Globalization How Will It Reshape the Truck Industry? Roman Mathyssek Senior Truck Analyst

Transcription

1 Globalization How Will It Reshape the Truck Industry? Roman Mathyssek Senior Truck Analyst

2 Presentation Outline Introduction Background and Status Quo Boom Markets Do you Get What You See? Cost Advantages of Emerging Market Players Consolidation Driven by Globalization? World Truck Just a Dream? Conclusion 2

3 Truck Industry Globalisation Introduction Truck Industry became ever more global in the last decades, mostly driven by search for profit potential Various developments in Truck Industry most are related and influenced by globalization Take a closer look at this broad topic Look at individual aspects of the umbrella term Globalization 3

4 Globalization Much More than Entering Emerging Markets Asia (excl. JPN) '03 '06 '09 '12 '15 '18 Globalization increasingly is a two-way process now emerging market players are actively involved Market growth should not be the only criteria for expansion Country risk and competition potential threats 4

5 Truck Segments and their Development Which type of market segments can be distinguished? Top End: life-cycle cost, reliability, efficiency, comfort, safety low price sensitivity Advanced: efficiency, reliability, comfort moderate price sensitivity Budget: low cost, robustness high price sensitivity Many possible new markets/regions to enter, decision contingent upon many factors Globalization triggers a long-term convergence of truck standards hence truck segments Match between market demand and product features vital prerequisite for commercial success 5

6 Global Status Quo Segments and Regions W. Europe Asia (excl. Japan, S. Afr, E. Europe S. America JPN/Oc nia) Oc nia NAFTA Budget Segment Advanced Segment Top End Segment 6

7 Market Growth As Such A Little Deceptive INDIA '00 '03 '06 '09 '12 '15 '18 HDT MDT CHINA '00 '03 '06 '09 '12 '15 '18 HDT MDT Great market growth in the future just don t think it is still an industry secret! Boom markets manufacturers fail to contrast market growth vs. number of new entrants Too many players entering detrimental effect for pricing Individual corporate targets not met 7

8 India: Significant Increase in Players Example of India number of players outweighs the market growth Directionally, price segments are converging, less differentiation potential Implication: new players buy into the market price pressure reduces profitability of all manufacturers ASHOK EICHER 2006: 238.4k ASHOK EICHER SW MZD TATA VOLVO 2012: 300.8k SW MZD TATA VOLVO FRC / MAN M&M SCANIA M-B IVECO 8

9 Skip Large Emerging Markets an Option? Major emerging markets are tempting by their sheer volume Manufacturers should factor in a large number of new entrants and more aggressive incumbents Plan market share realistically Don t overestimate demand for high-tech trucks What about smaller emerging markets? Volume less impressive, but still strong growth Key advantage: substantially less competition Higher pricing power more profit per unit 9

10 Expansion of Emerging Market Players Low Costs Are Their Biggest Asset Expansion plans are fuelled by using costs advantages to compete in new markets Low costs major asset Product quality still a long way to go, but good enough for many markets! Indicative Direct Labour Cost Comparison: TRIAD EE & LA EM-Asia 1/5 to 1/6 in EM-Asia! 1/2 to 1/3 in EE & LA! 10

11 Emerging Market Players Can Expand Actively W. Europe Asia (excl. Japan, S. Afr, E. Europe S. America JPN/Oc nia) Oc nia NAFTA Top End Segment WE OEMs WE OEMs WE & JPN OEMs WE & JPN OEMs U.S. & JPN OEMs WE, US & JPN WE & JPN OEMs Advanced Segment EE & WE OEMs Budget Segment IND & CHN OEMs 11

12 Expansion of Emerging Market Players A Hurdle to Take Expanding into new markets limitations to which trucks can be shipped Local assembly requirement can add substantially to the total truck costs valid for Non-TRIAD countries 12

13 Evolution of M&A vs. Alliances: Welcome to the Global Phase Phase 1 (national) Phase 2 (regional) Phase 3 (continental) Phase 4 (global) M&A A llces 16 Many players Good strategic fit Conquer new markets Emergence of concept little initial benefits Reg. champions Global reach to iron out volatility (EU & U.S.) Advantages increase as M&A complexity becomes obvious M&A wave Capitalization value increase, but flaws become obvious Modularity concept accepted as way-to-go > Alliances formed Legislative issues Fewer candidates Potential between Triad&Emerging Mkt Flexibility and cost Advantages often outweigh vs. M&A 12 8 M&A? Future 4 0 Alliances ' ' ' ' ' ' ' >>>? 13

14 TRIAD OEMs Limited Domestic Growth N. America W. Europe '03 '06 '09 '12 '15 ' '03 '06 '09 '12 '15 '18 Japan '03 '06 '09 '12 '15 '18 OEM Features: R&D Capability Financially Potent Scale Seeking OEMs & Component Utilization 14

