Alternative Fuel Vehicles Market Size, Share & Industry Analysis, By Fuel Type (BEV, HEV, PHEV, FCV, CNG, Biofuels, Other Gaseous Fuels), By Vehicle Type (Passenger Cars, Commercial Vehicles), and Regional Forecasts, 2024-2032

The global alternative fuel vehicles market size was valued at USD 462.83 billion in 2023. The market is expected to grow from USD 570.70 billion in 2024 to USD 4699.06 billion by 2032, exhibiting a CAGR of 30.2% during the forecast period.

Alternative fuel vehicles (AFVs) run on fuels other than conventional fuels such as diesel and gasoline. These alternate fuels are biofuels, such as electricity and solar batteries, ethanol and biodiesel, biogas, LPG, CNG, fuel cells, and hydrogen gas.

The growing concern for environmental sustainability has been a key driving force behind the rapid expansion of the alternate fuel vehicles market. However, despite this momentum, the high initial cost of adoption has posed a significant barrier to widespread uptake. Nonetheless, government incentives and advancements in technology are steadily driving down costs, making alternate fuel vehicles more accessible to consumers and thereby accelerating market growth.

The International Energy Agency noted electric car sales slowed to 6% in 2019 and dropped 15% in early 2020 due to supply chain disruptions and Chinese regulations during the COVID-19 pandemic. Lockdowns worsened supply chain issues, impacting production and sales, while closed dealerships during COVID-19 worsened the decline in alternative fuel vehicle sales. Despite these, the European Commission proposed a recovery plan in May 2020 focusing on alternate fuel infrastructure. Additionally, the automotive industry's recovery boosts natural gas vehicle demand, especially with EV subsidy cuts, in the post-pandemic period.

Alternative Fuel Vehicles Market Trends

Stringent Regulation Enforced by Government Worldwide for Emission Control from Automotive is Driving Market Growth

Rising pollution levels, global warming, and declining air quality in urban regions have become an international concern. Hence, governments worldwide are introducing various strict regulations to reduce carbon emissions from automobiles. Government bodies introduced various emission standards for the manufacturers to restrict the emission of pollutants from automotive exhaust. Along with regulations government’s initiatives to invest in electric and hybrid fleet for the public transportation system is anticipated to drive the market growth over the forecast period.

Moreover, European Union (EU) has introduced various emission standards for automotive emission control. For instance, starting from 2035, the EU aims for a fleet-wide CO2 emission target of 0 g CO2/km for both cars and vans, representing a complete 100% reduction.

Between 2025 and 2029, a ZLEV crediting system will be in effect for both car and van manufacturers. This system will ease a manufacturer's specific emission target if its portion of newly registered ZLEV (vehicles with emissions between zero and 50 g CO2/km) surpasses the following benchmarks, which include cars: 25% ZLEV and for vans: 17% ZLEV.

In addition, countries like the U.S., Japan, India, and others are also implementing their emission policies for automotive emission control. Moreover, governments undertake several initiatives to phase out fossil fuel-powered vehicles and achieve clean mobility. These regulations are anticipated to create a surge in demand for alternative fuel and renewable fuel vehicles worldwide.

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Alternative Fuel Vehicles Market Growth Factors

Increasing Fossil Fuel Prices and Heavy Dependence on Foreign Countries for Crude Oil is Driving Market Growth

Rising fossil fuel prices such as gasoline & diesel and heavy dependence on foreign countries to import fossil fuels significantly increase the pressure on the emerging economies worldwide, resulting in a boost in demand for AFVs. According to the U.S. Energy Information Administration, in December 2022, the crude oil price hiked by around 8.35%, as compared to December 2021.

Moreover, developing and underdeveloped economies suffered high impact due to the rising prices of petroleum products; hence developing countries worldwide are taking the initiative to increase the adoption of vehicles running on alternate fuel as a future mobility solution.

To reduce the fossil fuel dependency and emission from the automotive, governments worldwide are taking the initiative to encourage the populace to propel the adoption of alternative fuel vehicles by providing various tax benefits and generous subsidies. For instance, the U.K. government offers a grant of GBP 2,500 for electric cars priced at or below GBP 35,000.

