A few weeks back, the leaders of the commercial vehicle parts and service industries got together for several days at Heavy Duty Aftermarket Week and for HDMA’s Heavy Duty Dialogue 2011 conferences. The theme was: Game-Changers in the Commercial Vehicle Industry.
As one always expects from a conference at the beginning of the year, multiple changes are being predicted.
This year it was different, more significant. There are some major changes on the horizon in this industry. I know that sounds like an alarmist’s comment, but I have been around this industry my entire career and it has me concerned.
Will we be ready for an onslaught of low cost trucks from Asia – both China and India? At the Heavy Duty Dialogue, Frost & Sullivan’s Sandeep Kar and Ryan Carmichael explained, based on their firm’s research, that lower cost, less robust and “repair unfriendly” medium to heavy duty trucks will begin appearing on our roads and in our shops.
FOREIGN COMPETITION
The largest truck manufacturing country in the world is now China, with India not far behind. Both are fully capable of producing U.S. and European compliant trucks for 25 to 35 percent below the market prices of trucks built in these countries.
Both Chinese and Indian truck makers currently have substantial markets for trucks in their own regions, but they have their eyes set on the rest of the world for future growth. In these emerging markets, truck freight is the only practical method of transportation, given the cost and single-use issues with rail. Infrastructure built for both passenger vehicles and truck transport are essentially the same, whereas rail is for a single use – trains.
China will continue to produce and ship a million or so trucks and for the next few years, mainly in to its own interior, finds Frost & Sullivan’s research. As the size of the truck fleet rounds out in China or India, these countries’ truck manufacturing growth will come only from global expansion.
The interesting part of all of this is the global collaboration and partnerships occurring on the part of the major U.S. and European truck manufacturers with OEMs in China and India. Navistar, Daimler, Volvo and a few others are working very hard to secure positions in the growth markets in Asia. The major U.S. and European component suppliers are doing the same.
This is in parallel with the North American and European truck manufacturers, or directly with the emerging OEMs in Asia.
They are doing this via partnerships, joint ventures, licensing and marketing agreements, etc. The intent is to have a place in the big growth markets of the future.
It is a smart strategy, considering the certainty of the Asian truck manufacturers’ expansion into Western Europe and North America. Ensuring that they are in on the ground floor is a good way to have influence over the methods used to penetrate these markets, along with the new entries from Asia.
MARKET SHIFT
What does this mean to you? If you were around in the early 1970s and 1980s, you witnessed the Japanese car manufacturers coming in to this market, filling a need for lower cost, more fuel efficient vehicles. It worked great for them. U.S. car manufacturers seemed to be caught flat-footed with the strong consumer response to this major shift in the market. The big challenge was servicing these vehicles in the independent aftermarket.
The new entries to the market sort of looked, sounded, felt and smelled like domestic vehicles, but the similarities pretty much ended there. Everything was made differently – more compact, fewer serviceable components and very distinctive engines, drivetrains, brakes and suspension systems. Special training was needed to service, as well as sell parts, for the new vehicles.
With the new heavy duty version of an imported vehicle surge, many of these problems will surface again, this time in the truck industry.
Much discussion by Kar and Carmichael centered around the changes to expect – hybrid drives, electric drives, “de-contented” vehicles, unserviceable systems, etc. The long and short of it is: There are large segments of the truck buying public, particularly in municipal, city delivery, rental/lease and short haul that will be ripe for the cost savings offered with these new vehicles. They will most likely not have extended warranties or the robustness that goes along with domestic manufactured vehicles. That will mean earlier and more frequent parts and repair opportunities.
We can expect a fairly large percentage, as high as 20 percent, of the market to switch to these lower cost vehicles fairly early on. The framework of a support network will likely be in place via the domestic manufacturers’ dealer networks. There will be a few where entire dealer networks will be developed for the sales and service of the new brands of vehicles.
NEW OPPORTUNITIES
The good news for those in the parts and service business is that most of you will begin servicing these vehicles a lot earlier in their lifecycle than their domestic counterparts. Many of the systems and components will come from supplier brand names that you are already familiar. This could be a real opportunity for those willing to prepare, train and equip to service the new vehicles.
These new market entries certainly are, as the theme of Heavy Duty Dialogue 2011 stated: Game-Changers in the Commercial Vehicle Industry. We all need to be willing to keep an open mind and prepare for significant changes in order to benefit from the new opportunities that will come along.
Some 40 years ago, I was in the service station business. New domestic vehicles and all of the electronic systems chased me away from the light vehicle repair business.
Many of the service stations from the past are today’s convenience stores, with gas pumps out front. It became easier and more profitable to sell candy bars and soda than to work on cars.
We would hope to help our current parts and service providers from a similar fate. Besides, we don’t need that many more C-Stores.
