Commercial Vehicles

12014 Power Systems Research Inc. This presentation contains copyrighted and confidential information of Power Systems Research . Those having access

to the work may not copy or use it without written authorization of Power Systems Research Inc. Unauthorized use may result in prosecution.

www.powersys.com

Market Outlook For Commercial Vehicles

2

Table of Contents

• Introduction

• Drivers, Challenges and Restraints

• The Commercial Vehicles Market in India versus Rest of World

– Medium and Heavy Duty

– Light Commercial

• Industry Trends

– Engine Suppliers

– OEM Manufacturers

– End Users

• Conclusion

• Q&A

3

Introductions to the Power Systems

Research Team

4

Power Systems Research

• Global Provider of Market Research, Forecasting & Consulting

Services to the Power Products and Drivetrain Industry

- Headquartered in St. Paul MN, USA

- Presence in Detroit, Brussels, Tokyo, Beijing, Pune, Sao Paulo,

Moscow, Riyadh & Mexico City

• Founded in 1976, Over 35 Years of Industry Experience

• Expertise in over 15 Market Segments

Extensive Network of Experts Located in Every Key Market

Agriculture, Construction, Industrial, Light Commercial Vehicles,

Marine Auxiliary, Marine Propulsion, Medium and Heavy Vehicles,

Minivans and SUVs, Passenger Cars, Power generation, Railway

Lawn and Garden, Recreational Products and related products …

turbo, lubricants, components, tyres

5

OE LinkTM

Original Equipment Production Forecast & Sales with OE Model & Engine Details

Market Information Databases

EnginLinkTM

Global Engine Production Forecast with Engine Model Specifications

CV LinkTM

Commercial Vehicles- Truck-Bus Production Forecast with OE Model & Engine Details + Qualitative & Quarterly Forecast

PartsLinkTM

Population ModelComponents Modules

Emissions, Turbo chargers, Transmissions, Fuel Systems, Tyres

MarineLinkTM

Pleasure Boat Production Data

www.powersys.com

6

Market Forces Influencing Commercial

Vehicles Growth in India

7

Forces Influencing Production and Demand

• Drivers– Economic Situation – GDP, Capital Spending, Consumer Confidence, Capacity Utilization

– Increased Urbanization

– Infrastructure Spending

– Freight, Transportation & Technology Improvements

– Energy Demand – Natural Gas

– Emission Regulation

• Challenges– Total Cost of Ownership

• Fuel Economy

• Pricing for a new truck

• Resale value

– Replacement Cycles

– Manufacturing Capacity - Global OEMs

• Restraints– Threat of Substitutes - Rail

– Government Stability and Spending

– Monitoring Compliance

8

Country 2000 - 2007 2008 - 2012 2013 - 2018

India 7.2% 6.5% 5.8%

World 4.2% 2.9% 3.8%

USA 2.7% 0.8% 2.9%

Canada 2.8% 1.2% 2.2%

European Union 2.7% -0.1% 1.4%

Asia Pacific (Rest) 8.5% 7.8% 6.6%

Japan 1.5% -0.1% 1.3%

China 10.5% 9.3% 7.1%

CIS 7.6% 2.4% 3.4%

Latin America and

the Caribbean 3.6% 3.3% 3.4%

Middle East and

North Africa 5.8% 4.4% 3.8%

Sub-Saharan

Africa 5.9% 4.9% 5.6%

Drivers – Economy

• India GDP growth is forecast to grow at a 5.8% CAGR up to 2018

• This is well above the world average over that period

• However recovery is weak and uneven in the short term when we look at the most recent PMI survey,

export and the new orders index fluctuated throughout 2013.

• The market remains cautious.

• In the next five years, Indian GDP growth is unlikely to reach pre-2008 rates.