RESTRAINING FACTORS

Low Utilization Rate of Commercial Charging Stations and Charging Cost is a Key Restraint for Growth of this Market

DC fast-charging stations that are organized into multi-charger stations can provide considerable returns on capital costs. However, these returns are highly dependent on the percentage of time in which the electric vehicle supply equipment supplies electricity. This factor can lower supply chain and sales, thereby maintaining a high utilization rate. For instance, the average usage rate of conventional fuel stations in the United States, many of them with multiple pumps, is around 34%. However, the utilization rate of commercial EV charging stations is approximately 5-10%.

A 10% utilization rate for such stations, which cost around USD 160,000, is not a monetarily feasible proposition. Additionally, vehicles that have finished charging continue to charge idly while being plugged into the equipment and consume space without creating revenue. Hence, even a modest daily target of a twenty percent usage rate can be difficult to achieve even in regions with high electric vehicle penetration. EVs' charging costs are expected to additionally restrain the market's growth with the growing size of vehicle batteries.

Alternative Fuel Vehicles Market Segmentation Analysis

By Fuel Type Analysis

BEV Segment Expected to Dominate Market Owing to Increasing Adoption of Battery Electric Vehicles for Reducing Carbon Footprint

Based on fuel type, the market is segmented into Battery Electric Vehicle (BEV), Hybrid Electric Vehicle (HEV), Plug-In Hybrid Electric Vehicle (PHEV), Fuel Cell Vehicle (FCV), CNG, biofuels, and other gaseous fuels.

The battery-electric vehicle segment holds the major share in the market and is expected to retain its dominance in the coming years due to the increasing adoption of battery electric vehicles for reducing the carbon footprint. OEMs are adopting electrification by shifting from conventional vehicle production to electric automobile production to cater to the demand for emission-free automobiles.

Moreover, rising consumer’s demand in electric vehicles fuels the market growth. According to the International Energy Agency (IEA), the global battery electric passenger cars witnessed a growth of around 58.7% in 2022, as compared to the previous year, 2021.

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By Vehicle Type Analysis

Growth of Commercial Vehicles Segment Due to Reduced Fuel Consumption of Heavy-Duty Application Vehicles

Based on the vehicle type, this market is segmented into passenger cars and commercial vehicles.

The passenger cars segment accounts for the major market share in 2023 and is projected to dominate the market over the forecast period. Passenger cars include vehicles such as sports utility vehicles (SUV), hatchbacks, sedans, electric cars (battery electric vehicle (BEV), multi-utility vehicles (MUV), and hybrid electric vehicles (HEV)).

Growing penetration of alternative fuel commercial vehicles in industrial sectors such as logistics and transportation is expected to create new market growth opportunities for the commercial vehicle segment over the forecast period. Moreover, logistics & transportation companies invest in vehicles running on alternate fuels to achieve an emission-free fleet as a future transportation solution.

REGIONAL INSIGHTS

Based on the geography, this market is segmented into EMEA, Asia Pacific, and the Americas. In 2023, the Asia Pacific region dominated the market due to the high number of vehicles.

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Asia Pacific region includes South Korea, Japan, India, China, and other countries. Moreover, the increasing number of regulatory policies and adoption of cleaner fuels are mainly driving the regional growth over the forecast period. Further, this region offers lucrative opportunities for developing low-cost fuel-efficient automobiles and the upsurge in alternate fuel stations and public charging infrastructure in the market.

On the other hand, EMEA is estimated to be the fastest-growing regional market from 2024 to 2032. This factor is due to increasing government technological advancement and positive initiatives taken by the government, such as investment in electric buses for public transport. Moreover, major alternative fuel vehicles market players are also using strategic partnerships and acquisitions as a strategy to support the demand for alternative fuel vehicles.

