Truck Market 2024 Sustainable Growth in Global Markets Editorial Welcome to the Deloitte 2014 Truck Study

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Dear Reader, Welcome to the Deloitte 2014 Truck Study. 1 Growth is back on the agenda. While the industry environment remains challenging, the key question is how premium commercial vehicle OEMs can grow profitably and sustainably in a 2 global setting. 3

This year we present a truly international outlook, prepared by the Deloitte Global Commercial 4 Vehicle Team. After speaking with a selection of European OEM senior executives from around the world, we prepared this innovative study. It combines industry and Deloitte expert 5 insight with a wide array of data. Our experts draw on first-hand knowledge of both country 6 Christopher Nürk Michael A. Maier and industry-specific challenges. We hope you will find this report useful in developing your future business strategy. To the 7 many executives who took the time to respond to our survey, thank you for your time and valuable input.

We look forward to continuing this important strategic conversation with you.

Using this report In each chapter you will find: • A summary of the key messages and insights of the chapter and an overview of the survey responses regarding each topic Christopher Nürk Michael A. Maier • Detailed materials supporting our findings Partner Automotive Director Strategy & Operations and explaining the impacts for the OEMs

Yet, slow growth in key markets will increase competition while growth is shifting 1. Executive Summary to new geographies 2. Market Outlook From now to 2024, annual growth of > 3% is expected in the global truck market, mainly driven by global GDP 3. Focus Top 10 OEMs growth, estimated at 3.3% per year. 4. Competitive Landscape A closer look at growth by country reveals a wide range of growth rates. Brazil, China, and Japan show little mo- 5. Global Insights: North America, mentum, growing at 1% per year. The U.S. also trails the global average at 2%. India is the most dynamic large Increasing Profit in the Aftermarket market with a staggering 9% CAGR. New growth markets appear in Eastern Europe (10%), Russia and Central America (5% each) and in the ASEAN countries (4%). 6. Global Insights: Western Europe, Growth through telematics The study will examine in detail how market contenders can stay on top of ever-intensifying competition in the 7. Global Insights: Japan, How OEMs mature markets. Expanding into growth markets requires major decisions on the operating model and product will succeed in ASEAN portfolio for each region. Triad premium OEMs especially must adjust their offering to local market requirements if they want to move out of their high-end niche.

In our opinion, two strategic options will determine market success in 2024: 1. Focus on the right growth markets and invest in those 2. New business models to open new revenue streams to OEMs

From a global perspective we want to show examples how this strategic options can be successfully fullfilled by introducing the following topics by our global team: • Aftermarket and, even more importantly, aftermarket pricing can increase an OEMs profitability in mature markets with slower new vehicle sales. • The telematics market will grow to a size of US$20B by 2024. How do OEMs need to be organize to claim their piece of the pie? • Staying focused on investing in the right markets is key. We provide insights on how to enter ASEAN markets.

EU 38% 62%

Eastern Europe 25% 25% 50% Mid Market USA 18% 36% 46%

South/Central America 78% 11% 11% Low Cost ASEAN 11% 67% 22%

China 10% 70% 10% 10% 1 Winning in a global market is the key challenge forIndia every truck66% OEM 34% Brasil 10% 20% 40% 30%

Russia 50% 40% 10%

Japan 38% 24% 38%

But profitable and sustainable growth is contingent on adjusting the go-to-market approach, ROW 66% 12% 22% product and service portfolio to local requirements 0 20 40 60 80 100

Mature Market Insights from OEMs Strategy Q: Within the following regions, for which segment10% do you 30%expect the50% strongest 70% 90% New business models to open increase in sales volume? new revenue streams to OEMs

Global Insights EU 38% 62% Aftersales North America: Increasing Profit in Eastern Europe 25% 25% 50% the Aftermarket Premium Growth Market Strategy USA 18% 36% 46% Mature Market Strategy South/Central 78% 11% 11% America Mid Market Global Insights 11% 67% 22% Western Europe: ASEAN Growth through China 10% 70% 10% 10% Low Cost Telematics Growth India 66% 34%

Market Brasil 10% 20% 40% 30% Strategy Russia 50% 40% 10% Global Insights Strengthening Japan: How OEMs local presence in Japan 38% 24% 38% Will Succeed in the “right markets” ASEAN ROW 66% 12% 22% • Brands • Products 0% 20% 40% 60% 80% 100% • Development & production • Sales & services Low Cost Mid Market Premium Aftersales Source: Deloitte Global Truck Study 2014, Reference page

Country growth rates vary widely – from a meager 1% for China and Brazil to Insights from OEMs a staggering 9% for India and 7% for Eastern Europe Q: In your opinion, how will your company‘s turnover develop in the following regions The truck market is growing, but the pace is fairly slow in the future? (% of respondents) From 2004 to 2014, sales in the global truck market for MCV & HCV* grew at an average

annual rate of 2.7%, but growth was extremely volatile, ranging from -18% to 37%. HCVs 44% continue to be the dominant segment in the market, with a share of 63%. Between 2014 India +9% 33% and 2024 the global truck market is expected to continue growing at a fairly low rate of Eastern Europe 3.1% per year. The Indian market will be the main driver. +7% Russia 0% +5% Growth is not global – it is regional Growth rates vary widely around the globe. Growth is slowing down in large truck markets Central 56% America such as China and most of the Triad countries. On the contrary, India, the ASEAN countries, +4% and Eastern Europe will account for most of the future growth. Central America is showing Asean 67% dynamic growth as well. More than 70% of incremental sales in 2024 will be generated out- +4% side the Triad markets. But the solidity of the Triad markets will stabilize the total global truck 11% EU market in the decade to come. +4% US 33% Beyond BRIC +2% Much of the recovery of the truck industry after the financial crisis was due to the BRIC markets and their growth opportunities. This is not the only truth anymore. While the BRIC China 44% +1% markets remain the largest truck markets, other regions have developed more growth mo- Brazil mentum. It is essential for OEMs to focus on both, the largest markets and the new growth 0% +1% Japan regions. 0% +1%

Market growth (units, CAGR 2024e in %), source IHS Global Expected market growth by OEMs. *Medium Commercial Vehicle, Heavy Commercial Vehicle, Reference page Source: Deloitte Global Truck Study 2014

k units CAGR 3.1% 4000

3000 37%

36% 2000

63% 1000 64%

0 2014e 2024e

After a volatile periodMCV from 2004 to 2013, growth in the global MCV and HCV markets is expectedHCV to stabilize between 2014 and 2024

Market Outlook Outlook by Region Outlook by Country Country Deep Dives

Development of Global MCV and HCV Sales to 2024e Development of global MCV and HCV sales untilDevelopment 2024 of global MCV and HCV sales until 2024 k units k units CAGR 3.1% 4000 4000

3000 37% 3000

36% 2000 2000

63% 1000 1000 64%

0 0 2014e 2024e 2004 2006 2008 2010 2012 2014e 2016e 2018e 2020e 2022e 2024e 2005 2007 2009 2011 2013 2015e 2017e 2019e 2021e 2023e HCVMCV MCV HCV From • The annual growth rate for the global truck market is projected to be 2.7 M 3.1% for MCV and HCV sales from 2014 to 2024 • Average annual growth from 2004 to 2014 was 2.7% trucks in 2014 • Anticipated growth rates for MCVs and HCVs are very similar, with HCVs to 3.7 M remaining the dominant segment in the market with a 63% share in 2024 • 1 million additional vehicles are expected to be sold to 2024

Development of global MCV and HCV sales until 2024 Source: Oxford Economics, IHS Global & Deloitte Analysis

3000

2000

1000

0 2004 2006 2008 2010 2012 2014e 2016e 2018e 2020e 2022e 2024e 2005 2007 2009 2011 2013 2015e 2017e 2019e 2021e 2023e Growth is not global but regional, with India contributing the largest share – 377.000 additional units sold in 2024

Market Outlook Outlook by Region Outlook by Country Country Deep Dives

Russia

Development of Truck Sales to 2024e by Region +5% 2014e EU 2014e 116.00 297.000 2014e +4% 2014e China U.S. 377.400 985.00 +2% 195.000 +1% 461.000 2024e 2024e 469.000 1.090.000 2014e 2024e 2024e Japan Central 2014e 77.100 America 2014e Eastern Europa 48.100 +1% 65.500 84.500 +5% +10% 2014e 97.700 237.300 2024e 103.600 2024e 2024e 2014e 544.400 Brazil 2024e 2014e 164.700 ASEAN +1% 168.100 +4% +9% 181.700 2024e 242.900 India 2024e

South 2014e America 43.000 +2% 51.100 2024e

Source: IHS Global & Deloitte Analysis, Not allocated countries “Rest of World” not included, Reference page

Market Outlook Outlook by Region Outlook by Country Country Deep Dives 2024e Sales by Country 2024e Growth by Country Additional Sales in 2024e

Expected Volume of Truck Sales in 2024e by Country

1.100.000

1.000.000 Market Size: 900.000 • The BRIC markets will remain the world’s largest 800.000 truck markets

700.000 • India will supersede the U.S. as the world’s second 600.000 largest market 500.000 • Struggling European countries such as Spain and 400.000 Italy are expected to have recovered by 2024 300.000

200.000

100.000

Africa Arabia

China India USA Russia Brazil Indonesia Germany Japan France Mexico Canada UK Turkey Spain South Korea Vietnam Italy South Thailand Argentina Peru Saudi Colombia Poland Australia Chile Ukraine New markets 2014 Rank Triad markets

