Roland Berger study on the trucking industry

• Survey among 50 top managers of manufacturers and suppliers around the world
• Trucking industry hit particularly hard by the financial and economic crisis: New orders plummeted in QIV 2008 by up to 98%
• Customer demands and regulatory standards converging more and more around the world – Global product platforms and concepts are becoming possible
• Established manufacturers can "scale back" their vehicles for growth markets; manufacturers in emerging countries with affordable products can tap into other emerging countries and so gradually prepare to enter the established markets

Established truck manufacturers are facing severe difficulties from the financial and economic crisis. Incoming orders tumbled by up to 98% in the fourth quarter due to a significant drop in demand and increased difficulty in financing. Original equipment manufacturers (OEM) in the triad markets Europe, USA and Japan are therefore looking at growth opportunities in emerging countries, such as China, India, Brazil and Russia. However, providers there are going global with their sales markets. The Roland Berger study "Truck industry 2020: The future is global" shows that customer demands as well as regulatory standards are converging all over the globe. This offers opportunities both for established manufacturers and for producers in emerging countries. With global product platforms and clear strategies, both can profit from globalization.

"Whereas business in the home markets of established manufacturers virtually collapsed toward the end of 2008 and the start of this year, the markets in emerging countries such as Brazil or China are still growing," says Norbert Dressler, Principal in the Automotive Competence Center at Roland Berger Strategy Consultants. "That's why the established manufacturers are making a strong push into these markets." Chinese and Indian OEMs have been experiencing double-digit growth since 2005. "Increasing transport volumes, strong economic growth and improving road conditions will continue to drive demand for trucks in the emerging countries," says Dressler. In the coming years, Roland Berger experts expect annual growth of 30% in these countries.

The future is global – Markets are converging

"On the other hand, local manufacturers in emerging countries have also recognized that there are opportunities on the global market," says Roland Berger Partner Jochen Gleisberg. The trend toward globalization is intensifying since legal conditions and customer demands in the European Union, the US, India and China are becoming more and more similar." Whether it be quality, service, financing or comfort – customer priorities around the world will continue to converge by 2020, says Gleisberg. For manufacturers, this means an opportunity to provide the market with global concepts and components over the long term. "Until that point, companies should carefully adapt their products to the still-existing differences between individual markets," says Gleisberg. The OEMs have to clearly position themselves and make sure their organizations are aligned with their objectives. "Unclear alignment leads to inefficient structures," says Gleisberg. "Actions such as purchasing components or manufacturing locally make further savings possible."

Strategies for breaking into emerging countries

The market has three segments: Premium, Budget and Low-cost. The Low-cost segment will remain widespread in India and China. There is also a shift underway in the Budget segment.
The authors have identified three strategic options for established manufacturers who wish to enter markets in emerging countries:

1. Concentrate on the upper Budget segment (or on the lower Premium): This involves adapting and trimming back existing Premium products to local customer preferences. In developing countries, established providers have a technological head start.
2. Focus on the Low-cost segment: Here it is crucial to adapt to market demands and grow with the market.
3. Expand Strategy 2 by exporting to other emerging countries.

Strategies for breaking into the global market

Conversely, manufacturers from emerging countries must:

1. Export a currently successful low-cost truck to other emerging countries: this generates economies of scale and spreads the risk.
2. Grow with the local market in terms of technology and push into the Budget segment: This is the model currently being used by most manufacturers in emerging countries.
3. Extend Strategy 2 by expanding into more developed markets

"Regardless of what angle you look at the trucking market from," says Dressler, "the key to future success lies in globalization."