The global truck manufacturing industry is
undergoing substantial change. As is the case with the automotive industry in general,
pressures of globalisation, intensifying competition and the need to reduce cost bases are
all driving the industry in the direction of further consolidation. For the truck industry
in particular, this is nothing new. The past few decades have seen a steady increase in
the industry’s level of concentration. It is a long-standing trend being driven by
the economic fundamentals of truck manufacturing. It is an industry driven by the need to
achieve scale economies on high capital costs.
Convergence in the industry set to
accelerate
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While the industry has a history shaped by
differing regional standards-in terms of operating environments and truck
manufacturing requirements-those still significant differences are diminishing. This
is perhaps most notable in the emergence of multi-regionally based truck manufacturers
eager to exploit synergies and cut costs, principally in truck design and component
purchasing costs. The example of RVI and its US subsidiary, Mack, offers an illustrative
case. European and US operating environments have traditionally been seen as very
different, with very different trucks marketed in the respective markets. Nevertheless,
RVI has recognised the inherent business sense in moving the company towards greater
standardisation in its products. The changes will centre around moving trucks towards
common platforms for the next-generation products, in order to facilitate larger volume
parts procurement and lower costs. RVI executives believe that customer requirements are
converging and that different regulations and traditions are not the barrier to
commonisation they are sometimes held up to be. They believe, for example, that in spite
of different cab designs, common doors and dashboards could still fit. Chassis components
are another area being closely looked at. Some RVI trucks already use Mack engines. The
fruits of the joint development or “convergence” strategy could be evident by
2004 or 2005.
The growing significance of South
America-in truck market and production terms-is helping the European
manufacturers to increase their volume with trucks that are increasingly state-of-the-art
and consistent with the product lines offered in Europe. The short-term disruption to
demand there should not detract from its long-term attractiveness to the European
truck-makers and the region’s acceptability to “Europeanisation” from a
truck market standpoint.
More corporate collaboration too
Collaborations between separate companies
can also be expected to increase, driven by the same economic fundamentals. Thus, Renault
is on course to launch a replacement for the medium-duty Midliner Truck range this year
involving co-operation with Daf; the cab will also be used by Daf in its 45 replacement
and is based on a version of the Premium cab range. The collaboration is not just between
the OEMs. Key system supplier –especially engines and transmissions-are
acquiring a more pivotal role as the development costs involved in meeting ever-tighter
engine emission requirements continue to rise. At the same time, the competitive
conditions in the market place are driving the manufacturers to eke out additional
productivity gains through the drivetrain. This is partly market driven-truck
customers are increasingly interested in the lowest-cost solutions, expressed in tonne-km.
Examples of this include Navistar’s collaboration with Siemens on a new range of more
efficient engines. Navistar and Siemens will work together to develop and manufacture
proprietary “next-generation” diesel fuel injectors incorporating digital valve
technology. The venture is planned to bring new digital valve technology to the market
between 2000 and 2001. This technology involves a high-speed capability to control fuel
injection more precisely and improve performance. It will also help Navistar to meet
reduced diesel emissions standards in advance of the 2004 compliance deadline.
Increasingly and as part of efforts to reduce fuel consumption, rear axles, gearboxes and
retarders are electronically connected to the engine. As electronic management spreads to
include brakes, suspension and cruise control, the position of the integrated truckmaker
is boosted. A “clever” powertrain can give 10-15% fuel savings for the
operator and is the focus of intense development work.
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By GlobalDataLower levels of vertical
integration in manufacturing
This type of co-operation between
truck-makers and suppliers raises questions about the extent to which the truck
manufacturers will be moving towards the “American model” and reducing their
level of vertical integration over time. Certainly, prevailing cost pressures suggest that
this trend can also be expected to accelerate as truck manufacturers look to effectively
contract out elements of the manufacturing process. Paradoxically, the larger truck-makers
have been making moves to strengthen their downstream add and move towards becoming
broader-based “transport providers”. For some years now, the truck-makers have
expanded their truck financing operations. In recent years a number of
manufacturers-most notably Mercedes-Benz (with “Charterway” in the
UK)-have decided to set up contract hire/leasing company subsidiary. In the UK, RVI
has now set up a dedicated contract hire subsidiary. The development looks set to gather
momentum with truck manufacturers effectively developing wider roles as freight
transportation facilitators. The truck-makers are moving towards developing their
distribution and service networks to become suppliers of vehicle management products. In
many markets, truck manufacturers are seeking to get control of distribution and are
buying out third-party distributors.
