2025 Vision of Transformations in Global Medium-Duty Truck Market Growth in Value Truck Segment in BRIC and Next 11 Markets Offer Volume and

Margin Opportunities to MD Truck OEMs

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July 2016

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Contents

Section Slide Number

Executive Summary 3

Research Scope, Objectives, Background, and Methodology 12

Definitions and Segmentation 19

Mega Trend Implications and Transformational Shifts 21

Global Medium-Duty Truck Overview 30

Special Focus: Japan & Korea 43

Global Platforms of Select Medium-Duty OEMs 48

Market Share Analysis of Key Regions 57

OEM Comparison in Key Regions 73

Conclusions and Future Outlook 79

Appendix 83

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Executive Summary

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Executive Summary—Top 5 Insights Global thrust toward freight efficiency improvement will push the demand for alternative chassis designs and

advanced telematics-enabled technologies in medium-duty (MD) trucks.

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The medium-duty segment is facing volume pressure globally from growth in heavy-duty

trucks which are preferred for logistics between hubs and light city vehicles which are

preferred for city distribution. However, sustained demand for the segment will come from

urbanization and routing demand in ASEAN, Middle East, and Africa.

Evolving logistical needs in urban areas is resulting in increasing instances of trucks cubing

out before they weigh out. Focal point in truck chassis and body design will move from

weight characteristics to cube characteristics forcing innovative chassis and body designs

(Example: low-floor chassis).

Asian OEMs have a market share of more than 40% in the global MD market; they are

expected to further augment market share with leadership in the cab-over MD truck segment

and low-cost/value truck segment.

Ma

rket

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Urbanization, proliferation of hub-and-spoke distribution, growth in ASEAN, Africa, and the

Middle East markets will propel medium-duty (MD) truck growth at a CAGR of 4.8% to touch

1.55 million units globally in 2025, from 972,000 units in 2015.

Medium-Duty Truck Market: Top 5 Insights, Global, 2015–2025

Cab-over type MD trucks are growing in demand vis-à-vis conventional trucks due to the

impact of urbanization which drives the demand for more fuel-efficient truck design.

Source: Frost & Sullivan

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Market Stage

Growth

Market

Units/Volume

972,700

(2015)

Stable Increasing Decreasing

Compound

Annual Growth

Rate

4.8%

(CAGR, 2015–2025)

Base Year

Market Growth

Rate

(1.9%)

Market

Concentration

40%

(% of market share held by top

3 companies)

Number of

Competitors

>20

(active market competitors in

base year)

Market Size for

Last Year of

Study Period

1,550,000

(2025)

Medium-Duty Truck Market: Market Engineering Measurements, Global, 2015

TRIAD: North America, Western Europe, Japan

Market Engineering Measurement

Medium-duty truck sales will rise globally at a CAGR of 4.8% buoyed by growth in non-TRIAD economies.

Note: All figures are rounded. The base year is 2015. Source: Frost & Sullivan

Market Overview

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Medium-Duty Truck Market: Impact of Hub and Spoke Distribution, Global, 2015 and 2025

LDT MDT HDT

City

Trucks

2015

2025

• MD trucks are increasingly cubed out

before they weigh out, thereby

raising demand for improved body

volume.

• Thus, MD trucks with lower GVWR

ratings are likely to see a rise in

demand.

LDT & MDT HCT & Mega

Trucks

Key Comment

• Hubs are the central distribution centers located just

outside of city limits. Heavy-duty trucks (with double

trailers) are used to carry goods to and between hubs.

• Medium- and light-duty trucks are used to transport goods

from the hubs to multiple drop points within the city which

includes both distribution centers within the city and

increasingly, individual consumer door steps.

• The rise in number of intra-city drop points (while package

sizes drop) is generating the demand for greater volume

in truck body while payload demand drops.

The Spokes

Heavy CVs

The Hub

Medium

and

light

CVs

Executive Summary—Volume growth MD truck Market The growth in urban logistics is offering volume growth opportunities for medium-duty trucks. MD trucks to

cube out before they weigh out.

