U P D A T E M A Y 2 0 1 5EPA/NHTSA Phase 2 Fuel Efficiency& GHG Standards for Freight Trucks:Projected Effect on Freight CostsDana Lowell978-405-1275dlowell@mjbradlley.comM.J. Bradley & Associates LLC(978) 369 5533 / www.mjbradley.comM.J. Bradley & Associates LLC(978) 369 5533 / www.mjbradley.comPURPOSE•Analyze the effect on freight costs of more stringent“EPA /NHTSA Phase 2” fuel efficiency standards fornew trucks•Compare truck operating costs with Phase 2standards to a “base case” scenario in whichEPA/NHTSA Phase 1 standards do not change for newtrucks purchased after MY2019•More stringent EPA /NHTSA Phase 2 standards areexpected to achieve a significantexpected to achieve a significant reduction in totareduction in totaloperating costs as large fuel cost savings offset muchsmaller increase in truck & trailer initial purchasecosts.2M.J. Bradley & Associates LLC(978) 369 5533 / www.mjbradley.comFREIGHT TRUCK OPERATING COSTS ($/MI)3Current CostsCurrent Costs Future Costs Affected ByFuture Costs Affected ByFuel Costs 39%Equipment Costs 11%Other Costs 50%LaborMaintenanceTolls, feesInsuranceFuel Price ($/gal)Fuel Consumption (gal per mile)General inflationCompliance CostsGeneral inflationM.J. Bradley & Associates LLC(978) 369 5533 / www.mjbradley.comANALYZED EPA/NHTSA PHASE 2 SCENARIOMetricMetric EquipEquipEPA/NHTSA Phase 1EPA/NHTSA Phase 2MY 2014-2016MY 2017-2019MY 2020-2024MY 2025+ReducedFuel Use1Sleeper Cab 21% 23%29% 39%Day Cab 11% 13%22% 24%Van Trailer NA NA8% 15%MarginalChange inCost2Sleeper Cab $7,875 $232$1,034 $9,583Day Cab $3,353 $601$4,446 - $564Van Trailer NA NA$1,546 $3,2094Already in place,Incorporated intobaselineBased on April 2015 ICCTanalysis of feasible andcost-effective technologies.1Compared to MY2013 truck/trailer.2Change is relative to previous compliance period. All costs in 2014 dollarsM.J. Bradley & Associates LLC(978) 369 5533 / www.mjbradley.comPHASE 2 TECHNOLOGY OPTIONS5•Improved aerodynamics•Low rolling resistance, single-wide tires•6 x 2 axle configuration•Automated manual or dual-clutchtransmission•APU for idle reduction•Exhaust waste heat recovery•Engine improvementsLower frictionBetter air handlingBetter heat transferImproved after-treatment•Improved aerodynamics•Low rolling resistance, single-wide tiresThere are a range of technologies thatcould be combined to ensurecompliance with bold EPA/NHTSAPhase 2 rules. This analysis is basedon estimated costs for feasiblecombinations that could be used tomeet the modeled efficiency targets,and is not reliant on the use of anyspecific technology(s)M.J. Bradley & Associates LLC(978) 369 5533 / www.mjbradley.comBASELINE FUEL ECONOMY & FREIGHT RATES6Fleet FuelEconomyimproves due toturn-over totruckscompliant withEPA Phase 1standardsDespite improved truck fuel economyfreight rates continue to rise due togeneral and fuel price inflationM.J. Bradley & Associates LLC(978) 369 5533 / www.mjbradley.comFLEET FUEL ECONOMY WITH EPA/NHTSA PHASE 27+19%+31%Phase 2 trailerstandards willincrease thebenefits by 48%compared totruck standardsaloneM.J. Bradley & Associates LLC(978) 369 5533 / www.mjbradley.comFREIGHT COSTS – NEW SLEEPER CAB & TRAILER8From model year2020 – 2040net savings of$0.14 - $0.29/mifor new sleepercab + new trailermeeting modeledEPA Phase 2standards$18,000 -$38,000 savingsin first year newtruck is in serviceM.J. Bradley & Associates LLC(978) 369 5533 / www.mjbradley.comFREIGHT COSTS – NEW DAY CAB & TRAILER9From Model Year2020 – 2040net savings of$0.05 - $0.8/milefor new day cab +new trailer meetingmodeled EPAPhase 2 standards$4,100 - $4,800savings in firstyear new truck is inserviceM.J. Bradley & Associates LLC(978) 369 5533 / www.mjbradley.comFLEET AVERAGE FREIGHT COSTS10By 2030 fleetaverage savings of$0.06/mi, or$4,000 annuallyper truckBy 2040 fleetaverage savings of$0.21/mi, or$13,800 annuallyper truckM.J. Bradley & Associates LLC(978) 369 5533 / www.mjbradley.comPOTENTIAL FREIGHT RATES WITH EPA/NHTSA PHASE 211-6.8%Where savings arepassed on toshippers, averagefreight rates couldfall by up to 2.6%in 2030 and up to6.8% in 2040compared tobaseline ratesM.J. Bradley & Associates LLC(978) 369 5533 / www.mjbradley.comPOTENTIAL COMPANY SAVINGS12**2030 2040**Sporting Goods manufacturer $500 1,000,00060,000$ 207,000$Mid-size apparel company $5,000 10,000,000600,000$ 2,070,000$Large consumer food brand $30,000 60,000,0003,600,000$ 12,420,000$**Potential Annual Savings from a strong phase two** **Example Company Distribution** **Miles Revenue** **(in millions)*** estimate based on two miles per $1,000 of revenueM.J. Bradley & Associates LLC(978) 369 5533 / www.mjbradley.comSUMMARY•Bold EPA/NHTSA Phase 2 fuel efficiency & GHG standards willresult insignificant net savingsin freight truck operating costs forcompanies that purchase compliant trucksPer milesavings in fuel costsfor sleeper cab trucks are3 - 4xgreaterthan increased costs for equipment amortization•If EPA & NHTSA include trailers in Phase 2 this couldincrease thenet benefits by 48%compared to more stringent truck standardsalone•When operating cost savings are passed on to shippers, morestringent EPA/NHTSA Phase 2 fuel efficiency standards for trucksand trailers couldreduce average shipping rates ($/mile) by upto 6.8% by 204013