Source: IHS Global & Deloitte Analysis, Not allocated countries “ROW” not included, Reference page

Market Outlook Outlook by Region Outlook by Country Country Deep Dives 2024e Sales by Country 2024e Growth by Country Additional Sales in 2024e

Expected Market Growth in 2024e by Country

Growth in % Market Growth: 18 • The European Truck OEMs expect a growing mid- Croatia 16 Slovenia market segment in China which compensates for a 14 Costa Rica slow market growth overall in China Pakistan Greece 12 Ireland • The economic recovery will allow some EU econo- Uzbekistan Bulgaria 10 1 mies to move from sluggish growth to above-aver- 2 Spain India 3 Italy age growth rates 8 Malaysia Latvia Turkey 6 Estonia • Central and South America show momentum, but Mexico Russia cannot compensate for Brazil’s slow growth pace 4 Czech Republick Germany China Uruguy 2 1Portugal Average CAGR 2Romania 2014 - 2024 • Eastern Europe will be dynamic although the 3Kasakhstan Brazil 0 Ukraine crisis may cast a pall 0 50.000 100.000 150.000 200.000 250.000 500.000 1.000.000 Units sold

BRIC EU ROW East Europe Asean South / Central America

Source: IHS Global & Deloitte Analysis

Market Outlook Outlook by Region Outlook by Country Country Deep Dives 2024e Sales by Country 2024e Growth by Country Additional Sales in 2024e

Expected Volume of Incremental Unit Sales in 2024e by Region Outlook by country - Additional sales in 2024

39.126 55.133 Mature Markets

+4% 82.199 Germany 307.138

+2% Growth potential U.S. 91.610 differs in both Additional Unit Sales traditional and 973.000 developing Emerging Markets markets +5% +4%

Russia Indonesia

India 105.080 EU +5% +1% East Europe& Russia China Turkey Brazil United States 164.014 ASEAN / Japan Brazil / S/C America 128.585 ROW Source: IHS Global & Deloitte Analysis

ROW S/C America&Brazil Asean&Japan United States China East Europe EU India Daimler & Volkswagen are the dominant players in their home market and compete with a fragmented set of European and non-European players

Market Outlook Outlook by Region Outlook by Country Country Deep Dives Germany U.S. Russia Turkey Indonesia Brazil

Manufacturer group RegisteredGermany Commercial Vehicles* in Germany in 2013 Local Brand Footprint Achleitner • The German truck market provides an example of a mature marketA edombi - Amur-ZAO Gr. Mercedes Mercedes MAN MAN inated by two major OEMs, Daimler with its brand Mercedes Benz Trucks Aston Martin Finance Gr. M.B. Atego M.B. Actros MAN Unspec. MAN TGA-Series and Volkswagen owned MAN, that compete with a number of smallerBarkas Blue Bird Daimler players and a highly fragmented set of others Blue River Group • Daimler and Volkswagen benefit from a strong foothold in their home Volkswagen Borgward market and a balanced portfolio of registered models Boschung MAN MAN Bucher Chart 2 (Stacked) MAN TGS/TGX MAN L2000 • Other European players such as Fiat and Volvo account for a considerableCaterpillar Series < 16t. number of registrations on the strength of their proximity to GermanyChina Automobile and EU free trade China Hi-Tech Group Co. Mercedes Mercedes CNH Global Mercedes MAN MAN Daimler AG Sprinter/T1 MAN MAN Bus TGL-Series Unspec. Eicher Motors MAN Fiat Group Automobiles SpA MAN Expected German Sales and Production Units of HCV und MCV MAN Fiat Industrial Group Mercedes VW Ford Group M.B. LN2 Unspec. Scania CAGR +4.0% Geely Automobile Hld. Scania k % R/P/T/G-Series VW General Motors Group Unspec. 300 5 HaKo Gr. Iveco Iveco DAF DAF DAF Multicar Hinduja Grou4p Iveco Iveco DAF DAF DAF Multicar Paccar Hon211da Eurocargo-Series XF105-Series 85 45 Unspec. 200 189 190 167 Hyundai Kia Automotive Group DAF Fiat 3 Iveco 151 IFA Iveco Volvo Trucks IFA 125 115Isdera Iveco Unspec. Volvo Trucks 99 96 106 2 Iveco Daily 100 86 Isuzu Volvo Trucks Volvo 80 J ohn Deere 1 Kamaz 0 Komatsu 0 2014e 2016e 2018e 2020e 2022e 2024e Krupp *Including LCV and Buses Unit Sales Production GDP Growth Ladog Source: IHS Group, Oxford Economics, Deloitte Analysis Liebherr Lindner © 2014 Deloitte Consulting GmbH Manitowoc Production Mazda Motors Gr. Mecalac Unit Sales Mitsubishi Motor Group GDP Growth Mowag Muszertechnika Holding Zrt. Gr Navistar International Corp. Neuson Kramer Otokar Gr. Paccar Group Manufacturer und Model. Farbe zeigt Details zu Manufacturer group an. Größe Pfau zeigt Summe von 2013-2 an. Die Markierungen werden nach Manufacturer und Model beschriftet. Die Daten werden unter Country gefiltert, wobei Germany beibe- Piaggio halten wird. Die Ansicht wird unter Exclusions (Manufacturer,Manufacturer PSA Group group,Model) gefiltert, wobei 726 Elemente beibehalten wird. Pucher Gr. Reform Renault Nissan Alliance Robur Russian Machines Gr.

2014e 2016e 2018e 2020e 2022e 2024e A special design in the U.S. market for commercial vehicles strengthened domestic OEMs and caused foreign OEMs to penetrate via M&A

Market Outlook Outlook by Region Outlook by Country Country Deep Dives Germany U.S. Russia Turkey Indonesia Brazil

RegisteredUSA Commercial Vehicles* in the Unites States 2013 Local Brand Footprint • The current American truck market is characterized by a strong dominance

Navistar Navistar Daimler AG Ford Group of domestic companies with a long history of vehicle production Manufacturer group International International FREIGHTLINER FORD Blue Bird Corp. • This dominance can be explained by the market needs for long-haul trans- Caterpillar Navistar portation that strengthened domestic truck manufacturers Crane Carrier • Navistar accounts for the majority of registered vehicles in its home market, Daimler AG DSU Trucks Ford Group Ford Group Daimler AG leveraging its corporate history dating back to the early 1900s and joint Emergency One FREIGHTLINER FORD F550 FORD F450 CONVENTIONAL Ford ventures Fiat Group Automobiles SpA Fiat Industrial Group • While Daimler is a dominant foreign player in the United States, most of its Daimler Ford Group Navistar registered vehicles consist of former American Freightliner models Geely Automobile Hld. International Ford Group Ford General Motors Group Corp. Daimler AG FORD ECONOLINE Group INTERNATIONAL FREIGHTLINER CHASSIS FORD Gillig Corporation Navistar Daimler AG Grand Vehicle Works Holdings Ford International STERLING Corp. Ford Group Group Hendrickson FORD F Expected U.S. Sales and Production Units of HCV und MCV Hyundai Kia Automotive Group General General Motors Volvo Truck Geely Isuzu Motors Group Gr. Automobile CAGR +2.2% Group GMC MACK 600 Hld. k % J ohn Deere VOLVO Volvo 600 5 Kalmar Kovatch Mobile Equipment General Motors 469 444 451 4 Marmon Herrington 406 422 408 Paccar Group Paccar Group Isuzu Fiat 400 358 377 Maxim Truck & Trailer PETERBILT KENWORTH ISUZU 377 343 3 322 Mitsubishi Motor Group NPR 278 Paccar Motor Coach Industries Blue Bird 2 Navistar International Corp. BLUE BIRD 200 Nissan Motor Corp. 1 Oshkosh Corporation Manufacturer, Model und Manufacturer group. Farbe zeigt Details zu Manufacturer Paccar Group 0 group an. Größe zeigt Summe von Yp: 2013/09 an. Die M0arkierungen werden 2014e 2016e 2018enach Manu2020efacturer, Model u2022end Manufacturer 2024egroup beschriftet. Die Daten werden Pierce Manufacturing *Including LCV and Buses unter Country gefiltert, wobei USA beibehalten wird. Spartan Motors Unit Sales Production GDP Growth Source: IHS Group, Oxford Economics, Deloitte Analysis Terex Toyota Group © 2014 Deloitte Consulting GmbH Van Hool Group Production Volkswagen Group Volvo Truck Gr. Unit Sales White Motor Company

GDP Growth

2014e 2016e 2018e 2020e 2022e 2024e Local players dominate the Russian market where customs duties and tax- es have shut out large-scale foreign competition

Market Outlook Outlook by Region Outlook by Country Country Deep Dives Germany U.S. Russia Turkey Indonesia Brazil

RegisteredRussia Commercial Vehicles* in Russia in 2013 Local Brand Footprint • The Russian truck market is dominated by domestic players, with a limited pres-