In addition, the Americas region is one of the most attractive markets for AFVs. Several regulations by organizations such as Alternative Fuels Data Center and the U.S. government to control the vehicular emissions and import of fuels have substantiated the advantages for the alternate fuels. Thus, the Americas’ alternative fuel vehicle market is witnessing a substantial growth rate of 60.0% over the forecast period.

List of Key Companies in Alternative Fuel Vehicles Market

Key Market Players Focus on Collaborations Strategies to Gain Competitive Edge

The alternative fuel vehicles market is highly competitive and fragmented, with the presence of key players such as the Honda Motor Co., Ltd., Toyota Motor Corporation, Nissan Motor Corporation, Daimler AG, Tesla, BYD Company Ltd., and Ford Motor Company, among others.

Intensifying competition in the industry to meet the emission-free automotive requirement and increasing automakers’ focus on investment in AFVs such as electric or natural gas vehicles is driving the market. Moreover, the number of automakers committing to achieve zero-emission is rapidly increasing.

LIST OF KEY COMPANIES PROFILED:

• Honda Motor Co., Ltd. (Tokyo, Japan)


• Toyota Motor Corporation (Aichi, Japan)


• Nissan Motor Corporation (Yokohama, Kanagawa, Japan)


• Daimler AG (Stuttgart, Germany)


• Tesla (California, U.S.)


• BYD Company Ltd. (Shenzhen, China)


• Ford Motor Company (Michigan, U.S.)


• MITSUBISHI MOTORS CORPORATION. (Tokyo, Japan)


• SHELL International B.V. (Hague, Netherlands)


• JAGUAR LAND ROVER AUTOMOTIVE PLC (Coventry, U.K.)

KEY INDUSTRY DEVELOPMENTS:

• January 2024 - The Renewable Fuels Association showcased the Plug-in Hybrid Electric Flex Fuel Vehicle (PHEFFV) at the Washington, D.C. Auto Show. RFA conducted various tests for the converted 2022 Ford Escape, including tailpipe emissions analysis, life cycle greenhouse gas assessment, cost of ownership analysis, and convenience testing.


• The PHEFFV, a converted 2022 Ford Escape, blended the advantages of a flex fuel vehicle (FFV), capable of running on up to 83% ethanol, with those of a battery electric vehicle (BEV). This vehicle offered consumers a lower-cost, lower-emissions solution. Already, the Escape had exceeded 27,000 miles powered solely by low-carbon E85, an alternative fuel comprising 51% to 83% ethanol, thanks to an eFlexFuel conversion kit.


• June 2023 - National Fuel Gas Distribution Corporation (National Fuel) officials initiated an alternative fuel vehicle pilot program. The program utilizes an Adsorbed Natural Gas (ANG) platform developed by Ingevity Corporation, known as NeuFuel. According to the Natural Gas Vehicles of America (NGVA), when combined with renewable natural gas (RNG), this platform has the potential to reduce greenhouse gas emissions by up to 125 percent.


• February 2023 - Volvo Trucks launched a stronger gas-powered truck that could run on liquefied biogas. The truck is capable of carrying out demanding, long-distance transport tasks while reducing overall CO2 emissions.


• November 2022 - Honda unveiled its plan to manufacture an FCEV based on the Honda CR-V, commencing production in 2024 at its Presentation Manufacturing Center (PMC) in Marysville, Ohio. This zero-emissions vehicle plays a significant role in Honda's overarching objective to ensure that battery electric vehicles (BEVs) and FCEVs make up 100% of its global auto sales by 2040.


• October 2022 - AGCO Power introduced a range of diesel engines named CORE, designed with future alternative fuels in mind. The company aimed to decrease carbon emissions, which aligned with the objectives of many machine manufacturers. AGCO Power's diesel engines are fully adaptable to renewable HVO fuels, offering a pathway to nearly carbon-neutral operation.

REPORT COVERAGE

The market research report provides a detailed analysis of the market and focuses on key aspects such as leading companies, fuel types, and vehicle types. Besides this, the report offers insights into the market trends and highlights key industry developments. In addition to the factors above, the report encompasses several factors that have contributed to the growth of the market over recent years.

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