Expansion Aspirations of Asian Truck OEMs Shaking Up … · Expansion Aspirations of Asian Truck OEMs ... Broad Market Coverage Japanese Indian ... end” markets “value for money”

Expansion Aspirations of Asian Truck OEMs Shaking Up the Global Industry?

Roman C. MathyssekTruck Market Analyst

Copyright © 2006 Global Insight, Inc.2006 GLOBAL AUTOMOTIVE CONFERENCE 2

“Hino targets ex-Foden customers in the UK”

“Tata plans global expansion”

“CNHTC sells 10,000 Trucks to Iran”

Can They Seriously….?


• Introduction

• The Chinese and Indian OEMs

• The Japanese OEMs

• Potential New Markets

• Which Players for Which Markets

• Potential Market Movements and Implications

• Conclusion

Presentation Outline


Cause and Effect – Possible Expansion “Triggers”:

• Global expansion of Western European manufacturers into emergingmarkets

– Emerging markets growth rates high– Capitalization on growth potential– Leverage scale potential

• Reaction of major Asian manufacturers – their situation …– Local players attacked in their “territory” – Asia – Product improvement necessary – new truck generations– Detect new markets – increase sales

• … and action of major Asian manufacturers – their ambition …– Exploit sales potential – new product generations– New products suitable for foreign markets– Realize vision of “Global Player” – especially Japanese players

Introduction


• Introduction






• Conclusion



Chinese and Indian OEMs – Two Major Events

&1950’s

383715

991838

0300600900

1200

2000 2005 2010 2015

39%• Asian Market

Growth• Haulage Fleet

Formation

1990’sAsia (excl Japan/Oc’nia)

• Aggressive Product Renewal Strategy

• Technically and economically outdated

• “Crude” Trucks, operated by owner-drivers

• Focus on Medium Trucks

• New generation, technically and commercially upgraded

• Professional fleet usage• Life-cycle costing• High "value for money"• Focus on Heavy Trucks

New ModelsPast Models


• Chinese and Indian OEMs – product offensive • New products quantum leap – explore global sales potential • Match product features with market requirements

But currently, limited global market presence

Chinese and Indian OEMs – Moving Up

Indian

Chinese


• Introduction






• Conclusion



Japanese Manufacturers – Overview

Strength:• Complete product portfolio – Price and weight segments• Offer efficient and robust trucks at competitive price – Tailored to market demand• Localization of products to market demands• Produce / assemble locally – strong presence in other Asian markets

Weakness:• MDT majority of sales – margin affected• Relative to industry peers, high leverage• Subjected to price pressures from low cost OEMs – "value for money" position

challenged

Japanese


Japanese Manufacturers – Gateway Into Strong Asian Market Position …• Helpful to enter Asia – Market presence and know-how• Link between western companies and Asian emerging market players• State-of-the-art technology• Often highly leveraged – self constraining organic growth


• Introduction






• Conclusion



Which Players? Which Markets?

• Which type of markets exist?– Top end: Life-cycle cost, reliability, efficiency, comfort, safety – Low

price sensitivity

– Advanced: Efficiency, reliability, comfort – Medium price sensitivity

– Budget: Low cost, robustness – High price sensitivity

• Many possible new markets/regions to enter, contingent upon many factors

• Match between market demand and product features vital

• For Chinese and Indian OEMs – Advanced markets match with products

• For Japanese OEMs – Advanced and top-end markets match with products


Regions and Their Demands

330339 340331

0

130

260

390

2000 2005 2010 2015

W-EuropeGrowth: Volume change 2005–2015: 10k

% increase 2005–2015: 3.0%Market Demands: High operating economy, comfort

safety Profitability: Truck sales & service profitable

632570528 562

0

250

500

750

2000 2005 2010 2015

Growth: Volume change 2005–2015: 62k % increase 2005–2015: 10.9%

Market Demands: High operating economy, comfort,prestige (owner operators)

Profitability: Restored, no price wars, service profitable

NAFTA

13413197

140

0

60

120

180

2000 2005 2010 2015


Market Demands: Top-end trucks, demands on par withWestern Europe, Australia broad market demands

Profitability: Sound possibilities for generating profits

Japan & Oc’nia

Total Market MDT HDT


Regions and Their Demands (Cont’d)

172111 147

195

0

80

160

240

2000 2005 2010 2015

14012483

121

0

60

120

180

2000 2005 2010 2015


Market Demands: Shift from budget to advanced truck Profitability: Increasing, result of professional haulage

service products increasing in popularity


Market Demands: Advanced trucks with high operatingeconomy, MDT mix of budget and advanced trucks Profitability: Price pressures, service add to profitability

South America

E-Europe

Total Market MDT HDT


Market Demands: Shift from budget to advanced truck Profitability: Higher, due to fleet formation process

Service products, new profit potential

991

383715

838

0

400

800

1200

2000 2005 2010 2015

Asia (excl Jap&Oc’nia)


Which Players? Which Markets?