15 Emerging Market OEMs High Growth Potential S. America '03 '06 '09 '12 '15 '18 E. Europe '03 '06 '09 '12 '15 '18 Asia (excl. JPN) '03 '06 '09 '12 '15 '18 OEM Features: Understanding of Local Markets & Sales Network Strong Demand for Efficient Heavy Trucks Less Consolidation Barriers 15

16 Selected Truck Production Volume Impact of Potential Global M&A Activity 200 MEDIUM (6-15t) 150 OEM Geographic diversity essential to achieve earning smoothing FAW NAVISTAR DAIMLER 100 ISUZU NAVISTAR IVECO TATA MAN-NAVISTAR VOLVO DONGFENG DONGFENG TATA PACCAR-IVECO 50 HINO IVECO FAW MAN-IVECO MAN-VW-SCANIA VOLVO 0 ASHOK-LEY MAN VW HYUNDAI BEIJING FOTON SAIC SCANIA CNHTC MAN-SCANIA PACCAR HEAVY (>15t)

17 Global Consolidation Matrix Some Combinations Ashok Leyland CNHTC Dong Feng Shaaxi /Torch Ural AZ 17

18 World Truck A Lovechild Between Globalization and Synergies? Commercial viability of a standardized truck across regions? Benefit: higher scale, lower costs Benefit: substantial profitability boost Risk: are markets/regions homogenous enough? Risk: meet in the middle too many compromises Potential candidates? Hino 700 VW Constellation MB AXOR 2007 GLOBAL AUTOMOTIVE CONFERENCE Copyright 2007 Global Insight, Inc. 18

19 With Still Some Obstacles Ahead NAFTA Modular Truck Design EPA Emission Norms Captive Parts are Increasing (DAI, VOL, NAV, PAC) Europe In-house Modular Design High Captive Share Powertrain Internally Sourced Euro Emission Norms Captive Truck Design Diverse Technical Level Powertrain Internally Sourced Diverse Emission Norms Harmonization of Global Standards Broader Global Potential of Modular Components Asia R.o.W. EU, U.S., Asian Trucks, Local Adaptation Limited Legislative Forces follow mostly European Standards Notable local differences World Truck commercial success doubtful Standardization of powertrain components more appropriate Powertrain major cost driver hence also significant savings potential 19

20 World Truck Maybe Later World Components a Whole Different Story World Truck at best works as Regional Truck World Components are currently developed Better adaptability to local differences Powertrain components are cost drivers high savings potential Unproblematic integration into locally adapted truck Top-End Segment Budget Segment 20

21 Cost Decomposition of Major Components Component % Truck Costs Savings Potential Engine/ Electronics Transmission/ Retarder Axles/Brake System Total Powertrain Other Components (i.e. Cabins) 38% 14% 11% 63% 37% Substantial saving: legislative & market requirements higher Develop modular engine Standardization Cross brand sharing Non-captive/make-or-buy? Standardization Cross brand/function sharing Huge savings potential by modularization and sharing of components Cabin & Exterior: Product differentiation factor, cost savings limited! 21

22 Daimler Truck Group Global Truck Production Example of Daimler: Strong Global Connection on Trucks GER and TRK made Axor Interchangeable Truck components supplied to MEX Assembly plants Axor & Atego components, between BRA and TRK Atego, Axor, Actros shipped as CKD to S-Afr for local Assy Canter production in PRT, TRK Atego, Axor, Actros shipped As S/CKD to Middle East for local assembly (GER) Canter production in Taiwan MB800 and other Trucks shipped as kits to local assemblies 22

23 Daimler Truck Group Global Engine Production and on the Engine Side. Connectivity within companies will increase, leveraging local advantages MBE4000 engine, from GER Fuso engine to PRT TRK production MBE4000 engine, from BRA OM457 shared between GER, BRA, TRK, sourced from BRA BR500, OM457 shipped from GER to S-AFR for truck assembly All engines for local assembly plants in Asia Pacific Fuso engine to Taiwanese assembly Engine Production All engines for local Assembly plants in Asia Pacific, lighter engines also from ARG 23

24 Conclusion Globalization is still at an early stage in the Truck Industry To be considered global, we expect more than a presence in overseas markets seeking industrial ties is necessary Four Different Attitudes Four Different Clusters: Successful Global Players: We are almost Global! Daimler, Volvo Actively Globalizing: We want to be Global! Iveco, VW, MAN, Hino, Isuzu, Navistar Emerging Market Expanders: Hey! We can also be Global! Tata, Ashok, Kamaz, FAW, CNHTC, Weichai Fiercely Focussed: Global? No Thanks! Scania, Paccar, BMC, MAZ, Agrale, Hyundai, Eicher 24

25 Thank You Roman Mathyssek Senior Truck Analyst