Further evidence of the larger groups’
desire to move downstream and not up was provided by the move of Mercedes-Benz to offer
trucks ready-bodies in the UK. Mercedes-Benz has announced plans to offer a “one-stop
shop” facility to give customers a complete bodybuilding service on all rigid-bodied
7.5 to 18-tonne Atego trucks. The operation takes the form of a joint venture with
bodybuilder Boalloy. Mercedes-Benz customers will be able to order from the dealer a range
of body options to be fitted at the Mercedes-Benz commercial vehicle preparation centre by
Boalloy engineers.
Volvo wins its bid for Scania,
taking industrial consolidation further
Volvo finally purchased a controlling stake
in Scania (subject to regulatory approval) from Investor, Scania’s main shareholder,
with the aim of creating a stronger company with the scale and expertise to successfully
specialise in the heavy truck industry globally. The pairing carries a high degree of
product and geographical overlap, but that generates exceptionally large scope for cost
savings. Scania will remain a distinct unit within Volvo and it is planned that the brands
and distribution networks will stay separate. The synergies are expected to lie in areas
such as components purchasing, research and development as well as the warehousing and
distribution of spare parts. Volvo may be interested in further acquisitions to strengthen
the group still further. A North American company-eg Navistar-is possible, as is
an appropriate Asian one (Volvo remains under-represented there).
There can be little doubt that further
major changes in the truck-making and operating business lay ahead. Volvo’s purchase
of Scania simply reinforces the message that bigger can mean better. Truck manufacturing
is a highly capital intensive activity for which higher volume often means higher returns.
That may sound a little simplistic-and in a sense it is-but even for those
manufacturers operating relatively successfully on small volumes and with a low level of
vertical integration, the increasing concentration of the truck manufacturing industry
poses some serious concerns.
Segmentation drift to heavies may
be countered by home shopping
While there has been a discernible shift
towards heavier trucks with greater productivity benefits for long haul-a long
established trend in the US and Europe as road haulage has been deregulated-there are
developments taking place in distribution that could counter that movement in the future.
Two developments stand out and point to long-term growth potential for medium-weight (6-15
tonnes) trucks, as well as panel vans up to 3.5 tonnes GVW. One is the increasingly vocal
movement for restrictions on heavy truck usage in urban areas. This is a difficult policy
area with which to make firm forecasts, but it seems likely that over the next ten years
there will be a gradual move towards more controls on urban truck usage. This will tend to
support the development of out-of-town distribution hubs where heavy trucks deposit their
loads for onward travel in lighter vehicles to the final destination. This is already
happening and in Europe, an increasing emphasis on pan-European distribution and trade,
along with the emergence of “mega-transporters” will support the trend.
There is also increasing speculation that
home shopping is set to increase strongly, aided by the development of the Internet.
Again, that would tend to support demand for medium trucks-especially up to around 12
tonnes-that would be appropriate for these types of multi-drop applications.
“Clever truck” will
require regular high-tech maintenance
The increasingly technologically
sophisticated truck incorporating the modular production concept, electronically managed
engines and powertrains will require regular high-tech maintenance to keep its operational
performance optimal. Here again, the integrated manufacturer may have some advantage
because of its control of all steps in the engineering process-from research and
development to assembly to repairs and maintenance. “Clever” trucks are also
likely to accelerate the need to outsource maintenance: the complexity of the work
increasingly demands a critical mass for the workshop that most fleets do not have.
Mercedes-Benz has unveiled its Fleetboard telematics system which allows remote access to
the truck’s on-board computer systems and is seen as a way of improving efficiency
further.
Modular production techniques are
reducing costs
Truck manufacturers with internationally
organised operations are attempting to make the most of modular production techniques to
maximise economies of scale and achieve lowest-cost production for major component systems
(cab, engines, transmission, chassis). The modularity concept has proved especially
popular with Volvo and Scania-both specialist manufacturers with products grouped
over 15 tonnes GVW. Scania claims that its current-generation 4-series contains 40% fewer
parts than the previous-generation 3-series.
For the generalist full-line makers,
modularity is a less straightforward issue because of the difficulties inherent in
sharing, say, chassis development, across a very wide product range. The Mercedes-Benz
Atego truck range covers the old LK and MK ranges-and a broad weight span from 6.5
tonnes GVW to 40 tonnes GVW. The Atego light range stops at 15 tonnes GVW and the range
above that takes the chassis from the Actros (which starts at 18 tonnes GVW) but uses the
cab and engine from the light class. That gives economies of scale and also a weight
advantage (lighter cab and engine) while maintaining load capacity through the use of the
heavy chassis. This type of adaptation by a full-line maker emphasises the benefits of
scale economies for certain parts of the vehicle which can be spread across more than one
truck range; it can be described as “modified modularity”.