GAZ GAZ GAZ Kamaz ence of foreign truck manufacturers and few registrations of their products Manufacturer group GAZ 53 GAZ Unspec. GAZ 3307 Kamaz Truck • Whereas the dominant manufacturer, GAZ, boasts a wide range of models, Aebi GAZ Alvis Group Kamaz’ portfolio is relatively limited Amur-ZAO Gr. • Daimler owns a 10 percent stake in Kamaz Anhui Xinma Automobile Group L AvtoVAZ GAZ • European and Japanese OEMs such as Daimler, Volkswagen and Isuzu aim to GAZ 3221 Gazelle GAZ GAZ Kamaz Ayats GAZ 66 GAZ harness strong market growth by leveraging a diverse model portfolio. BAZ 3308 Beijing Auto / BAIC Motor Gr. VW has a small advantage in market presence due to their joint venture with Belarussian Autoworks Blue River Group UralAZ PAZ KAVZ local MAZ UralAZ Unspec. PAZ Bus Gr. KAVZ Bogdan Corporation Bus Kamaz Cacciamali Kamaz Truck UralAZ LIAZ Caterpillar UralAZ Truck Gr. LIAZ Bus ChangAn Automobile Volvo Expected Russian Sales and Production Units of HCV und MCV Zil Zil China Brilliance Zil Truck Zil Unspec. Volvo CAGR +5.3% China First Auto Works FAW k % China Hi-Tech Group Co. 300 20 CNHTC/Sinotruk Gr. Crane Carrier Isuzu Hino DAF 240 Isuzu Elf Hino DAF 10 Daimler AG Unspec. 200 192 195 Dongfeng Motor Co. Ltd. MAZ MAZ MAN 180 167 174 MAZ Heavy Truck MAZ MAN KrAZ 154 Fiat Group Automobiles SpA Avtokraz unspec 122 131 0 Fiat Industrial Group MAN Volkswagen 116 111 Ford Group Nissan 100 79 Nissan Cabsta Tatra (10) General Motors Group Guangzhou Automobile Group Co. Gueleryuez 0 (20) 2014e 2016e 2018e 2020e 2022e 2024e HaKo Gr. *Including LCV and Buses Hinduja Group Unit Sales Production GDP Growth Source: IHS Group, Oxford Economics, Deloitte Analysis Hyundai Kia Automotive Group IFA © 2014 Deloitte Consulting GmbH Ikarbus Gr. Production Irizar Gr. Isuzu Unit Sales J AC Anhui J ianghuai Automobile J ohn Deere GDP Growth Kamaz Kiraca Holding KOC Holding Komatsu Liebherr 2014e 2016e 2018e 2020e 2022e 2024e Lifan Gr. Manufacturer und Model. Farbe zeigt Details zu Manufacturer group an. Größe Mahindra Group zeigt Summe von 2013-2 an. Die Markierungen werden nach Manufacturer und Manitowoc Model beschriftet. Die Daten werden unter Country gefiltert, wobei Russia beibehalten wird. Die Ansicht wird unter Exclusions (Manufacturer,Manufacturer Marcopolo S.A. group,Model) gefiltert, wobei 726 Elemente beibehalten wird. MARZ Mega-Motors (UA) Mitsubishi Motor Group Mudan Muszertechnika Holding Zrt. Gr Turkey’s emerging truck market is characterized by a mix of global major Asian and European OEMs with a focus on light / medium-duty trucks

Market Outlook Outlook by Region Outlook by Country Country Deep Dives Germany U.S. Russia Turkey Indonesia Brazil

RegisteredTurkey Commercial Vehicles* in Turkey in 2013 Local Brand Footprint • The Turkish truck market is diverse, illustrated by the wide variety of

Mercedes Mitsubishi Ford Ford registered truck brands and the international mix of manufacturers M.B. Unspec. (CV) Fuso Ford Unspec. Ford Cargo Manufacturer group Mitsubishi • Turkey’s proximity to European markets has helped Daimler and other Ciftciler (Askam) Gr. Fuso Ford Cukurova Holding Canter European OEM build a strong presence with a focus on light- and Unspec. Daimler AG Daimler medium-duty trucks Fiat Group Automobiles SpA • Daimler’s strong position in the market is based on a local production and Fiat Industrial Group Ford Group a good product portfolio in Turkey General Motors Group • On the border with Asia, the Turkish market boasts a considerable presence Hyundai Kia Automotive Group Isuzu Mercedes Ford of Russian (Cukurova) and Japanese (Isuzu) truck makers Kiraca Holding Mercedes Sprinter/T1 Ford Transit Mazda Motors Gr. BMC MAN Iveco Renault BMC Unspec. MAN Unspec. Iveco Unspec. Trucks Navistar International Corp. Renault Tr. Otokar Gr. Premium Volkswagen Çukurova Expected Turkish Sales and Production Units of HCV und MCV PSA Group Fiat Renault Nissan Alliance VW CAGR +5.0% Sabanci VW Crafter k % Skoda Plzno Ltd. Volvo 60 10 Scania Iveco Trucks Volvo Toyota Group Isuzu Scania Unspec. Iveco Bus Volvo Trucks 47 49 VDL Group Isuzu Unspec. 43 Fiat Otokar Karsan 43 39 39 5 Volkswagen Group Fiat Unspec. Otokar Karsan 38 40 Isuzu 40 37 36 Volvo Truck Gr. Sultan J10 30 30 Karsan 0

Isuzu Peugeot Isuzu Elf Unspec. Peugeot 20 Unspec. Hino (5)

0 Manufacturer u(10)nd Model. Farbe zeigt Details zu Manufacturer group an. Größe 2014e 2016e 2018e 2020e 2022e z2024eeigt Summe von 2013-2 an. Die Markierungen werden nach Manufacturer und *Including LCV and Buses Model beschriftet. Die Daten werden unter Country gefiltert, wobei Turkey beibe- Unit Sales Production GDP Growth halten wird. Die Ansicht wird unter Exclusions (Manufacturer,Manufacturer Source: IHS Group, Oxford Economics, Deloitte Analysis group,Model) gefiltert, wobei 726 Elemente beibehalten wird. Production © 2014 Deloitte Consulting GmbH Unit Sales

GDP Growth

2014e 2016e 2018e 2020e 2022e 2024e Japanese truck OEMs including Daimler’s Fuso Brand own the Indonesian market due to substantial investment and compliance with local specs

Market Outlook Outlook by Region Outlook by Country Country Deep Dives Germany U.S. Russia Turkey Indonesia Brazil

RegisteredIndonesia Commercial Vehicles* in Indonesia in 2013 Local Brand Footprint • The Indonesian truck market is still very much in a developing stage and char-

Mitsubishi Fuso Toyota acterized by a strong dominance of Japanese truck manufacturers Manufacturer group Mitsubishi Fuso Canter Unspec Toyota Dyna/Toyoace Unspec. • Daimler’s predominant position in the market is mostly due to its acquisition Beijing Auto / BAIC Motor Gr. Toyota Daimler AG of the Mitsubishi Fuso brand and the suitability of their Canter model for Fiat Industrial Group Ford Group Daimler Indonesian terrain Hicom • Regional proximity and substantial foreign direct investment have bolstered Hyundai Kia Automotive Group Toyota’s position, especially benefitting its Hino brand. ISUZU is also expand- Isuzu Renault Nissan Alliance ing market share gradually due to their strength in the Medium CV area. Shanghai Shenlong Bus Co. Ltd • Due to its size and proximity to China some Chinese manufactures are trying Toyota Group Unspec. Hino Hino to enter the market – but so far with only little quantities Hino Dutro Hino Volkswagen Group Ranger/500 Volvo Truck Gr. Expected Indonesian Sales and Production Units of HCV und MCV

CAGR +3.0% k % 150 20 126 118 112 Mitsubishi Fuso Mitsubishi Hino Hino 112 118 117 Mitsubishi Fuso Truck Fuso 106 Hino Unspec. Hino Bus 100 101 103 15 UD Trucks 100 Isuzu Isuzu UD 88 86 Isuzu Elf Unspec. Isuzu Trucks Forward UD 10 Unspec. Isuzu 50 Isuzu Nissan 5

Manufacturer und Model. Farbe zeigt Details zu Manufacturer group an. Größe 0 zeigt Summe0 von 2013-2 an. Die Markierungen werden nach Manufacturer und 2014e 2016e 2018e 2020e 2022e 2024eModel beschriftet. Die Daten werden unter Country gefiltert, wobei Indonesia bei- *Including LCV and Buses behalten wird. Die Ansicht wird unter Exclusions (Manufacturer,Manufacturer Unit Sales Production GDP Growth Source: IHS Group, Oxford Economics, Deloitte Analysis group,Model) gefiltert, wobei 726 Elemente beibehalten wird. Production © 2014 Deloitte Consulting GmbH Unit Sales

GDP Growth

2014e 2016e 2018e 2020e 2022e 2024e Volkswagen and Daimler account for the largest share of vehicle registrations due to their long market presence

Market Outlook Outlook by Region Outlook by Country Country Deep Dives Germany U.S. Russia Turkey Indonesia Brazil

RegisteredBrazil Commercial Vehicles* in Brazil in 2013 Local Brand Footprint • The Brazilian truck market is dominated by foreign, global OEMs with the

VW Truck VW Truck Mercedes Mercedes majority of trucks registered to Volkswagen and Daimler Manufacturer group VW Truck unspec. VW Truck M.B. Vario/T2 M.B. Agrale 709-914-Series • Scania and Volkswagen Nutzfahrzeuge are the main models sold in the Volkswagen Brazilian market C hangAn Automobile C NHT C /S inotruk Gr. • Having established a market presence as early as 1953 through the as- Daimler AG Mercedes Mercedes sembly of VW Type 1, Volkswagen accounts for the largest share of new M.B. MK M.B. SK F iat Group Automobiles S pA Group over Group registrations 16t F iat Industrial Group • Daimler’s Vario and Atego models are the shining stars of a relatively bal- VW Truck VW Truck Daimler F ord Group VW Truck Delivery VW Truck Worker/Eletronico anced portfolio of new registrations that bolster its strong position General Motors Group