Globally, the following holds:• HDT Segment

– Growth rates high and above MDT – Higher profitability – Client structure and service products

• MDT Segment– Stable growth, below HDT rates– Less profitable

Consequently, HDT segment is more attractive than MDT segment“Top end” markets are more profitable than advanced markets• FAW, Tata, Ashok Leyland – aim at HDT based expansion• Japanese in some markets only strong in MDT, need to enter more profitable HDT• Japanese players able to enter “top end” markets with HDT (i.e. Hino into UK)• Chinese and Indian focus on advanced markets – former Japanese and West

European undisputed domain


• Introduction






• Conclusion



The Asian Truck OEMs – Broad Market Coverage

Japanese Indian Chinese

Top-End HCV Sales Regions:• W-Europe• Japan & Asian Tigers• USA & Canada• Oceania & S-Africa• Middle East

Advanced HCV Sales Regions:• Eastern-Europe• Rest of Asia• South America• Middle East

Budget HCV Sales Regions:• Eastern-Europe• Rest of Asia• Africa

Global Sales Regions of Various Trucks Sophistication Levels


Global Status Quo – Segments and Regions

E. Europe S. AmericaAsia (excl.Jap/Oc’nia)

W. Europe NAFTAJapan, S-Afr, Oc’nia

Top

End

Segm

ent

Adv

ance

dSe

gmen

tB

udge

tSe

gmen

t

Local OEMs


• Introduction






• Conclusion



Impact occurs on local and global basis:• Chinese and Indian OEMs use new trucks to defend domestic position

– challenge new entrants

• Chinese and Indian OEMs use new HDT generation to target advanced markets

– Attractive growth rates– Profitability

• Advanced markets product acceptance contingent upon their “openness” and “brand loyalty”

• Fact: Established European, American and Japanese players need new differentiation strategies – survive price pressures

– Introduce new technology/services into market– Create brand loyalty

Strategic Movements, Changing Dynamics –The Indian and Chinese Players




Top

End

Segm

ent

Adv

ance

dSe

gmen

tB

udge

tSe

gmen

t

?

WE & JAP

?

Strategic Movements, Changing Dynamics –The Indian and Chinese Players

Local OEMs

CHN

WE OEMs WE & JAP

?

WE, US & JAP


• Japanese attacked in Asia by Chinese and Indian OEMs

• Position in Japan unchallenged

• Extend current product line and enter new “top end” markets and advanced markets– Shift product emphasis from MDT to HDT– Create brand loyalty

• "value for money" gradually “shared” with Chinese and Indian OEMs – especially in oversees markets

• 2 out of 4 Japanese Truck OEMs strategically integrated in global truck manufacturers – actions limited

Global Movement, Resulting Pressures –The Japanese Players


Global Movement, Potential Market Entries –The Japanese Players

Top

End

Segm

ent

Adv

ance

dSe

gmen

tB

udge

tSe

gmen

t



WE OEMs

??

?

Local OEMs

CHN

?WE & JAP

WE, US & JAP WE & JAP

?WE, US & JAP

WE OEMs


Different Scenario – Co-operation Between Complementing Companies

• Market entry risky and resource intense

• Many companies with global ambitions – few will make it!

• Partner reduce risk and costs – “win-win” situation for geographic and product complements

• Recent examples of strategic agreements between complementary firms

– Scania & Hino

– MAN & Force Motors

– Mahindra & Navistar

– Isuzu & Bogdan

• Shake up can occur via co-operation or individual market entry


Possible Impacts and Consequences – Locally and Globally … and Hurdles

• Local basis – the “Intra-Asia” effect– Japanese lose cost-leadership position to Chinese and Indian OEMs – Japanese trucks, the “Asian-Premium” trucks …?– Japanese differentiate trucks with technology and service products

• Global basis – moving vertically and horizontally– Japanese OEMs focus chiefly on “top end” markets, some advanced

markets – Offer MDT and HDT in “top end” markets “value for money” trucks

– Chinese and Indian OEMs focus on advanced markets– Compete on price with incumbents …

• Hurdles to overcome in new markets– Local know-how– Infrastructure– Image and brand


• Introduction






• Conclusion



Conclusion

• Aim of all players - target markets with high volume and growth rates

• Chinese and Indian Truck OEMs seek to expand into advanced markets– Shake up the advanced segment

• Japanese target grow in HDT segment in “top end” markets– Shake up the advanced, but predominately the “top end” segment

• Advanced markets – a global Truck OEM “melting pot”

• Market entry strategy – Cooperation or individual approach

• Differentiation important, build market entry barriers – Brand, technology, services

Thank YouRoman C. MathyssekTruck Market Analyst

E-mail: [email protected]

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Expansion Aspirations of Asian Truck OEMs Shaking Up … · Expansion Aspirations of Asian Truck OEMs ... Broad Market Coverage Japanese Indian ... end” markets “value for money”