Global truck sales set to pick up
Analysis of the global truck market reveals
that it has been on a downward path since 1995 and that the downturn steepened in 1997 and
worsened still further in 1998. 1999 sees the market bottom. In 2000, the global market is
subject to contrary influences. While the emerging markets are firmly in recovery phase,
the European and North American markets are forecast to fall back.
Of great concern to the truck industry is
the scale of the demand crash in -recession-hit Japan and emerging Asia. The key issue
will be whether a serious restructuring and realignment of the Japanese truck industry
will result, to cope, in part, with these changes. As things stand, growth and
profitability are words rarely associated with the future of the Japanese truck
manufacturers, and with the industry awash with talks of co-operation and consolidation,
the Japanese truck industry has often found itself at the centre of these discussions.
Recovery to sales in Japan is off a low base. Low domestic demand is compounded by poor
sales in the main export markets of the Asia-Pacific region.
In western Europe, the main concerns for
the market surround the replacement cycle downturn widely anticipated for 2000 after
unusually strong sales in 1999. Forecasts of slowing sales in 1999 were confounded by
stronger than expected economic growth and a much-relaxed monetary policy across the
region. Certainly, past experience suggests that the fluctuations in demand in Europe can
be very strong; at this stage we are taking a cautious line on the scale of the
decline-in part a reflection of the co-ordinated loosening of monetary policy that
has already taken place. Similar considerations govern the US outlook: the truck sales
decline that is forecast is driven primarily by the replacement cycle, with the economic
forecast presenting a significant downside risk element. As 1999 has progressed, the
competitive element to the US market has increased.
Table 1
World truck sales by region and
country, 1995-2005a
(units unless otherwise indicated)
| 1995 | 1996 | 1997 | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | |
| US | 388,277 | 358,929 | 376,139 | 427,941 | 508,000 | 448,000 | 406,300 | 395,000 | 414,400 | 428,000 | 446,000 |
| Canada | 28,487 | 20,324 | 26,174 | 31,147 | 35,294 | 30,814 | 27,429 | 26,574 | 28,103 | 31,501 | 34,287 |
| Mexico | 4,365 | 6,189 | 13,050 | 17,559 | 13,950 | 15,875 | 19,500 | 23,002 | 25,000 | 27,002 | 28,000 |
| NAFTA | 421,129 | 385,442 | 415,363 | 476,647 | 557,244 | 494,689 | 453,229 | 444,576 | 467,503 | 486,503 | 508,287 |
| % change | n/a | -8.5 | 7.8 | 14.8 | 16.9 | -11.2 | -8.4 | -1.9 | 5.2 | 4.1 | 4.5 |
| Germany | 71,462 | 65,859 | 68,823 | 82,118 | 85,343 | 81,100 | 72,259 | 77,287 | 80,652 | 82,714 | 83,598 |
| UK | 49,773 | 47,146 | 42,513 | 50,832 | 48,381 | 44,245 | 43,400 | 44,900 | 46,500 | 48,100 | 49,600 |
| France | 41,265 | 43,122 | 38,819 | 47,273 | 53,042 | 45,547 | 41,289 | 42,683 | 47,292 | 49,199 | 50,831 |