Source: IMF

Annual Compound Gross Domestic Product (GDP)

India Purchasing Managers Index

Source: Markit / Economics Limited / HSBC India

Manufacturing PMI

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

Dec-0

5

Ap

r-06

Au

g-0

6

Dec-0

6

Ap

r-07

Au

g-0

7

Dec-0

7

Ap

r-08

Au

g-0

8

Dec-0

8

Ap

r-09

Au

g-0

9

Dec-0

9

Ap

r-10

Au

g-1

0

Dec-1

0

Ap

r-11

Au

g-1

1

Dec-1

1

Ap

r-12

Au

g-1

2

Dec-1

2

Ap

r-13

Au

g-1

3

Dec-1

3

New Export Orders Index New Orders Index

India GDP 2011 2012 2013 2014 2015 2016 2017 2018

% 6.3 3.2 3.8 5.1 6.3 6.5 6.7 6.7

Source IMF

9

Drivers - Emissions Regulation

• As in the other key markets, implementation and monitoring of regulations will drive

growth. India lags behind China but will catch up in 2018 or 2019

• USA & Europe are at the Euro VI stage. The first ever fuel standards to reduce Green

House gases and improve fuel economy will be implemented

• BS IV (Euro IV) norms implemented in October 2010 in thirteen cities and plans to expand

to 50 cities by 2015. The Indian Foundation of Transport Research and Training claims

more than 99% of trucks and buses are violating BS-IV norms.

• BS IV fuel requirements have been implemented by all oil companies. Now the focus will

be on logistics.

• BS V implementation will probably beyond 2020.

Segment 2005 2010 2013 2014 2015 2016 2017 2018 2019

India BS III BS IV BS IV BS V

China NS IV NS V

BrazilProconve/

Euro 3 (2006)

Euro IV not

implemented

Proconve P7

Euro V

(2012)

US EPA 10CO2

standardEPA 16 EPA 2017

Europe Euro VI GHG

10

Drivers - Natural Gas Prices ($/MMBtu)

• Today natural gas pricing in India is competitive versus other key markets

• India natural gas prices are due to double in 2015 and increase to US$8.4 by 2016/2017

• Natural gas will be increasingly significant in the fuel mix as Indian demand for energy grows

• Advantages: there are available resources, proven compliant technology to meet emission

standards

• Disadvantages: power is lower compared to diesel, pricing policy remains uncertain, lack of

infrastructure outside urban areas

8.0

4.4 4.2

8.4

13.4

3.5

5.6

Europe US India India 2015 Brazil Russia China

11

Drivers - Infrastructure

Source : NHAI

• Infrastructure Investment and development

remain positive in the short, medium and

long term

• India’s 12th Five Year Plan targets

infrastructure investment to 9% of GDP

• In November 2013, the World Bank

approved a US$500 million loan for the

National Highway Interconnectivity Project

in three states

• The National Highways and Development

Projects initiatives is in seven phases

• Availability of infrastructure provides good

prospects for growth in commercial vehicles

across the country

• The risk is delays in projects, lack of

investment and political uncertainties

12

Drivers – Infrastructure Progress

Number NHDP Phase Length (km) Status Start Completion

1 Phase I5,846 km

(3,633 mi)Fully complete Dec-00 Dec-06

2 Phase II7,300 km

(4,500 mi)Award in progress Dec-03 Dec-09

3 Phase III A4,000 km

(2,500 mi)Already identified Mar-05 Dec-09

4 Phase V6,500 km

(4,000 mi)

5700 km of GQ + 800 km to be

identifiedNov-05 Dec-12

5 Phase III B6,000 km

(3,700 mi)Already identified Mar-06 Dec-12

6 Phase VII A 700 km (430 mi) Ring roads to be identified Dec-06 Dec-12

7 Phase IV A5,000 km

(3,100 mi)To be identified Dec-06 Dec-12

8 Phase VII B Ring roads to be identified Dec-07 Dec-13

9 Phase IV B5,000 km


10 Phase VI A 400 km (250 mi) Already identified Dec-07 Dec-14

11 Phase VII C Ring roads to be identified Dec-08 Dec-14

12 Phase IV C5,000 km


13 Phase VI B 600 km (370 mi) To be identified Dec-08 Dec-15

14 Phase IV D5,000 km


Source : NHAI and WIKI

NHDP Projects divided into

seven phases

Yellow Highlighted – Still in

progress versus schedule.