Mercedes Hyundai Kia Automotive Group M.B. Axor Scania Scania Scania Navistar International C orp. Scania Scania G-Series Scania Series-4 Expected Brazilian Sales and Production Units of HCV und MCV R enault Nissan Alliance Scania Mercedes Scania Scania M.B. Accelo Volkswagen Group CAGR +1.0% Ford Ford Volvo Trucks Volvo Trucks Agrale k % Ford Cargo Ford Volvo Trucks Volvo Trucks Agrale Volvo T ruck Gr. F-Series FH-Serie Unspec. 300 5 SA Truck Volvo 228 237 4 220 216 216 Ford 196 200 179 180 177 182 Iveco Iveco Iveco Ford GMC 165 165 3 Iveco Iveco Iveco Ford Cargo Ford Ford 2 Ford F-250/350 Ford F-Series Iveco Fiat 100 Unspec. Iveco 1

0 0 2014e 2016e 2018e 2020e 2022e 2024e *Including LCV and Buses Unit Sales Production GDP Growth Source: IHS Group, Oxford Economics, Deloitte Analysis Production

GDP Growth

Manufacturer und Model. F arbe zeigt Details zu Manufacturer group an. Größe zeigt S umme von 2013-2 an. Die Markierungen werden nach Manufacturer und Model beschriftet. Die Daten werden unter C ountry gefiltert, wobei B razil beibehalten wird. Die Ansicht wird unter E xclusions (Manufacturer,Manufacturer group,Mo- del) gefiltert, wobei 726 E lemente beibehalten wird.

2014e 2016e 2018e 2020e 2022e 2024e 3 In the current truck landscape Daimler will likely defend its position as No 1 truck manufacturer*

The European OEMs are the only truly global players in the truck market, having Insights from OEMs acquired share and operations in several key markets Q: In your opinion, how will the competitive landscape develop within the next According to a recent market forecast, Daimler will manage to defend its No 1 spot ten years? • Controlling almost a quarter of the global market, Daimler remains the Number 1 global player and has penetrated all of the key markets with its own brands Increasing presence of • Tata is likely to profit from the growth of the Indian market, becoming the second largest Chinese OEMs in the player globally in 2024. But its dependence on one market may turn out to be a major low-cost and disadvantage mid-market segments outside China • A similar challenge will cause Dongfeng to lose its Number 2 market position and to trail Tata, VW and Volvo in a Chinese market showing little momentum • Volvo will maintain its global reach through strategic investment in key markets such as Increasing global China (Dongfeng) and India (Eicher) along with a focus on selling premium trucks under competition among the Volvo brand Big-3 European OEMs International • VW will try to reap further benefits from closer cooperation and integration of MAN/Scania (VW, Daimler, Volvo) consolidation into VW Group, potentially reinventing the game

Manufacturers outside Europe only play a dominant role in their local markets The European and North • Even though Chinese OEMs are said to be aspiring to the status of serious competitors New players in ASEAN and American markets will still be only 3% of their total sales will be exported. These 3% are low in percentage, but based Eastern countries dominated by local OEMs on > 1.000.000 trucks manufactured by Chinese OEMs this still needs to be considered as competition for regions like Asean or Africa • Exports will remain low due to hard-to-surmount differences in specs and emission stand- ards between the Triad markets and low-cost countries Chinese OEMs will • Chinese manufacturers are still partly state-owned and follow 3-5 year plans become serious competitors • Similar trends will occur in India and North America, with North American OEMs focusing on the South American market and staying out of Europe

* Analysis based on > 50% ownership. Daimler and Foton are treated as separate entities, Volvo and Dongfeng are treated as separate entities © 2014 Deloitte Consulting GmbH While Daimler will defend its position as No 1 truck manufacturer Tata seizes the growth in India to overtake Volvo, Dongfeng and Volkswagen

Global Market Share Export Capabilities Sales Split by OEM

OEM Regional Unit Market Shares in 2024e

Global Market Share (Units)

14% 8% 7% 7% 7% 5% 5% 5% 4% 4%

ASEAN Central Europe Europe Greater China Indian Subcontinent Japan/Korea Middle East/Africa North America Oceania Regional Market Split ASEAN South America Eastern Europe Europe Greater China Indian Subcontinent Japan/Korea Daimler Tata Volvo Volkswagen DFM Paccar FAW CNHTC BAIC Group International Middle/East Africa North America 2014 Rank (1) (7) (3) (4) (2) (6) (5) (8) (9) (10) Oceania South America

Source: IHS Global & Deloitte Analysis

Global Market Share Export Capabilities Sales Split by OEM

OEM Global Sales Reach (Units 2024e)

Source: IHS Global & Deloitte Analysis

Global Market Share Export Capabilities Sales Split by OEM Daimler VW Volvo Tata

DaimlerDaimler Unit sales Sales volume Volume in 2024e in 2024e Snapshot of 2% 1% 2% 3% Daimler’s Position

6% China: When Daimler established its first truck joint venture in the Chinese mar- 30% ket, competitors such as MAN and Iveco had already established a solid competi- 6% tive position. Daimler has not positioned its own Asian brands in China so as to achieve maximum unit sales

8% 525k units India: Daimler has introduced Bah- rat-Benz as a new brand designed to meet local requirements, opting for a

USA greenfield investment and brand build- EU ing from scratch. This may prove to be Asean 8% an advantage over other Triad OEMs Brazil ROW Russia + Eastern Europe Russia: Its partnership with Kamaz India brightens Daimler’s outlook, especially if 19% Japan Central America Daimler acquires more shares of Kamaz 14% South America in the long term China Source: IHS Global & Deloitte Analysis

China Russia + East Europa South America Central America Japan India ROW Brazil Asean EU USA VW 2024 Snapshot: Triad markets will continue to dominate VW sales, with most emerging market sales accounted for by Brazil & Russia

Global Market Share Export Capabilities Sales Split by OEM Daimler VW Volvo Tata

VW VWUnit sales Sales volume Volume in 2024e in 2024e Snapshot of 2% 1% 3% 3% VW’s Position

5% Europe: Volkswagen’s largest markets are the Triad markets, with a strong focus on Europe – almost 50% of VW’s units will be sold in Europe

12% Brazil: By 2024 Volkswagen will sell more than one third of its production volume in Brazil, mainly Volkswagen and MAN 47% 269k units trucks

North America: Volkswagen is currently without a North American presence, miss- ing out on leveraging the world’s third EU largest market in 2024 Brazil Russia + Eastern Europe ROW India: After acquiring all MAN Force JV South America shares, MAN aims to gain more traction in 27% India Asean the Indian market Central America China Source: IHS Global & Deloitte Analysis

China Central America Asean India South America ROW Russia + East Europe Brazil EU Volvo 2024 Snapshot: Volvo is a strong player in Europe and has been working on enlarging its footprint in the emerging markets

Global Market Share Export Capabilities Sales Split by OEM Daimler VW Volvo Tata

VolvoVolvo Unit sales Sales volume Volume in 2024e in 2024e Snapshot of 1% 2% 2% 3% Volvo’s Position

5% Triad: The Triad will account for more than half of Volvo’s sales, with Europe (37%) topping the U.S. (16%) in terms of 7% share 37% Russia: Volvo is the only Triad truck OEM that has established its own local plant in 8% Russia, assigning major strategic impor- 266k units tance to the Russian market. All other OEMs entered the market through joint production with JV partners

EU USA China: This year, Volvo announced a JV 9% ROW with Dongfeng, China’s largest truck man- Brazil Russia + Eastern Europe ufacturer. Currently, actual sales volumes Asean are low but it is to be expected that the JV Japan will leverage Dongfeng’s extensive dealer- China 10% Central America ship network 16% South America India Source: IHS Global & Deloitte Analysis

India South America Central America China Japan Asean Russia + East Europe Brazil ROW USA EU Tata 2024 Snapshot: Without a Triad presence, Tata will generate growth from its exceptionally large home market share and its ASEAN activities

Global Market Share Export Capabilities Sales Split by OEM Daimler VW Volvo Tata

TataTata Unit sales Sales volume Volume in 2024e in 2024e Snapshot of 2% 4% Tata’s Position

India: No other OEM is as focused on its home market as Tata, with India contributing 92% of its current unit sales. 2024 home market share is even expected to rise to 94%

Triad: Tata is not present in the Triad countries. Limiting its ability to participate 290k in technological advanced market

South Korea: Tata maintains a minimal presence in the emerging markets, with South Korea as the major exception. In Korea, Tata sells the trucks of its local Dae- woo subsidiary

India 94% Asean Other Source: IHS Global & Deloitte Analysis

Other Asean India Selected Truck ownership transactions 2010 - 2014

VW takes over full ownership Mahindra buys Navistar's stake in AB Volvo has signed an agreement Isuzu Motors Limited establishes MAN Force, a JV between Indian MAN and its Chinese partner Sinotruk of Scania. Despite VW’s large India JVs. M&M completes its with the Chinese vehicle manu- new joint venture company in Truckmaker Force and MAN AG have unveiled a new truck brand for ownership stake, Scania had purchase of the Navistar Group's facturer Dongfeng Motor Group Chongqing with its partner, was dissolved with Force Motors China and other emerging markets. remained an independently stake in Mahindra Navistar Company Limited (DFG) to acquire Qingling Motors Group. having sold and transferred Called SITRAK managed company. Automotives Ltd (MNAL) 45% of a new subsidiary of DFG, remaining 50% of Man Force shares Dongfeng to MAN AG. The global truck manufacturers landscape remains heterogeneous, despite the increase in acquisitions over the last years