| Spain | 17,338 | 16,153 | 20,380 | 25,459 | 30,600 | 23,050 | 21,300 | 20,700 | 22,150 | 23,400 | 24,700 |
| Italy | 23,974 | 24,631 | 19,800 | 22,745 | 25,888 | 25,200 | 26,300 | 26,900 | 27,700 | 28,600 | 29,700 |
| Netherlands | 12,497 | 14,531 | 13,470 | 16,642 | 15,218 | 13,780 | 12,900 | 14,160 | 14,590 | 15,020 | 15,550 |
| Belgium | 8,835 | 8,151 | 9,132 | 10,261 | 11,415 | 9,598 | 8,655 | 8,668 | 9,542 | 9,889 | 10,104 |
| Austria | 5,840 | 5,692 | 6,282 | 7,831 | 9,112 | 7,802 | 7,161 | 6,872 | 7,255 | 7,830 | 8,195 |
| Denmark | 4,836 | 4,707 | 4,844 | 5,087 | 5,375 | 4,608 | 4,372 | 4,636 | 5,075 | 5,320 | 5,473 |
| Portugal | 3,249 | 3,338 | 4,077 | 4,722 | 5,213 | 4,464 | 4,321 | 4,900 | 5,300 | 5,450 | 5,500 |
| Sweden | 3,281 | 5,149 | 4,025 | 4,326 | 5,019 | 4,762 | 4,574 | 4,951 | 5,242 | 5,140 | 5,020 |
| Norway | 3,699 | 3,869 | 3,955 | 4,038 | 3,411 | 3,328 | 3,550 | 4,010 | 4,080 | 4,000 | 3,900 |
| Finland | 2,711 | 2,606 | 2,772 | 3,331 | 3,650 | 3,845 | 3,412 | 3,035 | 3,171 | 3,423 | 3,677 |
| Ireland | 2,214 | 2,557 | 2,699 | 3,220 | 3,423 | 3,031 | 2,687 | 2,628 | 2,725 | 2,890 | 3,020 |
| Switzerland | 2,803 | 2,778 | 2,513 | 3,220 | 2,985 | 2,700 | 2,970 | 3,090 | 3,150 | 3,130 | 2,990 |
| Greece | 487 | 523 | 491 | 542 | 611 | 543 | 529 | 555 | 578 | 601 | 610 |
| Western Europe | 254,264 | 250,812 | 244,595 | 291,648 | 308,686 | 277,603 | 259,679 | 269,975 | 285,002 | 294,706 | 302,468 |
| % change | n/a | -1.4 | -2.5 | 19.2 | 5.8 | -10.1 | -6.5 | 4.0 | 5.6 | 3.4 | 2.6 |
| China | 281,363 | 245,864 | 224,018 | 209,080 | 196,677 | 219,941 | 253,118 | 280,158 | 304,797 | 323,962 | 342,019 |
| Japan | 177,264 | 168,299 | 150,871 | 93,816 | 92,660 | 107,690 | 123,770 | 138,520 | 150,642 | 144,443 | 132,210 |
| India | 91,800 | 113,267 | 82,235 | 55,301 | 61,225 | 72,599 | 83,704 | 97,287 | 107,257 | 112,624 | 117,634 |
| Indonesia | 50,242 | 51,074 | 45,465 | 16,555 | 15,584 | 17,862 | 26,816 | 32,441 | 34,808 | 37,333 | 41,526 |
| South Korea | 46,479 | 47,332 | 39,977 | 12,099 | 12,718 | 17,404 | 23,749 | 29,564 | 33,020 | 36,482 | 40,114 |
| Thailand | 40,541 | 41,898 | 13,586 | 7,338 | 7,840 | 11,326 | 14,657 | 18,222 | 21,985 | 26,840 | 30,265 |
| Australia | 8,050 | 7,544 | 6,879 | 6,859 | 6,494 | 7,661 | 8,129 | 7,980 | 7,490 | 7,051 | 7,272 |
| Philippines | 3,771 | 5,553 | 5,255 | 2,395 | 2,575 | 3,860 | 4,821 | 5,628 | 6,228 | 6,404 | 6,556 |
| Malaysia | 5,968 | 7,731 | 7,421 | 2,222 | 2,204 | 2,483 | 3,426 | 4,370 | 4,932 | 5,645 | 6,115 |
| Other | 1,954 | 2,224 | 2,438 | 1,785 | 1,723 | 1,838 | 2,240 | 2,238 | 2,341 | 2,433 | 2,547 |
| Asia-Pacific | 707,432 | 690,785 | 578,145 | 407,449 | 399,700 | 462,665 | 544,429 | 616,408 | 673,501 | 703,216 | 726,258 |
| % change | n/a | -2.4 | -16.3 | -29.5 | -1.9 | 15.8 | 17.7 | 13.2 | 9.3 | 4.4 | 3.3 |
| Russia | 66,060 | 53,200 | 53,000 | 41,134 | 38,779 | 42,118 | 49,998 | 59,389 | 67,575 | 77,491 | 85,522 |
| Poland | 4,966 | 5,622 | 8,292 | 9,111 | 6,976 | 6,994 | 8,700 | 9,500 | 10,200 | 10,950 | 11,700 |
| Romania | 3,693 | 4,586 | 3,640 | 3,218 | 2,861 | 3,138 | 4,222 | 4,744 | 5,263 | 5,709 | 6,174 |
