Major heavy duty truck OEMs change global platform strategies

It has been about 10 years since western OEMs started entering Brazil, Russia, India and China (BRIC) markets with serious intent. Since then, the very face and structure of the global heavy duty truck market has changed. Markets considered as an afterthought a few decades ago are now dictating the course of global commercial vehicle demand and industry's growth.

The seismic changes shaping the commercial vehicle industry globally have truly flattened the world, as OEMs from both triad and non-triad markets are aggressively competing for sustainable and robust growth. As OEMs begin developing growth strategies in this flat-world eco-system, global - not local or regional - platforms have emerged as a major requirement for any OEM with strategic intent and hunger for global growth.

Frost & Sullivan's global Commercial Vehicle Research program has recently published a comprehensive study titled: Strategic Analysis of Platform Strategies of Major Heavy Duty Truck Manufacturers. In developing this study, we derived that the concept of global platforms is so new in the commercial vehicle industry that there is no harmonized definition that exists among OEMs.

This led the research team to create a globally standardized definition based on the unique definitions that each OEM seems to use. By Frost & Sullivan's definition, a global truck platform can be termed as "a single set of common design, engineering, and manufacturing elements shared between different products/brands/marquee within the same organization or between organizations."

Global Platforms

The study, developed through intensive evaluation of platform strategies of 12 leading global OEMs, concludes that by 2018, on average, 30 percent of all heavy truck production of top 12 OEMs will be based on global platforms, and 29 heavy duty truck models globally will be based on global platforms.

Half of the top 12 OEMs will, in effect, increase the number of dedicated global platforms, while the remaining six will rely heavily on the global platforms that are currently in production.

While North America-based OEMs, such as Navistar and Paccar, are also increasingly showing interest and activities in this area, and are developing such platforms in global markets, success potential of such platforms in their home market is proving to be relatively low owing to the dominance of conventional designs in North America. This is also creating hurdles for European and Asian OEMs looking to bring global platforms into North America.

However, such barriers are not preventing OEMs, such as Daimler and Volvo, to increasingly share technologies, components and systems across global platforms and regional North American platforms in areas ranging from powertrain to chassis and safety technologies to telematics.

Global platform development and execution may appear to be just a triad OEM strategy to penetrate growth markets, reduce manufacturing costs and complexity in domestic and global markets and enhance margins. However, this strategy is also being feverishly pursued by BRIC OEMs to develop truck models for both developing and developed markets.

A look into platforms of TATA, DongFeng, CNHTC and Foton, among others, show that platform-based models such as PRIMA, Tianlong, SITRAK, Howo, Auman GTL and others will play a much greater role in markets as diverse as Asia Pacific, Africa, Middle East and South America, as well as hold the potential to enter European and North American markets by 2020.

Vertical Integration

Vertical integration seems to be the manifestation of global platform strategies of some OEMs, such as Daimler and Volvo, as it enables them to control both margins and product differentiation. In fact, vertical integration is actually posing a threat to current truck sales culture in North America, where trucks are pulled by end-users through spec'ing, as opposed to Europe where trucks are pushed by OEMs.

While vertical integration of key vehicular systems and modules may prove to create barriers for Tier-1 suppliers, it is also opening up opportunities for "virtual" integration.

OEMs' global platform strategies, especially with BRIC OEMs, are expected to partially hinge on the availability of Tier-1 suppliers that have the footprint and scale to support them as they go global, while also partially relying on local suppliers in foreign manufacturing locations that have the expertise and attractive pricing value propositions to develop and deliver cost competitive trucks.

Tier-1 suppliers such as Cummins, Eaton, ZF, Wabco, etc., are poised to support OEMs from both developed and developing countries in creating strong global platforms.

The global heavy duty truck market is just about getting ready for a prolonged love affair with global platform strategies. As it embraces these strategies with open arms and looks to benefit from their effective execution, it will become imperative that OEMs do not remain myopic in developing these platforms for triad and BRIC markets alone.

While it is true that we are seeing a relative slowdown of BRIC markets and arrival of market maturity, and continued maturity of triad markets, it is also true that the Next-11 and African markets are getting ready for takeoff. This makes it important for OEMs to encompass these potentially lucrative truck markets in developing global platform strategies for the next 10 to 20 years.

Frost & Sullivan is forecasting global heavy duty truck production from global truck platforms to reach approximately 612,000 units by 2018, which is nearly double of global platform-based truck production levels in 2011. This implies that service and maintenance principles and practices of heavy duty trucks that will be sold in North America in the coming years will change dramatically over the next 5 to 10 years.