However, market competition, technology changes and a more connected global Insights from OEMs economy will likely drive further consolidation Q: In your opinion, which of the following regions will face the strongest pressure Consolidation will strongly depend on the regional lay of the land for OEM consolidation in the future? • European Endgame: After the most recent transaction in May 2014, when VW acquired (% of respondents) Scania, only Iveco is left as a potential target. Daimler and Volvo Renault are positioned well. • U.S: Among European OEMs, Volkswagen has no presence or brand in the North Ameri- China 90% can market yet. • Vying for the Best Approach in BRIC: In recent years all of the OEMs established pres- Asean 40%

ences in the BRIC countries. In the years to come, it remains to be seen which approach India 40% will have an edge, with more transactions to be expected after current partnering has steadied. Europe 20%

Brazil 20% Selected Truck Manufacturer Acquisitions 2011 – 2014

Russia 20%

Japan 10% 5/2014 2/2013 1/2013 6/2012 3/2012 4/2011

VW takes over full Mahindra buys AB Volvo has signed Isuzu Motors Limited MAN Force, a JV be- MAN and its Chinese U.S. 10% ownership of Scania. Navistar‘s stake in an agreement establishes new joint tween Indian Truck- partner Sinotruk have Despite VW’s large India JVs. M&M com- with the Chinese venture company in maker Force and MAN unveiled a new truck ownership stake, pletes its purchase of vehicle manufac- Chongqing with its AG was dissolved brand for China and ROW 10% Scania had remained the Navistar Group‘s turer Dongfeng Motor partner, Qingling Mo- with Force Motors other emerging mar- an independently stake in Mahindra Group tors Group. having sold and rans- kets. Called SITRAK 0 20 40 60 80 100 managed company. Navistar Automotives Company Limited ferred remaining 50% Source: Deloitte Global Truck Study 2014 Ltd (MNAL) (DFG) to acquire 45% of Man Force shares of a new subsidiary of to MAN AG. DFG, Dongfeng 10% 30% 50% 70% 90%

Source: Deloitte Analysis

Market Overview Competitive Landscape

Number of OEMs Present in Major Markets in 2014 Drivers for Partnerships in the Global Truck Market

Positioning in growth markets U.S. 8 Eastern as a prerequisite for long-term growth 19 Europe 24 Russia

European Regional diversiﬁcation 16 Union as a hedge against regional business cycles 34 China

Access to advanced technology Central 19 America 4 Japan as a prerequisite for sustained competitiveness and regional diversiﬁcation

Economies of scale ASEAN as a lever to increase proﬁtability South 13 17 America 12 India Relocation of production as a step to increase proﬁtability and proximity to growth markets

Low consolidation pressure Medium consolidation pressure High consolidation pressure

Source: IHS Global, Deloitte Analysis & Deloitte Global Truck Study 2014

High consolidation pressure

Medium consolidation pressure

Low consolidation pressure 4 Who owns whom in the global truck market?

Market Overview Competitive Landscape Global Daimler VW Volvo Fiat

51% 72% FAW Jie Fang FAW Volkswagen Scania Trucks Hino Motors Toyota Group FAW Group Group AG 100% Truck Jie Fang 17%

Volkswagen MAZ-MAN MAZ-MAN (Belarus) Trucks & 75% Buses 30% Hino Scania Isuzu 50%

50% Qingling Severtsalauto Cummins-Scania 80% Isuzu HICOM MAN SE MAN Injection Motors Isuzu (Malaysia) GAZ FAW TRW Fawer (USA) (China) 6% (Russia) Deutz (Dalian) 100% (Russia) Commercial Engine Vehicle Steering (China) 50% 45% (China) 20% 51% 29% GM-Isuzu MAN Force Qingling Isuzu Motors Commercial 50% Trucks (India) Motors 51% Truck Steyr SITRAK CNHTC/ Jinan 75% 80% 45% (Nafta)

Isuzu Isuzu 9% PT Isuzu Xian Shaanxi Commercial 50% Qingling Astra Motors Ural Cummins Heavy-duty 35% Truck of America GAZ GAZ 25% Engineering (Indonesia) Truck (China) Automobile (Nafta)

CNHTC Isuzu Sinotruk Huanghe Philippines 25% Prince Ashok IPC Leyland 100% Automotive Shaanxi Infotronics Smith Electrical Private Vehicles 35% (India)

Uralaz 50% Jinan Huawo Howo Trucks Ashok International Hinduja Group Leyland Iveco Larimar 51% Avia Motors Astra (South Africa) Mahindra Iveco Navistar Iveco Automotives Ltd 60 % Nissan Ashok Ashok Leyland Beijing Automotive Leyland Mahindra & Navistar Nissan Vehicles Industry Holding IC Bus 51% 50% Technologies Iveco-AMT Mahindra International (India) Iveco Iveco Samotlor 49% (India) 66% (Russia) 33% 51% (Russia)

49% 50% 50% Mahindra Nissan Ashok Navistar Leyland Engines Powertrain MWM SAIC-Iveco (India) Naveco International Beiqi Foton Comm. Vehicle Magirus Foton Iveco (China) Motors Investment 50% Blue Diamand 100% 51% (China) 25% (Nafta) 75%

NC2 Global Dongfeng 50% (outside Nafta) Nissan Motors SAIC-Iveco Chaoyang Mitsubishi Hognyan Yuejin Diesel Engine Comm. Navistar Group Beijing Foton Vehicles Jianghuai 50% Foton (China) Automobile 11% Daimler Auman 50% Automotive (China) Dongfeng Ford Otosan Motor Co. (Turkey) NC2 Global 50% Mitsubishi 50% 50% Jianhuai Fuso Automobile Mercedes Hongyan Benz (China) 50% 41% Dongfeng 89% 55% 50% Dongfeng Commercial DND Dongfeng Motor Group Renault 67% Vehicles 45% JAC Motors BB Bharat Benz Daimler Trucks Freight- Fiat Chrysler (China) liner Fiat Group (Anhui Jianghuia 100% 100% Automobiles Automobile) Ford Motor 50% 50% Company Ford 100% Western Star Li-Tec Dongfeng (Germany) Dongfeng 99% 50% Dongfeng Cummins Engine Holding Motor Nissan-Diesel Renault Renault Trucks Engine GmbH* Corporation (China) 50% (China) Dodge 100% 32% Rolls-Royce Novotruck Leyland Daimler Group Deutsche 18% Power Systems Russia Trucks 10050%% Accumotive 100% 50%

Jiangling DAF Motors Corp. 50% 100% Volvo Group Eicher Motors Fuso KAMAZ 8% Trucks 11% (Russia) 50% Kenworth Paccar 50% 50% Tata Group

100% Mercedes-Benz 50% Trucks Vostok Kamaz VE Commercial (Russia) Peterbilt Volvo Trucks Vehicles Eicher UD Trucks 50% (India) Tata Motors Taiyuan Changan Tata Heavy Truck Co 50% Karsan Kamaz Vectra Cummins Kama Motor 51% 50% (Russia) Tata Volvo (India) 76% Cummins (India)

Mack Kamaz - Tata Engineering Daewoo Guanzhou (Kazakhstan) Hyundai Motor Hyundai Hyundai Company 50% (China)

*Stand 08/2014 OEM Other Player Joint Venture Brand Ownership Strategic Partnership Joint Venture

Market Overview Competitive Landscape Global Daimler VW Volvo Fiat

Company Structure Units Sold by Brand in 2024 (%)

5% 1%1%

Beiqi Foton Foton 33% Motors 21%

50%

Mitsubishi Group Freightliner Beijing Foton Foton 11% Daimler Auman Mercedes Benz Automotive Mitsubishi Fuso

Mitsubishi 50% Fuso Western Star Mercedes Benz Other 89% Bharat Benz

BB Bharat Benz Daimler Trucks Freight- 100% liner 39%

100% Western Truck Brands by Region Mercedes Star Li-Tec (Germany) Benz 99% Engine Holding 50% GmbH* Other Fuso Western Star Foton 100% Freightliner Rolls-Royce Mitsubishi Fuso Deutsche Power Systems Daimler Group Mercedes Benz Mercedes 10050%% Accumotive FreightlinerWestern Star Benz 50% Trucks Bharat Benz Fuso Fuso Fuso KAMAZ Fuso Trucks OEM Other Player 11% (Russia) BharatBenz 50% Joint Venture Brand 50% Freightliner Mercedes Ownership Benz Mercedes-Benz 50% Trucks Vostok Kamaz Strategic Partnership Mercedes Western Star (Russia) Benz Trucks Joint Venture Fuso Freightliner Fuso Source: IHS Global, Deloitte Analysis

Market Overview Competitive Landscape Global Daimler VW Volvo Fiat

Company Structure Units Sold by Brand in 2024 (%) <1%

22%

43%

MAN 72% Volkswagen Scania Trucks Scania Group AG 17% Volkswagen

MAZ-MAN Volkswagen Other MAZ-MAN Trucks & (Belarus) 75% 30% Buses Scania

50% 35% Cummins-Scania MAN SE MAN Injection 100% (USA) Truck Brands by Region MAN Force Trucks (India) Steyr SITRAK CNHTC/ Scania Jinan Other Scania Volkswagen Scania MAZ-MAN Sitrak MAN Xian MAN 50% Shaanxi Cummins Heavy-duty (China) Automobile Scania Scania CNHTC Sinotruk Huanghe 25% Prince OEM Other Player MAN Shaanxi Joint Venture Brand Scania Scania Scania Ownership Volkswagen Strategic Partnership Nutzfahrzeuge Joint Venture MAN

Source: IHS Global, Deloitte Analysis

Market Overview Competitive Landscape Global Daimler VW Volvo Fiat

Company Structure Units Sold by Brand in 2024 (%)

10%

Dongfeng Motor Co.