| Czech Republic | 2,020 | 3,095 | 3,031 | 2,689 | 2,547 | 3,296 | 3,564 | 3,924 | 4,433 | 5,000 | 5,532 |
| Hungary | 977 | 1,073 | 1,496 | 1,689 | 1,776 | 1,852 | 1,954 | 2,038 | 2,165 | 2,277 | 2,424 |
| Bulgaria | 1,902 | 1,399 | 1,110 | 1,075 | 1,235 | 1,644 | 2,243 | 2,710 | 3,092 | 3,507 | 3,857 |
| Other | 11,427 | 10,185 | 8,724 | 5,529 | 4,238 | 6,124 | 7,241 | 7,933 | 8,801 | 9,742 | 10,567 |
| Eastern Europe | 91,045 | 79,160 | 79,293 | 64,445 | 58,412 | 65,166 | 77,922 | 90,238 | 101,529 | 114,676 | 125,776 |
| % change | n/a | -13.1 | 0.2 | -18.7 | -9.4 | 11.6 | 19.6 | 15.8 | 12.5 | 12.9 | 9.7 |
| Brazil | 57,803 | 40,986 | 52,909 | 49,099 | 37,032 | 43,117 | 48,915 | 52,880 | 56,574 | 60,238 | 61,324 |
| Venezuela | 5,787 | 5,453 | 13,596 | 13,020 | 4,660 | 7,640 | 9,550 | 10,800 | 13,900 | 12,750 | 12,625 |
| Argentina | 5,655 | 8,762 | 11,166 | 12,229 | 8,780 | 9,550 | 11,050 | 12,270 | 13,300 | 13,885 | 14,305 |
| Colombia | 7,595 | 6,237 | 5,631 | 6,898 | 6,899 | 7,600 | 8,775 | 8,633 | 9,083 | 9,432 | 9,943 |
| Other | 3,089 | 3,020 | 2,366 | 2,262 | 3,200 | 3,600 | 3,200 | 3,000 | 3,000 | 3,050 | 3,000 |
| Uruguay | 1,911 | 1,680 | 2,134 | 2,238 | 1,800 | 2,100 | 2,400 | 2,500 | 2,600 | 2,650 | 2,700 |
| Peru | 454 | 546 | 755 | 764 | 701 | 770 | 850 | 912 | 990 | 1,044 | 1,075 |
| South America | 82,294 | 66,684 | 88,557 | 86,510 | 63,072 | 74,377 | 84,740 | 90,995 | 99,447 | 103,049 | 104,972 |
| % change | n/a | -19.0 | 32.8 | -2.3 | -27.1 | 17.9 | 13.9 | 7.4 | 9.3 | 3.6 | 1.9 |
| Turkey | 17,800 | 28,214 | 38,888 | 29,254 | 22,547 | 26,541 | 29,741 | 33,817 | 36,287 | 38,214 | 40,111 |
| South Africa | 7,664 | 8,110 | 7,123 | 6,419 | 5,133 | 5,299 | 5,656 | 6,001 | 6,199 | 6,561 | 7,022 |
| Other | 5,012 | 4,725 | 4,533 | 4,548 | 5,041 | 5,728 | 5,638 | 5,548 | 5,587 | 5,671 | 5,721 |
| Others | 30,476 | 41,049 | 50,544 | 40,221 | 32,721 | 37,568 | 41,035 | 45,366 | 48,073 | 50,446 | 52,854 |
| % change | n/a | 34.7 | 23.1 | -20.4 | -18.6 | 14.8 | 9.2 | 10.6 | 6.0 | 4.9 | 4.8 |
| Grand total | 1,586,640 | 1,513,933 | 1,456,498 | 1,366,920 | 1,419,835 | 1,412,069 | 1,461,035 | 1,557,558 | 1,675,055 | 1,752,596 | 1,820,615 |
| % change | n/a | -4.6 | -3.8 | -6.2 | 3.9 | -0.5 | 3.5 | 6.6 | 7.5 | 4.6 | 3.9 |
a Figures for 1995-98 are actual; 1999 is
an estimate; the remainder are forecasts.
Sources: Industry sources; EIU estimates
and forecasts.
Elsewhere, the picture is dominated by
underlying economic and business conditions. After a period of strong investment and
market growth, South America has experienced a sharp market correction which is
nevertheless failing to dampen overall enthusiasm for its longer-term market prospects. By
contrast, Russia and the Commonwealth of Independent States (CIS) are still being held
back by fundamental economic dislocation and uncertainty. Kamaz stands as an unhappy and
grandiose tribute to the failings of the command economy, with its very survival still in
real doubt.
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