Source: Frost & Sullivan

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37%

35%

10%

8%

8%

2%

0%

0% 20% 40%

Asia+Oceania

Japan

North America

South America

Africa+Middle East

Europe

Row

% Share

36.2%

19.4%

13.5%

13.5%

9.0%

5.7%

2.6%

0.0% 10.0% 20.0% 30.0% 40.0%

Africa+Middle East

Japan

Asia+Oceania

North America

Europe

South America

RoW

% Share

Isuzu Annual Unit Sales: 6T–10T, Global, 2015

Hino Annual Unit Sales: 5T–15T, Global, 2015

• ASEAN, Middle East and Africa are the largest

markets for Japanese MD truck OEMs as these

markets are the prime targets for low-cost and

value trucks giving opportunities to both Asian

OEMs and TRIAD OEMs.

• Sustained economic growth in these regions will

result in growth in market share of Japanese as well

as other Asian OEMs with their leadership in

low-cost trucks and focus on value truck segment.

TRIAD

BRIC

The Middle East

Next 11

ASEAN

Africa *TRIAD—North America, Western Europe, and Japan

Executive Summary—Rise of Asian OEMs in Medium-duty Truck Market As growth shifts from TRIAD* (and even BRIC markets) toward ASEAN, the Middle East and Africa, these

MD-intensive truck markets will stoke the growth of Asian OEMs.

Source: Frost & Sullivan

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2025

Premium

Value

Low Cost

Executive Summary—MD Truck Price-positioning Forecast Owing to the rising per capita income across ASEAN, the premium and value segments are set to capture

69% of the global MD truck market by 2025.

NA 28.8%

SA 10.6%

EU 7.5% Russia

10.5%

China 6.2%

India 1.6%

Next 11 11.6%

RoW 23.1%

2015

Premium

Value

Low Cost

17.0%

40.0%

43.0%

31.0%

30.0%

39.0%

Medium-Duty Truck Market: Percent Unit Shipment Forecast, Global, 2015 and 2025

• Value segment is set to grow to 30% market share in the next 10 years, largely driven by demand from ASEAN.

• The low-cost truck segment is likely to decline in terms of percentage share by 2025. However, in terms of unit volume this

segment is expected to grow by 79%.

MD Truck Market: Value and Premium Truck Sales by Region,

Global, 2025

~972,700 ~1,550,000

Note: All figures are rounded. The base year is 2015. Source: Frost & Sullivan

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8

11

3

1

3

4

2

3

2

1

2

3

3

3

1

1

1

1

1

1

1

1

2

2

Daimler (incl Foton)

Volvo (incl Dongfeng)

MAN SE

Scania AB

IVECO

PACCAR Inc.

Navistar Inc.

TATA Motors

Ashok Leyland

CNHTC

Isuzu

Hino

Observed no. of distinct platforms, 2015

Estimated no. of global platforms available, 2015 OEM Group

Key Global Truck and Associated

Platforms

Daimler Group Fuso Canter, Fuso F series, Foton

Aumark

Volvo Group UD Condor, Quon, Dongfeng KR

MAN SE TGL

Scania AB P Series

IVECO Eurocargo

PACCAR Inc DAF LF

Navistar Inc Durastar

TATA Motors Daewoo Novus

Ashok Leyland Ecomet

CNHTC Howo

Isuzu F Series, N Series

Hino 195/155 (for NA), 300, 500 Series

Medium-Duty Truck Market: Key Truck Platforms, Global, 2015

Expected to Increase by 2025 Expected to stay at current level

Executive Summary—Medium-Duty Truck Global Platforms Despite strong modular platform development capabilities, OEMs such as Scania, PACCAR and Navistar

do not have strong low-value truck platforms for emerging markets.

Source: Frost & Sullivan

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Engine

Engine Power (HP) 150–300

Torque (Nm) 400–1000

Engine

Displacement (L) 4–6.5

No. of Cylinders 4

Transmission

5/6 AMT (low cost)

6 Speed AT

(value/premium) Suspension and Braking

• Multileaf suspensions

• Disc/drum brakes with ABS

Medium-Duty Truck Market: Virtual MDT Truck, Global, 2025

Weight

GVWR (Ton) 6–15

Payload Capacity (Ton) 4–10

Cab Features

Steering Telescopic and

Power steering

Telematics Standard

Comfort and Safety A/C, ABS and

airbags

Infotainment Music system,

Bluetooth

Build

• Cab-over-engine

• Wheel base 150-240 inches

Executive Summary—Vision of 2025 MD Truck Design Boundaries 4–6.5L engine, 6–15T GVWR, and 150–300 HP power bandwidth to define basic tenets of global MD truck

platforms by 2025.

Source: Frost & Sullivan

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Parameters Current Outlook (2015) Future Outlook (2025)

Market Status MD trucks account for nearly 37% of MD-HD

trucks globally.