50% Dongfeng 55% Dongfeng Commercial DND 20% Dongfeng Motor Group Renault 67% Vehicles 45% (China) Mack 50% 50% 55% Renault

Dongfeng UD Trucks Dongfeng Dongfeng Cummins Motor Nissan-Diesel Renault Renault Trucks Engine Volvo Corporation (China) 50% (China) 15% 18% 100%

Volvo Group Eicher Motors 8% Truck Brands by Region

50% UD Trucks Volvo Volvo UD Trucks VE Commercial Volvo Renault Mack Volvo Volvo Trucks Vehicles Eicher Renault UD Trucks 50% (India) Mack DFM Volvo Renault

UD Trucks

OEM Other Player Volvo Eicher Joint Venture Brand Mack Volvo UD Trucks Ownership Volvo Mack Strategic Partnership Renault Joint Venture Volvo

Source: IHS Global, Deloitte Analysis

Market Overview Competitive Landscape Global Daimler VW Volvo Fiat

Company Structure Units Sold by Brand in 2024 (%)

15%

Iveco Larimar Astra (South Africa) Iveco Iveco

60 %

Iveco-AMT Iveco Iveco Iveco Samotlor (Russia) 33% 51% (Russia) Dodge RAM

50% Other

SAIC-Iveco Comm. Vehicle Magirus Naveco Investment 50% Iveco (China) (China) 85%

SAIC-Iveco Hognyan Yuejin Comm. Truck Brands by Region Vehicles (China)

Other RAM Iveco Iveco Iveco Hongyan Dodge

Fiat Chrysler Fiat Group Automobiles OEM Other Player 100% Joint Venture Brand Iveco

Ownership Iveco Strategic Partnership Iveco Astra Joint Venture Dodge

Source: IHS Global, Deloitte Analysis

The aftermarket accounts for approximately one third of total revenue Insights from OEMs and is becoming a key differentiator for firms looking to improve profitability Q: In your opinion, how important are the following levers to increasing profitabil- Industry Trends in the NA Truck Industry ity of the aftersales segment? • Growing complexity of products and services 100 • Inadequate coverage of older vehicles by network • Price-sensitive customer buying behavior 90 • Changing distribution patterns – short haul vs. long distance 80 30 44 38 and innovative delivery solutions 70 58 60 57 Immediate Priorities and Long-Term Opportunities in Aftersales • Implement advanced pricing capabilities moving from cost and 50 competition-based pricing to value–based pricing strategies 40 • Align product strategy to incorporate aftermarket requirements 55 30 44 49 • Improve dealer market share by improving offerings for price sensitive customers 22 20 30 • Alliances / partnerships to provide alternative channels • Deploy service products – remote diagnostics, consulting and contract maintenance 10 0 22 12 10 10 10 5 5 5 -10 6

-20 Second New Pricing Availability of Dealer brand for business spare parts interface spare parts models

very important somewhat important neutral somewhat unimportant

Source: Deloitte Global Truck Study 2014 Very important 100 90 80 44 30 38 70 58© 2014 Deloitte Consulting GmbH 60 57 50 40 55 30 44 49 20 22 30 10 0 22 12 10 10 10 -10 6 Second New Dealer -20 Pricing Availability of brand for business spare parts interface spare parts models Very unimportant Winning in the aftermarket requires truck OEMs to extend current business models with new service elements and cooperation partners

Trends and Challenges Immediate Priorities Future Opportunities

Trends within the trucking industry are putting increased pressure on OEMs to capitalize on aftermarket sales to support their primary business

Network and Customer Questions on Products and Services Channel Coverage Buying Behavior Future Trends

• Vehicle lifecycle – Extended • Dealer Support – Dealers need • Buying sophistication – • Changing Distribution part life due to improving quality support to capture price-sensitive Price-sensitive customers demand Networks – Will the long-dis- • Private label – Use of private, customers lower-priced part options tance freight model change to value line parts to penetrate the • Dealer alternate channel – • Driver Safety – Increased short haul? price-sensitive market Dealers have employed alternate scrutiny of safety / compliance • The Future of Fuel – How will • Value-added services – channel offerings to serve the programs alternate fuel technologies im- Expanded value-added services price-sensitive market • Alternate dealer suppliers – pact aftermarket support ? offerings to improve service levels • Warehouse & Distribution Dealers are developing relation- and retain business consolidation – ships with WDs and OES for non- Major push to increase scale and proprietary parts network / buying power

Low-Cost Suppliers 3rd Party Manufacturers Direct Sales with Dealers Retail Environment

These trends manifest themselves across the entire shipping industry ecosystem, OEMs must devise ways to strengthen relationships with players at each point to succeed

Trends and Challenges Immediate Priorities Future Opportunities Priorities Deep Dive Pricing

Improve dealer market share 4 • Improve e-commerce capability • Utilize end-customer analytics to find market opportunities • Enhance end-customer segmentation • Integarte supply chain to get visibility into dealer inventory 3 and buying patterns

Utilize dealer and customer incentives • Develop loyalty program • Execute end-customer campaigns 2 • Provide dealer incentives • Manage dealers’ inventory

Align product strategy 1 • Manage lifecycles • Innovate to improve proprietary content • Introduce value line products • Enhance competitive analysis If executed successfully, the above strategies may lift Strengthen pricing capabilities operating margin by 6% - 8% • Utilize advanced pricing analytics • Employ segment-based pricing • Implement pricing tools • Ensure organization alignment

Trends and Challenges Immediate Priorities Future Opportunities Priorities Deep Dive Pricing

Impact of profit driver improvements Pricing Evolution – From Cost-Based to Value-Based Pricing

1% improvement in… How much value am I Basis for …improves operating profit by creating for Price Setting my customer? Strong What price will the Value-based pricing Perceived market customer value Price 12,3% bear? What was the price Economy- based Economic and Variable Cost 6,7% of the best pricing industry trends alternative?

Unit Volume 3,6% How do Competi- tion based Competitor prices I recover pricing Profitability Impact Profitability my cost? Fixed Cost 2,6% Cost-based pricing Historic costs

Weak

Reactive Pricing Maturity Proactive 0 3 6 9 12 15

• Pricing has 3-4 times the effect on profitability • Value Pricing is a price setting method that derives the perceived customer value than other improvement measures • Offerings are defined based on customer preferences and willingness to pay • The average 5% improvement in returns on sales • A value-based pricing initiative results in a win-win situation for both from improved pricing creates $1,5 billion of additional customersand the seller value over 5 years for an average S&P 500 company

Source: IHS Global, Deloitte Analysis

Trends and Challenges Immediate Priorities Future Opportunities

Targeted Ecosystem Partnerships Potential Opportunities

Opportunities exist to partner with a number of different sectors within the trucking ecosystem to build relationships and gain access to new truck owners

Truck Service Providers: Develop part-supply relationships Suppliers with third-party contract maintenance service providers

Owner-Operator-Aggregators: Develop relation- Fleet Management ships with owner-operator- aggregators to gain access to the independent owner-operator segment Service Owner Operator

Providers Aggregators

Insurance Providers: Obtain the first right to provide Insurance replacement parts in the event of an accident Providers

These alliances/partnerships could be particularly effective in penetrating the old-VIN vehicles that traditionally do not use the OE dealer network for repairs

New business models have emerged that shift from selling a truck to providing Insights from OEMs customers with new ways to improve total cost of ownership Q: In your opinion, is the field of telematics important for European OEMs? If Telematics has undergone a few transitions since first appearing on the scene yes, why? Having evolved from a supporting role to providing major value-added to drivers, owners, and OEMs, telematics puts entire new revenue streams within reach. OEMs have traditionally Because telematics have focused on two core revenue streams from automotive telematics: an inﬂuence on TCO • Vehicle price markup • Telematics subscriptions Information But with all the data available and the potential use of that data, even more is possible. Telematics as the central management element of future service creates added offerings value Future OEM business models might focus on services rather than the truck itself In 2024, the global OEM telematics market may total up to $20B US, with Europe account- ing for the largest share Telematics as an enabler of • Increasing connectivity and mounting cost pressure in the transportation business are the Highly important further optimization main drivers for this growth for CRM • In a very competitive market, a truck’s efficiency increasingly becomes the main buying criterion for the customer.

