Spurred by government regulations and programs to place more low emission vehicles on the road,...

Spurred by government regulations and programs to place more low emission vehicles on the road, the US market for natural gas and other low emission alternative fuel vehicles (AFVs) is forecast to expand over fivefold, to more than 170,000 units in 2002. Fleet operators will continue to provide

essentially the entire customer base for AFVs due to government regulations and availability of centralized refueling centers. Government agencies and fuel providers are the largest markets for AFVs. However, despite environmental advantages, AFVs will continue to represent a minuscule share of US vehicle production. These and other trends are presented in Natural Gas & Other Alternative Fuel Vehicles, a new study from The Freedonia Group, Inc., a Cleveland-based industrial market research firm.

The most critical problem facing the AFV industry will be its ability to survive the transition from a market supported largely by government regulations and programs to one driven entirely by commercial factors. In the short term, government regulations and programs will continue to be essential for the viability of the AFV industry. AFV sales have failed to meet industry expectations of the early and mid 1990s because of the slow development of service and refueling infrastructures, the premium prices of AFVs relative to their traditional fuel counterparts, moderate prices and ample supplies of gasoline and increasingly cleaner traditional fuel vehicles. Indeed, improvements in engines and emission control technologies for traditional fuel vehicles may undercut the long term need for AFVs.

Natural gas vehicles (NGVs) are emerging as the dominant AFV and will account for 85 percent of AFV sales in 2002 compared with 55 percent in 1997. Automobiles will surpass vans and trucks as the largest market for NGVs because of technological improvements and expanding lines of original equipment manufacturer (OEM) vehicles being offered by the Big Three automakers. Natural gas automobiles are important in both government fleets and private fleets, such as taxis. Sales of heavy NG trucks will also register attractive growth, but from a very low base.

Propane (liquefied petroleum gas, or LPG) vehicle sales will be restrained by Environmental Protection Agency (EPA) regulations that discourage conversion of traditional fuel vehicles, the somewhat poor starting performance of propane vehicles in hot and very cold temperatures, variable fuel properties, and the geographical concentration of refueling stations in just a few states. These vehicles are used primarily by the propane industry itself. Methanol vehicle sales will be extremely limited due to lack of an extensive refueling infrastructure, competition from other AFVs and lack of interest in these vehicles on the part of motor vehicle manufacturers.

Natural Gas & Other Alternative Fuel Vehicles (published 8/98, 218 pages) is available for $3500 from The Freedonia Group, Inc., 767 Beta Drive, Cleveland, Ohio 44143-2326. For further details, please contact Corinne Gangloff by phone 440.684.9600, fax 646.0484 or e-mail pr@freedoniagroup.com. Full text is also available online through commercial database companies and the www.freedoniagroup.com Web site.

If information in this release is used in an article, please attribute information from this news release to The Freedonia Group, Inc. (Cleveland, OH) and include, if possible, the price of the report. We would also appreciate (at your convenience) a copy of the article or publication in which we appear.