Despite market share threats from mega trucks and

light city vehicles, MD trucks are expected to grow in

emerging markets to sustain global market share.

Competition

This is a highly fragment market with domestic

OEMs dominating most regional markets. NA

OEMs are rebadging/jointly developing trucks

with Japanese OEMs for this market.

Japanese OEMs are expected to gain market share

globally due to the growing demand for their cab-

over-engine trucks.

Technology

Telematics are installed in nearly 19% of MD

trucks in operation across key markets. NA,

EU, and China account for about 72% of global

populace of telematics installed vehicles.

Over the next 10 years, penetration is expected to

grow rapidly to more than 31% of vehicles in

operation (VIO). NA, EU, and China would account

for 62% of telematics-installed trucks in operation in

2025, rising from 72% in 2015 and indicating greater

proliferation in other markets.

Value

Proposition

MD trucks are re-used for a multitude of

applications from short haul to vocational

applications, such as garbage collection, mining

and construction.

MD truck in short-haul application is expected to

shrink with the increase in mega trucks and light city

vehicles. Demand in vocational applications is set to

rise, especially in emerging markets.

Total MD Truck Market: Current and Future Outlook, Global, 2015 and 2025

Executive Summary—Key Findings and Future Outlook

Growing demand for trucks in vocational applications will sustain the demand for MD trucks globally.

Source: Frost & Sullivan

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Research Scope, Objectives, Background, and

Methodology

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Research Scope

Commercial Trucks with GVWR 6T upto less than 16T Vehicle Type

2016–2025 Forecast Period

2015–2025 Study Period

2015 Base Year

Global

• North America consists of the United States & Canada

• South America includes all other countries of Latin America, save

Mexico

• Europe consists of 28 Countries in European Union

• China

• India

• Russia

• Next 11 (Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, the

Philippines, Turkey, South Korea, Vietnam, and Bangladesh)

• Rest of the world (RoW)

Geographical Scope

Source: Frost & Sullivan

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Research Aims and Objectives

Aim

• To identify and understand the key trends impacting the MD truck market across regions that

influence truck design and technology.

Objectives

• To provide market size and forecasts of medium-duty trucks for 2015–2025.

• Outline market dynamics, key trends, market drivers and restraints thereof, and industry challenges.

• Compare and analyze the different platforms of major global MD truck OEMs.

• Provide strategic recommendations and conclusions and highlight a tentative global MD platform

expected to be the best-fit model based on Frost & Sullivan analysis.

• To analyze competitive factors, competitor market shares, and product portfolio and capabilities.

• To develop an actionable set of recommendations for market growth and sustenance.

Source: Frost & Sullivan

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Key Questions This Study Will Answer

What are the key trends impacting the medium-duty truck market?

How will truck features evolve by 2025? What will be the key technologies?

What will be the product focus of key OEMs in each region?

What will be the medium-duty truck technology strategy for truck OEMs across regions?

What is the projected volume of truck sales and the share of medium-duty trucks in 2025?

What are the drivers and restraints for medium-duty truck market?

Source: Frost & Sullivan

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Research Background

This research builds on the content from Frost & Sullivan’s recently published studies in the area of

business strategy and innovation:

NF9E-18 Executive Analysis of the Global Medium and Heavy Duty Truck Transmissions Market (2015)

NEC5-18 Strategic Outlook for Autonomous Heavy-duty Trucks (2015)

NF51-18 Executive Outlook of Hyundai’s Global Commercial Vehicle Market Activities (2015)

NF8D-18 Executive Analysis of Medium-Duty and Heavy-Duty Value Truck Market in Select Emerging

Economies (2015)

NFAB-01 Executive Profiles of Key Truck Telematics Vendors—PART 1(2015)

NE05-18 Executive Outlook of the Global Medium- and Heavy-Duty Low-Cost Truck Market (2015)

P895-18 Strategic Analysis of Chinese Light, Medium, and Heavy-Duty Commercial Truck Market (2015)

ND32-18 Strategic Analysis of Global City Truck Market (2014)

NC9A-18 Commercial Vehicles 2020 Vision (2014)

NE67-18 Executive Impact Analysis of Big Data in the Trucking Industry (2014)

This study is also supplemented by ongoing interactions with vehicle manufacturers and suppliers in the

area of business strategy and innovation. Source: Frost & Sullivan

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Research Methodology

Research Methodology: Frost & Sullivan’s research services are based on secondary and primary

research data.

