Truck Market 2024 Sustainable Growth in Global Markets

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

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global setting.

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This year we present a truly international outlook, prepared by the Deloitte Global Commercial

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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

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Christopher N?rk

Michael A. Maier

and industry-specific challenges.

We hope you will find this report useful in developing your future business strategy. To the

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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 ? Detailed materials supporting our findings and explaining the impacts for the OEMs

Christopher N?rk Partner Automotive

Michael A. Maier Director Strategy & Operations

? 2014 Deloitte Consulting GmbH

Table of Contents

1. Executive Summary 2. Market Outlook 3. Focus Top 10 OEMs 4. Competitive Landscape 5. Global Insights: North America,

Increasing Profit in the Aftermarket 6. Global Insights: Western Europe,

Growth through telematics 7. Global Insights: Japan, How OEMs

will succeed in ASEAN

The global truck market outlook is optimistic

Yet, slow growth in key markets will increase competition while growth is shifting to new geographies

From now to 2024, annual growth of > 3% is expected in the global truck market, mainly driven by global GDP growth, estimated at 3.3% per year.

A closer look at growth by country reveals a wide range of growth rates. Brazil, China, and Japan show little momentum, growing at 1% per year. The U.S. also trails the global average at 2%. India is the most dynamic large 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%).

The study will examine in detail how market contenders can stay on top of ever-intensifying competition in the mature markets. Expanding into growth markets requires major decisions on the operating model and product 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.

? 2014 Deloitte Consulting GmbH

ASEAN 11%

67%

22%

China 10%

70%

10% 10%

1 Winning in a global market is the key challenge forIndeia very tru66c%k 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, product and service portfolio to local requirements

ROW 0

66%

20

40

12%

22%

60

80

100

Mature Market Strategy

Mature Market Strategy

New business models to open new revenue streams to OEMs

Growth Market Strategy

Growth Market Strategy

Strengthening local presence in the "right markets"

? Brands ? Products ? Development & production ? Sales & services

Insights from OEMs

Q: Within the following regions, for which

segme1n0%t do you3e0x%pect the5s0t%rongest 70%

90%

increase in sales volume?

Global Insights

EU

38%

62%

Aft

North America:

Increasing Profit in

Eastern Europe

25%

25%

50%

the Aftermarket

Pre

USA 18%

36%

46%

Global Insights Western Europe: Growth through Telematics

South/Central America ASEAN 11%

China 10%

India

78% 67% 70%

66%

11% 11% Mi

22%

10% 10%

Low

34%

Brasil 10% 20%

40%

30%

Global Insights Japan: How OEMs Will Succeed in ASEAN

Russia Japan ROW

0%

50%

40%

10%

38%

24%

38%

66%

20%

40%

12% 22%

60%

80% 100%

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 a staggering 9% for India and 7% for Eastern Europe

The truck market is growing, but the pace is fairly slow 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 continue to be the dominant segment in the market, with a share of 63%. Between 2014 and 2024 the global truck market is expected to continue growing at a fairly low rate of 3.1% per year. The Indian market will be the main driver.

Growth is not global ? it is regional Growth rates vary widely around the globe. Growth is slowing down in large truck markets such as China and most of the Triad countries. On the contrary, India, the ASEAN countries, and Eastern Europe will account for most of the future growth. Central America is showing dynamic growth as well. More than 70% of incremental sales in 2024 will be generated outside the Triad markets. But the solidity of the Triad markets will stabilize the total global truck market in the decade to come.

Beyond BRIC 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 markets remain the largest truck markets, other regions have developed more growth momentum. It is essential for OEMs to focus on both, the largest markets and the new growth regions.

*Medium Commercial Vehicle, Heavy Commercial Vehicle, Reference page

Insights from OEMs

Q: In your opinion, how will your company`s turnover develop in the following regions in the future? (% of respondents)

India +9%

44%

Eastern Europe +7%

33%

Russia

0%

+5%

56%

Central America +4%

67%

Asean +4%

11% US

33% +2%

EU +4%

44%

China +1%

0%

Brazil +1%

0%

Japan +1%

Market growth (units, CAGR 2024e in %), source IHS Global Expected market growth by OEMs. Source: Deloitte Global Truck Study 2014

? 2014 Deloitte Consulting GmbH

0 2014e 2024e

After a volatile periodMCVfrom 2004 to 2013, growth in the global MCV

and HCV markets is eHCxVpected 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 uDnteivl e2l0o2p4ment of global MCV and HCV sales until 2024

k units 4000

CAGR 3.1%

k units 4000

3000

37%

36% 2000

1000 64%

63%

3000 2000 1000

0 2014e

2024e

HMCVCV MCV HCV

0 2004

2006

2008

2010

2012

2014e

2016e

2018e

2020e

2022e

2024e

2005

2007

2009

2011

2013

2015e

2017e

2019e

2021e

2023e

From 2.7 M trucks in 2014 to 3.7 M in 2024

? The annual growth rate for the global truck market is projected to be 3.1% for MCV and HCV sales from 2014 to 2024

? Average annual growth from 2004 to 2014 was 2.7% ? A nticipated growth rates for MCVs and HCVs are very similar, with HCVs

remaining the dominant segment in the market with a 63% share ? 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

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%

Central America

+5%

2014e

U.S. +2%

2014e

377.400

EU +4%

2014e

297.000

461.000

116.00

195.000

2024e

2014e

985.00

China +1%

469.000

2024e

2024e

2014e

1.090.000

2024e

2014e

77.100

2014e

Eastern Europa

48.100

65.500 103.600

+10%

97.700

2024e

2014e

237.300

84.500

2024e

2024e

2014e

544.400

Brazil

164.700

+1%

2024e

2014e

168.100 ASEAN

181.700

2024e

+9% India

+4%

242.900

2024e

Japan +1%

South America

+2%

2014e

43.000

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 2024e Sales by Country

Outlook by Region

Outlook by Country

2024e Growth by Country

Country Deep Dives Additional Sales in 2024e

Expected Volume of Truck Sales in 2024e by Country

1.100.000 1.000.000

900.000 800.000 700.000 600.000 500.000 400.000 300.000 200.000 100.000

0

Market Size:

? The BRIC markets will remain the world's largest truck markets

? India will supersede the U.S. as the world's second largest market

? Struggling European countries such as Spain and Italy are expected to have recovered by 2024

China India USA Russia Brazil Indonesia Germany Japan France Mexico Canada U K Turkey Spain South Korea Vietnam Italy South Africa Thailand Argentina Peru Saudi Arabia Colombia Poland Australia Chile Ukraine

2014 Rank Source: IHS Global & Deloitte Analysis, Not allocated countries "ROW" not included, Reference page

New markets Triad markets

? 2014 Deloitte Consulting GmbH

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