according to Kocher.
'Every electric truck they put into the market means they're taking a cut on profit,' he said. 'They're not going to make those maintenance and after-sale part sales.'
Recognizing the profitability 'conundrum' that the industry is facing, Kocher expressed sadness that the firms he had held in high esteem decided to choose this direction.
'To see them turn around and do this, it's made me very disappointed and frustrated,' he added.
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The week's initial lawsuit, filed Monday by Daimler Truck, International Motors, PACCAR and the Volvo Group, alleged the federal government had deemed California's emissions rules 'unlawful' in June. At the time, President Trump signed off on three congressional resolutions revoking a Biden administration waiver that had allowed the state to set these rules. Under the 1970 Clean Air Act, California can create emissions standards that are stricter than federal norms but must acquire a waiver from the Environmental Protection Agency to do so. In Monday's filing, the truckmakers — also called original equipment manufacturers (OEMs) — argued California's demands have 'threatened' their ability to 'design, develop, manufacture and sell heavy-duty vehicles and engines.' The lawsuit noted the Department of Justice had instructed manufacturers 'to immediately cease and desist compliance with California's preempted and unlawful mandates,' leaving the companies 'caught in the crossfire.' CARB said it would not comment on pending litigation. The FTC declaration that followed on Tuesday determined a 2023 voluntary agreement between truckmakers and CARB — the 'Clean Truck Partnership' — was 'unenforceable.' In that partnership, the companies had agreed to abide by California's emissions standards in exchange for certain concessions. One such standard was the Advanced Clean Trucks rule, requiring 7.5 percent of heavy-duty vehicles to be emissions-free by 2035. A second, the Omnibus Regulation, focused on slashing nitrogen oxide releases by 90 percent and updating engine testing protocols. Segall described Monday's lawsuit as 'an audacious move,' noting in a Thursday op-ed that truckmakers just two years ago supported the Clean Truck Partnership, which he helped negotiate. He accused companies such as Daimler, which controls 40 percent of the country's truck market, of 'badly letting the trucking industry down.' Meanwhile, he warned, China is accelerating electric truck adoption. A possible goal of the sudden turnaround is to move costs onto the industry and 'to drag out the transition from diesel as long as possible,' Segall told The Hill. Because the companies haven't faced serious new competition yet — disruptors such as Tesla in the car space — and have the federal administration 'clearly on their side,' they 'can burn the regulators for the fourth largest economy in the world,' Segall observed. Yet at the same time, Segall noted, the truckmakers are up against a billion-person market in China, where other manufacturers 'are rapidly eating their market share.' The U.S. trucking giants, he continued, could jeopardize their presence in the world market while also getting the country 'stuck in diesel for a few years.' 'That's not a long-term win for them,' Segall said, arguing things may change when a new president enters office in 2029. The new president might realize 'with horror, the U.S. is badly behind on EVs,' Segall said. Policymakers at that point, he explained, could either revive CARB's rules or enact national-level legislation. Rather than leaving the freight system 'stuck in diesel' in 2040, Segall said he believes the industry will return 'hat in hand' to Congress and California. Pointing to the fact that delivery firms such as Amazon have smaller EV trucks operating nationwide, Segall forecast that 'giant semitrailers' will make a similar transition soon. With that in mind, he stressed there is 'an interesting opening' for other competitors, such as Chinese electric truck startup Windrose. Industry veteran Rustam Kocher echoed these sentiments in a recent post on LinkedIn, calling upon Windrose, other Chinese e-truck manufacturers and Tesla Semi to fill in this gap and 'let the market-share eating competition commence.' 'This industry is changing, just like the light-duty industry is changing,' Kocher told The Hill. While Kocher said he believes the companies made their decisions due to the short-term profit margins, he argued that 'the profitability they're going to gain off of combustion engines is going to change.' 'At some point, the resale value of those things is going to drop off the end of the Earth,' he added, noting Windrose or Tesla Semi are 'perfect examples' of market entrants that could perform better and cheaper. Kocher, who is now semiretired in Portugal, worked in various electrification-related roles for Daimler Truck North America from 2011-19 and then served as transportation electrification manager for Portland General Electric. During his time at Daimler, he said he helped launch the e-mobility group and worked on developing fast-charging standards 'with the full support of Daimler Truck, with the full support of everyone else in the trucking OEM world.' Kocher acknowledged that from a business perspective, although electric trucks are viable, they are not currently as profitable as existing diesel trucks and cost more up front. Yet they cost less to operate per mile and save money for fleets due to their reduced maintenance needs — needs that drive profits for truckmakers, according to Kocher. 'Every electric truck they put into the market means they're taking a cut on profit,' he said. 'They're not going to make those maintenance and after-sale part sales.' Recognizing the profitability 'conundrum' that the industry is facing, Kocher expressed sadness that the firms he had held in high esteem decided to choose this direction. 'To see them turn around and do this, it's made me very disappointed and frustrated,' he added.
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