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Commercial Trends Vehicles
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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
(3,100 mi)To be identified Dec-07 Dec-13
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
(3,100 mi)To be identified Dec-08 Dec-14
13 Phase VI B 600 km (370 mi) To be identified Dec-08 Dec-15
14 Phase IV D5,000 km
(3,100 mi)To be identified Dec-09 Dec-15
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
Source: OE LinkTM 2014
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%
Source: OE LinkTM 2014
20
97% of Truck Production is Diesel
Production By Fuel Type
Source: OE LinkTM 2014
• 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