13

Challenges – Total Cost of Ownership

102030405060708090

Petrol Diesel CNG

Freight

107110114

123127

140

165 167171172174175176177178

100110120130140150160170180190

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

Indian Road Freight Cost Index

Fuel Prices (INR)

Source : TCIL and PSR assumptions

• The Indian Road Freight Cost Index has been creeping up year on year and this trend is expected

to continue into 2014/15.

• The Index is a composite which includes fixed and variable costs including fuel cost per trip

per tonne, toll tax, max tonnage and minor repair eg. puncture costs.

• Increases in fuel prices and road freight cost explain the cautious outlook in the short term.

• In the medium term, introduction of emissions regulated trucks will increase new truck prices.

• These factors are increasing total cost of ownership.

14

Drivers – Summary

Manufacturers, Fleet Operators, Owner drivers continue to focus on reducing cost of ownership

Improve Vehicle Profit Margins

Emissions Regulations

Fuel Technology

Diesel, Natural Gas, Other Alternatives

Low Cost Components

Design for Fuel Economy

Extended Service Intervals

Fleet Owners

Price of a New Truck and Resale

Value

Fuel Cost

WarrantyRepair,

Maintenance

Driver Cost

Manufacturers

• In summary, the key drivers which will shift the dynamics and composition of the India commercial

vehicles market are - improved infrastructure, better road regulation, tightening emissions norms

and improved cost of ownership.

• Like the regulated markets of Europe, USA, BSV compliant product will be designed to improve

fuel economy.

15

Global Truck Market Outlook

16

Global Medium-Heavy Vehicles Production Outlook

Source: OE LinkTM 2014

• Global Medium and Heavy Vehicles Production is expected to grow in line with

economic conditions at a 5 Year Compounded Growth Rate of 3%.

• Production will increase from 5.6 million units in 2014 to 6.4 million units in 2019.

• India represents 6% of global truck production today and will increase to 9% of total

global production by 2019.

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

India Rest of World

000s units Global Production

17

Global Medium and Heavy Truck Production

• China dominates global market share and represents 38% of global production.

• The pace of growth will remain uneven across all markets. USA and Western Europe

will be lower versus India, Indonesia and Russia.

• The prospects for India amongst the BRICS are optimistic.

• Overall the future Medium and Heavy production prospects look bright for India. We

are forecasting growth to expand from a 6% CAGR to 11% in the next five years.

2009 2014 2019

Global 3% 8% 3%

India -2% 6% 11%

China 24% 2% 2%

Brazil 5% 9% 1%

Russia and

Belarus-9% 19% 5%

2014 Production

Brazil4%

China38%

Indonesia3%Russia

2%

United States10%

Western Europe

10%

India6%

Rest of World27%

5 YR Compound Annual Growth Rate


18

India Truck Production By Gross Vehicle Weight

• The 16t+ segment is forecast to grow to 279K units by 2019.

• We are expecting some shifts in demand from 3.5 – 6 tonnes to less than 3.5t ie. into the

Light Commercial Vehicles segment.

• Exports represent 10% of total truck production today and are forecast to double in the

next five years.

• Key export markets include Sri Lanka, Bangladesh, Uzbekistan, Middle East and Africa

and others where unregulated product can be sold.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

GVW as % of total production

3.51-6.0 tonnes (Class 3) 6.01-10.0 tonnes (Class 4 & 5) 10.01-12.0 tonnes (Class 6)

12.01-16.0 tonnes (Class 7) 16.0+ tonnes (Class 8) Bus and Motor Home ChassisSource: OE LinkTM 2014

19

Light Commercial Production in India (0-3.5t)

• The Light Commercial Vehicles segment is forecast to grow to 687K units by 2019.

