Frost & Sullivan's 2017 Global Commercial Vehicle Industry Outlook-(Medium-Heavy Duty Trucking)

1. 2017 Outlook of Global Medium-Heavy Duty Truck Industry
―Truck as a Service‖ Business Model Creating Sustainable Revenue Opportunities and
Transforming Both Developed and Mature Markets
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February 2017
Automotive and Transportation Practice @ Frost & Sullivan
BRIEF
SUMMARY
VERSION

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Contents
Section Slide No
Executive Summary 3
Global MD-HD Truck Market Outlook—2017 10
Global MD-HD Powertrain Outlook 17
Global HD Platform Outlook 21
Global MD Truck Market Outlook 28
Global Connected Truck Outlook 35
Special Focus A—Select Emerging Markets Performance South America, Turkey, and Stan-Jan 40
Special Focus B—Autonomous Trucking and Platooning 44
Special Focus C—Health, Wellness, and Wellbeing Outlook in Trucking 55
Special Focus D—Digital Freight Brokering 60
Special Focus E—Start-ups Disrupting Global CV Industry 66
Special Focus F—Business Model Change: Truck as a Service 72
Conclusions and Outlook 77
Commercial Vehicle Research Titles 2017 82

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Return to contents
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Executive Summary

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2016 Key Highlights
Global Medium Duty (MD)-Heavy Duty (HD) truck sales recovered by 5% over 2015 levels driven by demand
recovery in China, India and Europe. VW’s equity stake in Navistar marked the group’s entry into North America
Source: Frost & Sullivan
1
Recovery In China, India Was Overshadowed by North America Weakness
Truck sales recovery in China, India and Europe propelled global truck sales by 5 percent; Truck demand hit historical
lows in South America as economic environment remains precarious in Brazil
2
Medium-duty Trucks and Mid-Market Products Gained Significant Demand
Medium-duty truck sales share increased by one percentage point to 38% of total MD-HD truck sales, while share of mid-
market value trucks increased from 17 percent to 19 percent in 2019. These two trends underscore the rising influence of
Next 11 countries and urbanization on truck sales.
3
VW’s Consolidation Brought About Synergies
Consolidation of MAN and Scania operations progressed through the year despite the emission compliance issue in VW’s
passenger car business. Synergies in shared product development, procurement and platformization is likely to provide
cost benefits. Equity investment in Navistar paved way for VW’s entry into the North American truck market in 2016.
4
Freight Industry Challenges Accelerated Digitization in Freight Transportation
Demands for greater transparency, speed, and truck capacity optimization ushered in a range of digital freight brokerage
solutions in both mature and emerging markets. Ageing driver population and shortage of skilled drivers in developed
markets and demand for greater visibility in freight movement creating market pull for digitization enabled services.
5
Engine Platformization Came to Forefront
After successfully adopting platform based truck production, global OEMs and engine manufactures started focusing on
powertrain platformization encompassing engine, drivetrain, transmission, turbo technologies.

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Potentially Disruptive Business Models Cited by Global Survey of CEOs
Frost & Sullivan’s 2016 Global CEO Survey (300 Respondents) Covering Ten Industries and 6 Continents
Indicates Business Model Recalibration in Many Industries, These Are Especially Relevant to Trucking
Note: All figures are rounded. Source: Frost & Sullivan
Trucking industry globally is shifting focus from ”truck as a product “ to “truck as a service” based business model.
Moreover, rise of value trucks, platform based production ,and rise of connected truck enabled services is expediting
this shift. These changes are aligned to findings from Frost & Sullivan’s 2016 global CEO survey where CEOs of
leading organizations in ten industries rated business models that could potentially disrupt their organizations.
Base: All respondents (n=303)
Q17. Which new business models could potentially disrupt your organization?
(MAXIMUM 3 RESPONSES)
7%
13%
20%
22%
22%
25%
31%
32%
38%
41%
Other
Circular Economy
Co-Creation
eCommerce
Sharing Economy
Platform-based Production
Connectivity as a Key Enabler
Value for Many as Opposed to Value for Money
Personalization and Customization
Product as Service

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8 Transformational Shifts Shaping Future of Commercial Trucking
Digital Transformation is the Driving Force Behind 4 of the 8 Transformational Shifts
Source: Frost & Sullivan Analysis
1
5
3
7
4
8
2
6
Digital
Transformation
Rise of Value
Trucks
PlatformizationAutonomous
Trucking
Urban
Trucking
Rise of Asian
OEMs
Beyond
BRIC
Dealership
Evolution
Digitization-enabled
transformational shift
Emerging market
driven transformation
Core technology
transformation

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2016–2017 CV Industry Senior Management Top-of-Mind Issues
Despite continued economic uncertainty and fuel price volatility, global commercial vehicle executive’s mind-
share and strategic focal points will be guided by digitization and electronics enabled business model changes
Source: Frost & Sullivan
CV Market: Senior Management Top-of-Mind Issues, Global, 2016-2017
Note: Data collected from 2015-2016 interviews and discussions with Senior
Managers to CEO-level executives of truck OEMs and tier-I suppliers in North
America, Europe, Asia-Pacific, China, India, Latin America, and other regions
Scale: 0 stands for limited focus, 5 stands for top focus
0
1
2
3
4
5
Next Frontiers of Globalization—
Next 11 and Africa
Fuel Price Volatility and
Rise of Alternatives
Truck-as-a-Service
Driver Related Cost
Implications to TCO
Urban Logistics, Bricks-and-
Clicks, and Multi-modality
Electronics Enabled Business
Model Calibrations
Start-ups Disrupting
Global Truck Market
Digital Freight Brokering