Allows OEMs to collect While many studies show how telematics can improve truck operations and vehi- data on customers and cle management, the big question remains how OEMs stand to benefit vehicles • Telematics is not about technology. To win the market against often cheaper aftermarket organizations, OEMs must offer complete solutions

• OEMs need to lever their existing competitive advantage in trucks diagnostics while devel- Source: Deloitte Global Truck Study 2014 oping independent business models, that require integrating different skill sets from outside the organisation Source: Deloitte Analysis

Market Outlook Market Trends Recommendation

Commercial Vehicle Telematics Forecast 2014 – 2024 for OEM Hardware ($bn)

25 CAGR +17.2%

20 Expected market size is 15 $11B for 10 telematics by

5 the end of 2014 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

ROW Commercial Vehicle Telematics Forecast 2014 – 2024 for Aftermarket Hardware ($bn) Asia 15 Europe CAGR +6.4%

Latin America

Chart 2 (Stacked) 10 North America

0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 North America Latin America Europe Asia ROW

Europe

Latin America

Chart 2 (Stacked) North America Usually, telematics are primarily employed to address TCO. Increasingly theAddressed by telematics view on TCO is broadened to include resources and operations managementGIT3

Market Outlook Market Trends Recommendation AddressedLicence by telematics Overview Telematic Areas Potential Applications for “Area 3 New Telematics”

Insights from OEMs GITInterest Total costMedium of ownership Commercial Trucks for MCV & HCV vehicles Q: In your opinion, is the business area 13 T telematics important for European 5 years à 22% 39% 13% 13% 6% OEMs? (% of respondents) 45.000 miles LicenceTrailer

0 20 40 60 80 100 Optimization Heavy Commercial Trucks 80% of resources InterestTyres 26 T Fuel optimization 70% 6 years à 26% 31% 15% 14% 7% 50.000 miles Operations 40 T Management 50% 6 years à 32% 24% 17% 9% 7% (billing, delivery notes) TrailerInsurance 70.000 miles Vehicle availability 40% 0 20 40 60 80 100 Safety 30% Repair & Maintenance Fuel1 Wages Overheads2 Depreciation Repair & Maintenance Tyres Insurance Tyres Trailer Interest Licence GIT3 Navigation 30% Addressed by telematics 0 10 20 30 40 50 60 70 80 90 100 1 Based on 101 pence per litre Diesel InsuranceDepreciation 2 Overheads are all business costs not specifically covered in the other cost types 3 Goods in transit insurance Source: Deloitte Global Truck Study 2014

2 More than anything else, increasing cost pressure in the transportation business RepairOverheads & Maintenance drives telematics implementation. In a very competitive market, truck efficiency is increasingly becoming the main buying criterion for customers. DepreciationWages

Wages

Fuel There are 3 major application areas, ranging from core to adjacent to new telematics offerings

Market Outlook Market Trends Recommendation Overview Telematic Areas Potential Applications for “Area 3 New Telematics”

Area 1: Core Telematics Area 2: Adjacent Telematics Area 3: New Telematics Security/Safety Management Fuel Optimization Leverage Telematics assets • Track and trace • Fuel POI tracking 1. Telematics data • Stolen vehicle tracking • Charging station 2. In-vehicle screen to create value • Critical event alerts • Battery swap facility location in non-automotive industries like: • Fuel-tax filing • Advertising Vehicle Uptime Maximization • Energy • Remote Diagnostics Mobile Resource Management • Financial Services • Prognostics • Driver and vehicle connectivity • Health over cellular and WiFi networks Smart Navigation • Two-way communication • Dynamic Navigation • V2I + V2V Communication • Telematics-based fuel • EOBR, HOS • Green routing • Electronic vehicle inspection • Electronic toll collection • Handheld device connectivity • Real-time parking

OEM value: Increase revenue by: • Growing truck sales through • Providing new business solutions • Boosting truck prices due to enhanced CRM via telematics outside the core automotive field telematics features • Offering fleet management services

Market Outlook Market Trends Recommendation Overview Telematic Areas Potential Applications for “Area 3 New Telematics”

Potential Value Streams for Level 3 new telematics OEMs have traditionally focused on two core revenue streams from automotive telematics: 1. In-vehicle 2. In-app advertising 3. Text and audio ads display & audio capability • Vehicle price markup Partner Company Customers of OEM Advertisers Advertising e.g. App developers OEM’s telematics 6. Payment for 5. Payment for 4. Payment for • Telematics subscriptions display & audio use telematics advertising application usage

However, telematics provides new

2. Data, Analytics 3. Targeted channels of access to customers as 1. Telematics data platform promotional offers Telematics OEM Oil Major Gas station Energy Customers well as new and valuable customer 5. Payment for 4. Payment for 6. Payment for data gasoline gasoline insights

When aggregated and distributed 1. Vehicle and 2. Policy aligned with 3. Improved risk surrounding data accurate risk proﬁle proﬁling for all customers Partner Company Common Customers Partner’s by partners these assets can gener- OEM Financial Services e.g. Auto Ins. Comp. (to OEM and PC) customers only 6. Payment for data 5. Insurance premium 4. Insurance premium ate incremental profits for OEMs

Augmentative telematics business 1. Safety warning based 2. In-vehicle health 3. In-vehicle on driver condition, monitoring data & value opportunities in sectors adja- health advice health/ﬁtness advice Telematics display/audio Health Insurance OEM Health Health Customers Company cent to automotive as well as the 4. Payment for safety & 5. Payment for data health service and display potential profit for OEMs

Market Outlook Market Trends Recommendation

Common Telematics Organizational Challenges How to Win the Market

Those without a vision for and a focus on the telematics organization Telematics is not about technology. To win the mar- have faced greater growth challenges; organizations without a longer- ket against often cheaper aftermarket organizations, term focus have had difficulty laying the groundwork for innovative OEMs must offer complete solutions future products and services. Telematics solutions must be embedded in a service Start regionally, moving towards global implantation or start as a organization to ensure that OEMs leverage their com- global entity at the outset; typically seen started as a focused, regional petitive advantage, which is Truck Diagnostics and its level and scaled up. The drawback is a lack of global consistency at influence on the optimization of total cost of ownership the outset for data analysis and executive reporting, and an inconsist- ent customer experience. In addition, the cost of multiple stand-alone The challenge is developing an independent business solutions is greater and comes at the expense of regional flexibility model with different lifecycles and supply chains for and customization. the telematics organization

The telematics organization is sometimes grouped together with the In the People dimension, content, application develop- engineering and IT organizations. This may lead to the organization ment, and integration require a different skill set than becoming a cost center, limiting future revenue growth focus. truck design or enhancement

Building a telematics organization usually requires expertise and re- OEMs that follow these steps consistently will sources of limited availability within the organization, which may need win the market to look externally for talent; skills and know-how. While such a step may lead to advanced expertise being available, any externally fueled growth needs to be balanced with organic growth.

Southeast Asia is the leading growth region but a one-size-fits-all approach Insights from OEMs will not work due to different country maturities and needs Q: In your opinion, In which regions will your company‘s turnover grow in the future? (% of respondents) The respondents in Deloitte’s Global Truck Study consider South East Asia the leading region for future growth. China’s market is seen to expand only slightly while the saturated Japane- se market is expected to stagnate.

Four groups of countries dominate the regional economic landscape • With a per-capita GDP ≥U.S.$10,000, Singapore and Brunei represent the most mature markets, where OEMs expand their business beyond truck sales & after-sales ASEAN • With a per-capita GDP ≥U.S.$5,000, Thailand and Malaysia will evolve away from their 33% emerging market status, allowing OEMs to offer the entire range of their service portfolios. • With a per-capita GDP ≥U.S.$2,000, Indonesia and the Philippines offer an opportunity to expand sales through dealers while transitioning into higher value added services • With a per-capita GDP

Market Predictions Recommendations Cases Region Group A Group B Group C

ASEAN consists of “Northern” and North Myanmar “Southern” members Continental Asia 65M North • Thailand-centric market (“hub & spoke”) Thailand Laos • ASEAN highway construction will facili- South 68M 7M tate the interchange of people and goods Maritime Asia Cambodia Vietnam South 15M • Domestic demand-led market 87M Philippine Malaysia 97M Brunei 30M 0.4M

Singapore 5M Indonesia

248M Group S: Per-capita GDP ≥ US$10,000 Group A: Per-capita GDP ≥ US$5,000 Group B: Per-capita GDP ≥ US$2,000 Group C: Per Capita GDP < $2,000

Bubble size represents population

Group S: Per Capita GDP≥$10,000 Group B: Per Capita GDP≥$2,000 Group A: Per Capita GDP≥$5,000 Group C: Per Capita GDP<$2,000 Group A: Countries such as Thailand and Malaysia with high maturity

Market Predictions Recommendations Cases Region Group A Group B Group C

Thailand Malaysia 2014 2024

Developed Mature • Market almost saturated • Market highly developed • OEMs provide all services • OEMs expand business beyond Maturity truck sales & after-sales service

16 7 20 9

3 2 6 4 MCV HCV Market Development in K Units

• Transport efficiency • Logistics volume • Market deregulation Main Driver

Low-cost mass High value-added Cross-industry Focus Area Eco-friendly car Telematics transport body building partnership Source: IHS Global & Deloitte Analysis © 2014 Deloitte Consulting GmbH Group B: High market potential but less profitability

Market Predictions Recommendations Cases Region Group A Group B Group C

Indonesia Philippines 2014 2024

Expanded Developed • Widespread use of trucks • Market almost saturated • OEMs expand sales through deal- • OEMs provide all services Maturity ers

