Truck Market 2024 Sustainable Growth in Global Markets Editorial Welcome to the Deloitte 2014 Truck Study 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 © 2014 Deloitte Consulting GmbH Table of Contents The global truck market outlook is optimistic 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 require- ments 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. © 2014 Deloitte Consulting GmbH Premium 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 © 2014 Deloitte Consulting GmbH 2 The global truck market is expected to grow at a CAGR of 3.1% to 2024 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 © 2014 Deloitte Consulting GmbH Development of global MCV and HCV sales until 2024 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 k units © 2014 Deloitte Consulting GmbH 4000 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 © 2014 Deloitte Consulting GmbH The Triad and BRIC markets will remain the biggest truck markets in 2024, despite suffering from slower than average growth in most cases 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.