Selective Catalyst Reduction Diesel Engine Fluid - Urea Availability Gets “Green” Light, So Next Issue Is…

Implications: One of the often-cited risks in implementation of Selective Catalyst Reduction (SCR) technology has been Diesel Engine Fluid (DEF) - a.k.a. Urea - availability. That has been covered in past GLG articles - and continues to move along better than expected. The next major issues include whether truck-buyers will “pre-buy” current technology in 2009, wait until SCR engines are available, take the Navistar EGR new engine model approach or a mix thereof. However, the real elephant in the room for the majority of the marketplace is financing.

Analysis: Through collaborative efforts of US DOE / EPA, engine / vehicle manufacturers & dealers, the oil industry / their retailers, truck stops and trade associations, DEF planning is moving quickly toward implementation. An issue therein involves education, which we are actively involved in - and potential buyers are being swayed. Daimler’s Detroit Diesel / Mercedes Engine group has been a leader in these efforts with Volvo North America (including Mack) following closely. Paccar and Cummins are involved now too.

What this means is that one will be able to get DEF at fleet terminals, large / small truck stops, diesel fueling stations, truck dealer locations, independent truck repair garages, etc - all the way to local NAPA stores. The estimated range for a full DEF tank on a truck is 6,000+ miles or over two weeks in a typical over-the-road fleet. If one is running low, there will be 2.5 gallon jugs widely available, giving one 600+ miles to get more. Supply will be matched to the phase-in of engines with the manufacturers’ being the safety valve.

The debate is now more about the cost / benefit of waiting until 2010 to address the replacement of current trucks versus buying today or next year. This is because some of the fuel mileage projected improvements are notable. Rough math says that a 5% improvement with SCR equals 0.3 mpg or about $0.03 per mile at $3.50 per gallon fuel. For a half million miles for just the first cycle owners, this is a $15,000 benefit ($20,000 at $4.00 fuel).

Another benefit being assessed with SCR is the projected reduction in heat-related maintenance costs where estimates may be savings similar amounts to that from fuel - but those are still hard to tie down. It also makes for “green” fleets, which is a marketing benefit.

Of course the other major questions leading to pending truck purchases in any case are freight demand and financing. Part of the financing issue today is availability of credit compounded by the inability to qualify - due to the poor creditworthiness / profitability of fleets in today’s environment. That is for another article to come.