• Other light duty segments such as Minivans an SUVs are also expected to remain

strong.

• Customers will increasingly shift from Medium Duty to Light Commercial Vehicles.

• The key drivers are increased urbanization, hub and spoke type logistics, competitive

pricing and driver regulations.

0

100000

200000

300000

400000

500000

600000

700000

800000

2009 2014 2019

Light Commercial Vehicles 0-3.5 tonnes

000s Units 2014 2019 5 YR CAGR

LCV (Light

Commercial

Vehicles)

560 687 4%

Minivans 315 372 3%

Sports Utility

Vehicles664 850 5%


20

97% of Truck Production is Diesel

Production By Fuel Type


• Diesel fueled engines dominate medium and heavy truck and light commercial

production.

• Within the Minivans and SUV segment both diesel and gasoline are popular.

• In 2014, natural gas engines represent around 3% of total Medium and Heavy

Truck production.

• Most of this growth is in transit buses. We expect natural gas penetration to

increase by 5% for buses and trucks.

• Increases are highly dependent on the availability of natural gas fuel at a

competitive price and in line with infrastructure development. Currently only

available in major cities.

Production By Fuel Type and Segment - 2014

3% 0.01%

2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Medium and Heavy Duty Light Commercial Vehicles Minivans and SUVs

Diesel Natural Gas Gasoline LPG

21

Medium and Heavy Truck Production By OEM Parent

Tata Group47%

Volvo AB21%

Hinduja Group21%

Mahindra Group3%

Sumitomo Corporation

3%

Daimler AG2%

Asia Motor Works2%

Force Motors LTD0.56%

Others (Ros Roca, Nissan, DRB,

Daewoo, Severnaya)1%

• The market is concentrated with the top three players – Tata, Volvo, Hinduja making up 89% of total

production

• Mahindra, Sumitomo, Daimler and Asia Motor Works each have 2-3% share.

• Double digit compounded growth rates are projected for Tata, Daimler, Asia Motor Works and the

Hinduja Group.

• Volvo, Mahindra, Ros Roco and Sumitomo are also expected to strengthen in the next five years

OEM Parent Name OEM Brand

Asia Motor Works AMW

Beiqi Foton Motor Company Beiqi Foton

Daimler AG

Bharat Benz

Mercedes-Benz

Mitsubishi Fuso

Force Motors LTD Force

Hinduja GroupAshok Leyland

Nissan

Kamaz, Incorporated KAMAZ

Mahindra Group Mahindra

Sumitomo Corporation Swaraj

Tata Group Tata

Volkswagen AG.MAN

Scania

Volvo ABEicher

Volvo

22

Since 2012 we have seen OEMs and

Engine Suppliers expanding

manufacturing capacity across all on-

highway segments

Medium and Heavy Truck Production Capacity

23

Global OEMS Expansion Plans In India

First manufacturing facility in Naraspura, Bangalore. Two manufacturing units – one for truck assembly and another for

buses. Truck production began in June 2013, rolling out two trucks per day and 30 trucks per month. Bus production expected

to start mid 2014. Currently employs 190 with plans to expand workforce to over 800 people over the next five years.

Heavy truck segment focus — 16 to 49 tonnes

Presence since 2008 but local production started in 2012. Bharat Benz vehicles are manufactured at the Chennai production

facility in Southern India, opened in April of 2012. By 2014, they aim to launch a total of 17 truck models between 7 and 49t.

Bharat Benz 3123 won the "Best Rigid Haulage Truck of the Year" the brand won the "CV of the Year" award.

Volvo-Eicher, announced further expansion of their Bangalore bus plant and Pithampur truck plant.. This is to double both truck

and bus capacity in the next few years. Current truck production capacity is 48,000 units per year and geared up to produce

Euro 3, 4, 5 & t4 engines. Plans are to export 60% of the medium duty engines from the Pithampur plant into rest of Asia,

Middle East and Africa.