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2017 Global GDP and Commercial Truck Market Growth Outlook
Global GDP Expected to Grow by 2.3-2.8 Percent Range Resulting in 3.2 Percent Growth in MD-HD Truck
Sales Amidst Increasing Decoupling of Truck Sales Volumes with GDP Growth Rates
Source: World Bank, Frost & Sullivan
CV Market: GDP and CV Growth Outlook Overview, Global, 2017
Region
GDP Growth
Estimates: 2017 (%)
YoY MCV
Growth (%)
YoY HCV
Growth (%)
YoY Overall
CV Growth (%)
Market
Opportunity
North America 1.9-2.4 2.9 (10.2) (3.5) Low
South America 1.4–1.5 2.5 6.3 4.5 Moderate
Europe 1.6–1.7 (6.1) (1.5) (2.9) Low
China 6.2–6.7 5.9 4.2 4.7 Moderate
India 6.6-7.1 9.5 10.7 10.2 High
Russia (0.5)–(1.0) 2.1 2 2.2 Low
Next 11 5.5–6.5 6.9 4.9 6.1 High
RoW 4–5 5.0 5.2 5.1 High
Global 2.3–2.8 4.7 2.1 3.2 Moderate

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2017 Top 6 Predictions
As sales increases by 90,000 units in 2017, industry will increasingly focus on offering
integrated service based solutions to fleets and owner-operators to maintain and grow margins
Source: Frost & Sullivan
1
Global Sales to Hit 2.87 Million as the World Economy Grows in the Range of 2.3–2.8%
Growth from India, China and Rest of World (RoW) markets will increase global truck sales by 3%. North America
is likely to contract by 3.5% reaching 485,000 units in 2017. South America to show meagre signs of recovery in
truck sales in 2017 following multi year contraction.
2
Fuel Price Volatility to Continue to Impact Green Technologies
Short-term headwinds from the fuel market are likely to impact the adoption of advanced powertrain technologies
such as natural gas and hybrid electric. However, long-term opportunity remains strong, as vocation-based solutions
will be built around these technologies in the medium-to-long term. Global natural gas adoption is expected to settle
at 1.9% in 2017.
3
Autonomous Trucking and Platooning Investment Rising Rapidly
Autonomous trucking and platooning technologies are quickly becoming a reality in the trucking industry. Most key
original equipment manufacturers (OEMs) and Tier I suppliers are intensifying efforts to develop a functioning system
and business model for platooning. (expected to be introduced in North America within 2017-2019 period) The next
step in the process is to convince fleets to buy into the benefits of truck platooning.
4
Value Truck Platforms Attracting Maximum Traction Globally
Over 60 percent of new platform development in the next 2-3 years is expected to be in the value truck segment.
This is largely driven by a growing demand for value trucks from emerging markets, especially China and India.
A majority of the trucks built on such platforms are expected to fall in the price range of $65,000 to $86,000
5
Stakeholders Shifting Focus from Products to Services
Rise in interest and adoption of technologies such as telematics, platooning, freight aggregation, etc. clearly indicating
a shift from product based growth strategies to service based growth models. Nikola’s truck leasing model is an early
indication of impending paradigm shift is the trucking industry.
6
Truck OEMS to Increasingly Look Inside the Cabin for Innovations
As the industry is changing focus from products to services, trucking industry innovations will shift focus from under
the hood to inside the cabin. Health, wellness, and wellbeing, trucking apps, video safety, fleet management services,
utilities, and digital freight brokering will emerge as major focal points for OEMs and tier-1s.

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Key Conclusions and 2017 Outlook
Source: Frost & Sullivan
Global MD-HD Truck Market: Key Conclusions and Future Outlook, Global, 2017
• Global MD-HD truck
demand to grow by
3.2% in 2017, with
HD truck sales
accounting for 60%
of total demand
• As global MD-HD
truck sales growth
rate remains muted,
market participants
will look at service
based business
models to enhance
margins
• Connected truck
technologies , digital
freight brokering, big
data/IoT, and HWW
technologies will
emerge as key
digitization
imperatives
• Stake-holders must
focus on developing
eco-system
partnerships as these
will drive economies
of scope and scale
• Diesel’s share of
total powertrain fuel
mix will increase to
94% while that of
natural gas will
decline to 1.9% in
2017
• Global engine
platforms and focus
on natural gas and
hybrid/electric
technologies will be
necessary to
future-proof for
2022 and beyond
• Service based
revenues to reach
$245-300 Billion by
2025 (driven by
technologies such
as Autonomous
driving, video safety,
telematics, digital
freight brokering,
HWW, etc.)
• Global service and
solution platforms
necessary for
sustainable revenue
streams
• Value truck sales
increasing at fastest
pace and expected
to reach reaching
21% of total sales,
offering margin and
service platform
opportunities
• Several innovative
start-ups and
trucking apps
creating unique
partnership
opportunities for
OEMs and tier-1s
Growth Powertrain Digitization Truck as a Service Priorities

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Market Engineering Methodology
Source: Frost & Sullivan
One of Frost & Sullivan’s core
deliverables is its Market
Engineering studies. They are
based 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.