17 71 33 89

2 2 MCV HCV Market Development in K Units

• Resource development • Trade volume • Government incentives Main Driver

Focus Area After-sales Use of customer High-quality Remanufacturing Parts sales service information bodybuilding business Source: IHS Global & Deloitte Analysis © 2014 Deloitte Consulting GmbH Group C: Small markets with high industrialization potential

Market Predictions Recommendations Cases Region Group A Group B Group C

Vietnam Cambodia 2014 2024 Myanmar Laos

Nurtured Expanded • Little use of trucks • Widespread use of trucks • OEMs make few inroads • OEMs expand sales through dealers Maturity into the market

1 3 1 16 31 1 1 1 7 1 14 11 MCV HCV Market Development in K Units

• Resource development • Thailand – Plus One • Labor-intense industrialization Main Driver

Focus Area After-sales Start of customer Remanufacturing New truck Parts sales network development management business sales Source: IHS Global & Deloitte Analysis © 2014 Deloitte Consulting GmbH OEMs must tailor their market growth strategies to a set of very diverse market needs

Market Predictions Recommendations Cases Sales Market Entry Custom tariffs

High market potential Suggestions for OEMs

Thailand • Offer differentiated services to: Malaysia - Increase customer loyalty Telematics Cross-industrial - Better serve mature markets partnership

Indonesia • Develop low-cost strategy to compete with local/upcoming competitors Philippines After Sales Customer Parts sales Management

Vietnam • Enter the market via the used vehicle business since Cambodia new vehicle market growth will be slow due to local policies and poor infrastructure Myanmar Remanufacturing Business Laos

Market Predictions Recommendations Cases Sales Market Entry Custom tariffs

Recommended Hub-Approach For products traded among ASEAN member states, tariffs • To tackle the growing and dynamic ASEAN markets are decreasing while technological and homologation requirements are becoming harmonized and comply with ASEAN content requirements, OEMs commonly use one country as a regional hub, taking advantage of low regional trade barriers To enjoy these benefits, an ASEAN-produced content of 40% is required • Considerations when establishing a regional ASEAN hub include Goods brought to the ASEAN region are subject to the respective - Different entry tariffs and regulations for requirements, incentives and tariffs of the entry country each member state (e.g. CKD regulations) - Regional and bilateral FTAs ASEAN has concluded FTAs with China, Japan, South Ko- - Location decision criteria (e.g. the right set of rea, India, Australia and New Zealand location decision criteria to make sense of differences in factor costs, workforce qualification, infrastructure etc.) Some ASEAN member states have concluded bilateral FTAs • Individual markets should be addressed as required by their respective size, maturity, and import duties

*FTA= Free Trade Agreement

Market Predictions Recommendations Cases Sales Market Entry Custom tariffs

CBU (Completely built-up) CKD/SKD and CBU Tariffs – LCVs, Trucks and Heavy Trucks1) • Vehicles do not require any additional assembly Indonesia Malaysia • High effective tariffs • Higher transportation cost Regular Regular EU China India EU China India Customs Rate Customs Rate 50 CKD/ SKD (Completely/ Semi knocked down) 40 40% 40% 40% • Local assembly complies with ASEAN content 30 30% 30% 30% 30% requirements 26% 20 20% 15% • But local assembly adds supply chain complexity10 10% 10% • Applicable CKD/ SKD requirements to be considered0 0% 0% 0% 0% • Lower effective tax rate • Leverages location factors Thailand Vietnam Regular Regular EU China India EU China India Customs Rate Customs Rate

50 50% 50% 50% 40 40% 40% 40% 40% 30 20 20% 20% 20% 10 15% 15% 15% 0 5%

Effective Duty Rate CBU Effective CKD/SKD Rate Gap Tariff for individual parts applicable

1) Based on Tariff Codes 8704.22 (GVW > 5t ≤ 20t ) and 8704.23 (GVW > 20t). Including individual customs rate, excise tax and other import fees. Serves as an overview and does not include rates applicable to special types of LCVs, trucks, and heavy trucks © 2014 Deloitte Consulting GmbH OEMs have taken bolt action to win in the ASEAN market, with creating customer value at the core of the initiative

Market Predictions Recommendations Cases

Business Cases

• Forecast demand for cars/parts Thailand OEM for construction, mining • Know replacement timing of parts and industrial machinery Malaysia • Use data for credit management • Offering diverse services by using Telematics • Protect against theft (vehicle monitoring) telematics

• Provide fleet management by contract Indonesia Global OEM • Use genuine parts Philippine • Offering a wide range of af- • Provide 24h-service-and-parts support ter-sales services After Sales • Offer safe-driving courses

• Provide high-quality products at a low price Vietnam Global Heavy Duty Truck OEM • Buy back used parts Cambodia • Building a remanufacturing • Offer financing solutions business Myanmar Remanufacturing Business Laos

Authors Christopher Nürk Ranjit Singh Britta Mittlefehldt Julia Pabst Partner DC Principal Manager Senior Research Analyst Deloitte Consulting Germany Deloitte Consulting United States Deloitte Consulting Germany Deloitte & Touche Germany [email protected] [email protected] [email protected] [email protected]

Michael Maier Manish Prabhu Kei Hayase Henning Buchholz Director Senior Manager Senior Manager Senior Consultant Deloitte Consulting Germany Deloitte Consulting United States Deloitte Consulting Japan Deloitte Consulting Germany [email protected] [email protected] [email protected] [email protected]

Global Automotive Team Global Germany US India Joe Vitale Thomas Schiller Bruce Brown Kumar Kandaswami Global Automotive Sector Leader Partner Principal Senior Director Deloitte Consulting United States Deloitte Consulting Germany Deloitte Consulting United States Deloitte Consulting India [email protected] [email protected] [email protected] [email protected]

Italy Asia Sweden China Marco Martina Yuki Kuboshima Joakim Torbjorn John Hung Partner Partner Partner Partner Deloitte Consulting Italy Deloitte Consulting Asia Deloitte AB Deloitte Touche Tohmatsu [email protected] [email protected] [email protected] [email protected]

Vehicle Classification Regions

Commercial Vehicles European Union

Austria Latvia

Belgium Lithuania Trailer/ Trucks Buses Vans semi-trailer Other Bulgaria Netherlands Czech Rep. Norway Eastern Europe Denmark Poland United States Ukraine Weight in t Scope of analysis Weight in 1,000 lbs Estonia Portugal Russia Kazakhstan Finland Romania Heavy CommercialVehi- Central America Belarus cle (HCV) Class 8 France Slovakia Japan Schwere Costa Rica Uzbekistan 15.0 Heavy Germany Slovenia Lastkraftwagen Class 7 Trinidad & Tob. Turkey Duty Greece Spain China 12.0 Mexico Medium Commercial Class 6 Hungary Sweden Mittelschwere Vehicle (MCV) 19.5 Honduras India Lastkraftwagen Ireland Switzerland Class 5 Colombia Brazil 7.5 Medium Italy Ud Kingdom Venezuela Asean 6.0 Duty Class 4 Leichte Light Commercia Guatemala Indonesia Lastkraftwagen Class 3 South America Vehicle (LCV) Panama 10.5 Rest of World (ROW) South Korea 3.5 Uruguay Class 2 Nicaragua Vietnam Light Argentina Pakistan Peru Kleinlaster Light Vehicles/Cars Duty Thailand Class 1 Chile Bahamas Jamaica Malaysia Paraguay Domi. Rep Australia Germany IHS United States Taiwan Bolivia Neth Antilles Cuba Philippines El Salvador Saudi Arabia Barbados Canada Haiti Productsegments Ecuador Bermuda Belize

Medium Duty Trucks Heavy Duty Trucks New Zealand Oth Caribbean

Low Cost € 14.000 - € 40.000 € 22.000 - € 45.000 South Africa

Midmarket € 20.000 - € 50.000 € 35.000 - € 65.000 Regions have been defined based on materiality and country-specific availability of sales data for MCV & HCV segment1 Premium > € 45.000 > € 65.000

About the Survey The Deloitte Global Truck Survey was conducted by Deloitte’s Global Automotive Practice. The results of the survey are based on data from IHS Global, analysis by the Deloitte Global Automotive Practice, and in-depth interviews with hand -selected senior executives of global truck OEMs.

51% 72% FAW Jie Fang FAW Volkswagen Scania Trucks Hino Motors Toyota Group FAW Group Group AG 100% Truck Jie Fang 17%

Volkswagen MAZ-MAN MAZ-MAN (Belarus) Trucks & 75% Buses 30% Hino Scania Isuzu 50%

Isuzu Isuzu 9% PT Isuzu Xian Shaanxi Commercial 50% Qingling Astra Motors Ural Cummins Heavy-duty 35% Truck of America GAZ GAZ 25% Engineering (Indonesia) Truck (China) Automobile (Nafta)

CNHTC Isuzu Sinotruk Huanghe Philippines 25% Prince Ashok IPC Leyland 100% Automotive Shaanxi Infotronics Smith Electrical Private Vehicles 35% (India)

Jiangling DAF Motors Corp. 50% 100% Volvo Group Eicher Motors Fuso KAMAZ 8% Trucks 11% (Russia) 50% Kenworth Paccar 50% 50% Tata Group

Mack Kamaz - Tata Engineering Daewoo Guanzhou (Kazakhstan) Hyundai Motor Hyundai Hyundai Company 50% (China)

*Stand 08/2014 OEM Other Player Joint Venture Brand Ownership Strategic Partnership Joint Venture

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Issued 09/2014