Volvo is also bringing in the UD Truck. This will be for on and off highway applications. The final production of these trucks is

under development in Thailand, India and China

Present since 2006, fully owned from 2012 as MAN Trucks India Pvt. Ltd. The company has a manufacturing facility in Pithampur,

Madhya Pradesh, installed capacity of 24,000 trucks per year. Manufacture of heavy MAN CLA Trucks for the Indian Market and

for export to Asian, African and CIS. The range of products manufactured includes Mining & Construction Tippers, Haulage

Tractors and Multi Axle Trucks, from 16 t GVW to 49 t GCW as well as 16 tonne bus chassis for left hand and right hand drive.

In May 2011, Beiqi Foton announced plans to manufacture trucks in Pune, India. However since there’s been limited news.

The first vehicle should be rolled off the line from April 2015. These products are primarily targeted for the India, Srilanka

and Bangladesh markets.

KVML is a joint venture company between Kamaz Inc. and Vectra Group (Tatra Trucks Limited). Established the

operation in Bangalore in 2010. There is limited manufacturing of heavy trucks although capacity to produce up to

5000 trucks. The product is traditional Kamaz design which includes the 8x4 and 6x4 construction trucks.

SML Isuzu Limited (Formerly Swaraj Mazda Ltd.) – established since 1983. is a joint venture between Japan’s Mazda Motor

Corporation and Sumitomo Corporation. Product range above engine displacement 3.45 litres – mainly buses, ambulances, and

customized vehicles. The company employs over 1,500 people. Planning on investing Rs 3,000 crore at its manufacturing plant

in Andhra Pradesh over the next five years.

24

Local OEMs Expansion Plans

Tata Motors is the market leader. Total India production above 3.5t is around to 167,000 trucks per year. Their commercial vehicle market with a 60% share. The Tata-Cummins Ltd .joint-venture produces 100,000 Euro 3-compliant B-Series engines annually which are supplied to Tata Motors. The new Prima platform vehicles are fitted with 200 to 500hp Euro 3-compliant engines competes with Daimler, Volvo and MAN emissionized products. Their existing platforms will be discontinued as Euro IV is implemented

Two key manufacturing hubs in India – Jamshedpur and Pune.

Launching new global platforms

.

Ashok Leyland produce around 130,000 trucks and buses above 3.5 tonnes in Hosur or Uttarkhand. They are the market leader n the bus chassis segment. In major Indian cities, 80% of all public transportation buses carry the Ashok Leyland badge.

In January 2008, they announced its development of India's first compressed natural gas (CNG) bus engine that met Euro 4 emission requirements.

In March 2009, Ashok Leyland announced the development of a BS-4 hythane engine, which is a combination of natural gas and hydrogen for initial usage on bus applications.

Mahindra and Mahindra produce trucks and buses above 3.5 tonnes in Chakan, Pune. In December 2012, M&M purchased their joint venture partner- Navistar’s stake from two joint ventures Mahindra Navistar Automotive Ltd (MNAL) and Mahindra Navistar Engines Ltd (MNEPL) for Rs 175 crore. MNAL forecasts truck and bus production will get to 40,000 trucks by 2014.

Mahindra's current market share in LCV is 10% and HCV is 3%.

AMW Motors (AMW) is India's third largest fastest growing manufacturer of heavy commercial vehicles. Located in Bhuj, Gujarat, they produce trucks ranging from 16 to 49 tons and has pioneered several segments in the Indian CV market and in India with an annual volume growth of over 100% for the last three years. Around 5200 trucks produced in 2013.

25

0-3.5 (LCV only) 3.51-6.0 6.01-10.0 10.01-12.0 16.0+

Tata Motors Tata Motors Tata Motors Eicher Motors Tata Cummins

Mahindra & Mahindra Ltd Mahindra & Mahindra Ltd Eicher Motors Ashok Leyland Tata Cummins Ashok Leyland

Ashok Leyland

Beiqi Foton Cummins

Engine Co. Ltd SML Isuzu Limited Tata Motors Doosan Infracore Co. Ltd Eicher Motors

Force Motors LTD Force Motors LTD

Beiqi Foton

Cummins Engine

Co. Ltd Mitsubishi Motors Mercedes

Greaves Cotton Limited Eicher Motors

Mahindra &

Mahindra Ltd

Beiqi Foton

Cummins Engine Co. Ltd

Mahindra Navistar Engines

Ltd.

