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Strategic Analysis of Global Low cost Truck Market
Frost & Sullivan, Dec 2010, Pages: 326
Demand and Production of Low-cost Trucks Poised to Soar
The rising reliance of emerging economies on cost-effective light, medium and heavy commercial vehicles coupled with a recessionary environment in developed economies is creating tectonic changes in demand for trucks worldwide. The demand for low-cost trucks is set to experience steady and robust growth over the next 5 years. Over 3.2 million low-cost commercial trucks will be manufactured globally in 2016. Powertrain, chassis, safety, comfort and convenience and other marketing related expenses will be key focal points for cost reduction in an endeavour to create low-cost trucks.
“Opportunities in the global low-cost truck markets require OEMs to focus on creating trucks cheaply and not creating cheap trucks”, notes the analyst of this research. “The emergence of Asian OEMs, rising total-cost of ownership demands from both developed and developing nation truck buyers, economic uncertainty in mature markets, and strengthening urbanisation trends are stoking demands for low-cost trucks, and some OEMs are moving faster than others to convert these drivers into revenue growth opportunities.” The low-cost truck will be initially fuelled by demand from BRIC nations, gradually finding traction in developed economies and eventually supported by the growth in the Next 11 economies. The changing nature of commercial vehicle activities under an environment of rising urbanisation, economic and energy price volatility and robust growth in demand for cost-effective commercial vehicles are compelling global truckmakers and suppliers to participate in this growing segment. This implies that a new segment is being created rapidly in the global commercial truck market offering growth opportunities to truckmakers and suppliers alike. This is also offering the opportunity to mature market OEMs to attain rapid volume growth in both local and global markets.
Multi-pronged Approach Required to Sustain Growth Momentum
In an endeavour to penetrate and grow in global markets, Asian OEMs have created low-cost truck platforms that are customisable to meet local market needs. The North American and European OEMs are acknowledging the threat and also realising the opportunities that they can avail through participation in the global low-cost truck market. “The net result is creation of a new segment in the global commercial vehicle market which is experiencing deep-seated changes in the form of demand for trucks that not only feature lower upfront cost, but also lower lifecycle cost,” remarks the analyst. “The low-cost truck market is offering OEMs from all parts of the world to benefit from a swiftly growing segment that can offer economies of scale benefits to offset the lower margins offered by such vehicles.”
While the growth potential is alluring, it is, nevertheless, clear that end users do not just want cheap trucks, but trucks that can help reduce total cost of ownership. Therefore, participation in this fast growth segment requires recalibration of OEMs and supplier strategies. “Most major truckmakers are either creating new platforms, or creating new nameplates to create and introduce these low-cost vehicles,” comments the analyst. “These trucks will feature innovative technologies, optimised systems and components, developed through incorporation of aggressive design-to-price strategies.” However, it will prove increasingly difficult to maintain low-cost advantage as stricter regulations, rising demand for reduced maintenance requirement, relatively lower margins and rising labour costs will challenge market participants. This implies the need for unique and innovative approaches that cut across all corners of truck manufacturing. Developed market participants must continue seeking partnerships with manufacturers in emerging markets. As a strategic response, market participants in North America and Europe should also consider creating new nameplates and well differentiated product platforms. “With competition in the already hyper-competitive global low-cost truck market set to intensify, market participants must look at seeking cost advantages through partnerships, manufacturing in low-cost destinations, and developing strong OEM-supplier relationships built upon virtual integration premise” advises the analyst. “In addition to manufacturing related cost reduction, focus should also be on reducing marketing and sales related expenses.” These, coupled with globally harmonised and standardised platform creation, will enable market participants to grow faster than their competitors.
Market Sectors
Expert Frost & Sullivan analysts thoroughly examine the following vehicles in this research:
- Low-cost light commercial vehicles (LCVs)
- Medium commercial vehicles (MCVs)
- Heavy commercial vehicles (HCVs)
By Geographic region:
- North America
- Brazil
- Europe (including Russia)
- India
- China
- South Korea
- Japan
This Frost & Sullivan Strategic Analysis of Global Low-cost Truck Market analyses the dynamics and trends of the market and projects the future outlook for the market and the opportunities it offers to the different members of the value chain analysis. In this research, Frost & Sullivan's expert analysts thoroughly examine the following vehicles: low-cost light commercial vehicles (LCVs), medium commercial vehicles (MCVs) and heavy commercial vehicles (HCVs) in global markets. Regions covered include: North America, Brazil, Europe (including Russia), India, China, South Korea and Japan.
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