Secondary Research: Extraction of information from existing reports and project material within the

Frost & Sullivan database includes data and information gathered from technical papers, specialty

magazines, seminars, and Internet research.

Primary Research: More than 15 interviews have been conducted over the phone by senior consultants

and industry analysts with original equipment suppliers, regulation authorities, and distributors. Primary

research accounts for 80% of the total research.

Note on Images: Images have been used with permission of the copyright holder.

Source: Frost & Sullivan

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Key OEMs Compared in This Study

Group CV OEMs

Daimler

Mercedes-Benz, Freightliner,

Western Star, Mitsubishi Fuso,

Thomas Built, Bharat Benz,

Setra

Volvo Volvo, UD, Renault, Mack,

Eicher

Volkswagen Volkswagen Commercial

Vehicles, MAN, Scania, SEAT

BAIC Foton Motor

Navistar Navistar, IC bus, SST Truck

Company

Hyundai Motor

Group (HMG)

Hyundai, Kia, Sichuan

Hyundai Motor Company

Group CV OEMs

Isuzu Isuzu

Dongfeng DFM, Dongfeng Peugeot-Citreon

Paccar DAF, Kenworth, Peterbilt

Ford Ford

Tata Tata Motors

CNH Iveco, Iveco Astra, Heuliez Bus

Toyota Toyota, Daihatsu, Hino

CNHTC Sinotruck

FAW FAW

The following OEM groups are compared in this study:

Source: Frost & Sullivan

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Definitions and Segmentation

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Reference

Vehicle

Classification Definition GVWR Typical Applications

MD Medium-duty

truck

Represents all

types of mid-size

trucks

Class 47

GVWR ≥6T and <16T

Pick-up and home delivery, beverage,

utility, parcel delivery, highway hauling,

construction, refuse, and ambulance.

Definitions and Vehicle Segmentation Trucks are classified light, medium, or heavy, based on a combination of GVWR and vocation. This study

addresses the MD truck segments only.

Commercial Vehicle Market: Definitions and Segmentation, Global, 2015

Vehicle

Platform

A medium-duty truck platform can be defined as ‘a single set of common design, engineering,

and manufacturing elements shared between different products/brands/marquees within the

same organization or between organizations, aimed at balancing customer expectations and

product development costs.’ Key mechanical components that can constitute a platform are:

engine, transmission and related linkages, chassis, suspension system, axles, braking

systems/wheel-end.

Global

Platform

Within the study, when we refer to a global platform, it means either ‘a platform on which

the OEMs have themselves defined and developed their global medium-duty truck for

various regions carrying the same marquee name’ or ‘same truck rebadged with different

brand name.’

Source: Frost & Sullivan

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Appendix

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Abbreviations and Acronyms Used

A/C Air Conditioning

ABS Anti-Braking System

AMT Automated Manual Transmission

ASEAN Association of South East Asian Nations

AT Automatic Transmission

CAGR Compound Annual Growth Rate

CNG Compressed Natural Gas

EU European Union 28

GHG Green House Gas

GVWR Gross Vehicle Weight Ratio

HCV Heavy-Duty Vehicle

HD Heavy Duty

HDT Heavy-Duty Truck

LDT Light-Duty Truck

LDV Light-Duty Vehicle

MD Medium Duty

MDT Medium-Duty Truck

MT Manual Transmission

NA North America

Next 11

Egypt, Indonesia, Iran, Mexico, Nigeria,

Pakistan, the Phillipines, Turkey,

South Korea, Vietnam, Bangladesh

NG Natural Gas

NHTSA National Highway, Transportation and

Safety Authority

OEM Original Equipment Manufacturer

RoW Rest of the World

TRIAD US, Canada, Western Europe, Japan

V2I Vehicle to Individual

V2V Vehicle to Vehicle

VIO Vehicle in Operation

Source: Frost & Sullivan

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• Talk to an analyst

• Arrange a Growth Workshop

• Explore the Growth Excellence Matrix 2.0

Learn More—Next Steps

Source: Frost & Sullivan

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Market Engineering Methodology

One of Frost & Sullivan’s core deliverables

is its Market Engineering studies. They are

based on our proprietary Market

Engineering Methodology. This approach,

developed across the 50 years of

experience assessing global markets,

applies engineering rigor to the often

nebulous art of market forecasting and

interpretation.

A detailed description of the methodology

can be found here.

Source: Frost & Sullivan