Ford Motors FPT Industrial Tata Cummins SML Isuzu Limited MAN Truck & Bus AG

Hindustan Motors Nissan Motor Tata Cummins Cummins Engine Company

SML Isuzu Limited Volvo

Kamaz Inc.

Scania

FPT Industrial

Top Engine Suppliers By GVW (tonnes)

• Tata and Tata-Cummins dominate engine

supply for light, medium and heavy trucks

in India.

• Many global players now have product

available in the 16t+ segment. Their

presence is expected to increase due to

emissions advanced technology

requirements in the next five years

0

50

100

150

200 16t+ Production By Engine Supplier

2014 2019

000s unit

26

Engine Trends

27

Engine Trends

• Low Cost Production and Sourcing

– Global OEMs with emissions compliant products are strengthening their presence. This has improved vehicle quality and increased competition with traditional Indian OEMs.

– Locally manufactured engine blocks are being exported globally – or finished in regional markets.

• The market shift is two pronged:- there is a shift to higher tonnage tractors with four axles and to lower tonnage light commercial.

– Transition toward tractor trailer combinations.

– Higher power-to-weight ratio vehicles.

– Tipper market will account for a larger portion of demand.

– Automated Manual Transmissions (AMT) will play a key role moving forward.

• Adoption of natural gas engines will continue to increase.

– Fueling infrastructure needs to expand.

– Best opportunity is in the bus and light commercial vehicle segments (near refueling terminals).

– Higher up-front engine cost but lower fuel cost.

– No after treatment required for compliance.

28

Natural Gas Prospects: Six Stars Alignment

PROVEN TECHNOLOGY

OPERATIONAL COST INFRASTRUCTURE

GLOBAL TRENDS

LEGISLATION GOVERNMENT INCENTIVES

“If all these stars align – the prospects for natural

gas product uptake will be even higher”

29

Major Engine Models launched

• Ashok Leyland

– Introduced the 5 and 8

litre “Neptune” engine

in 2012.

• Tata Cummins

– Produce 5.9 litre B

series engines.

– Will likely upgrade to

the ISB 6.7 litre during

the next few years.

• Daimler

– The 6.4 litre OM906

assembled and

installed on Bharat-

Benz trucks.

• Volvo

– Global medium engine

platforms.

– Produce the 5 and 8

litre engines.

30

In Summary

• The outlook for the Indian Commercial Vehicles market remains optimistic in the next

five years with a 11% CAGR forecasted until 2019.

• By the end of 2019, the market will have evolved significantly in line with improved

infrastructure, tightening emissions and improved total cost of ownership

• Products will be designed to improve fuel economy

• Product will be manufactured for both the domestic and lagging regulated export

markets of Africa, Middle East, Sri Lanka, Uzbekistan and Bangladesh.

• The market dynamics are expected to shift to the 16t+ and Light Commercial vehicles

segments.

• Global and local manufacturers have increased capacity to fulfil market expansion.

• Natural gas penetration will continue in line with infrastructure development but

primarily in bus and urban related applications.

• Implementation and enforcement of regulations will have an impact on new product

pricing which will put further pressure on fleet owners.

• Expect competition to increase as global OEMs launch products and establish

distribution particularly in the 16t+ segment.

• Improving the cost of ownership through low cost product technology advancements

and after sales service will remain critical factors to success.

31

Q & A

32

Kamini PATEL

Sunil KULKARNI

Chris FISHER

Carlos BRIGANTI

www.powersys.com

[email protected]

mailto:[email protected]

Commercial Vehicles

Documents

Transcript of Commercial Vehicles