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Mega trends shaping g p gthe global commercial vehicle industryvehicle industry

What is shaping the global commercial vehicle industry?What is shaping the global commercial vehicle industry?

The global commercial vehicle industry is currently at an important crossroad with globalization, technology development,

l ti d i k t t tIn answering these questions, Ernst & Young has identified

Consequently, stakeholders throughout the industry are likely to be significantly impacted by rapidly changing events

th t f thregulations and emerging markets set to change the face of the industry in the next decade.

After having softened due to the global financial crisis the industry bounced back

Ernst & Young has identified six mega trends that will

impact the revenues, costs and profitability of

participants in the global

across the ecosystem — from the preferences of fleet operators or managers, to distribution channels and supply chain.

To prepare for the years ahead companies financial crisis, the industry bounced back strongly in the past two years with global sales expected to exceed 3 million units by 2016. Participants in the industry are faced with an interesting dilemma with demand in TRIAD

commercial vehicle industry. To capitalize on opportunities that lay ahead, players need to leverage their ability to innovate and to be flexible.

To prepare for the years ahead companies across the commercial vehicle value chain therefore need to ask themselves the following five questions and assess how well they are prepared to respond to

markets stagnating and emerging markets demanding more attention.

innovate and to be flexible.

H ill th d d H ill b i Wh t th l

evolving opportunities and challenges in the domain:

How will the demand for trucks and buses

evolve?

How will productsneed to adapt?

How will business models need to

adapt?

What are the new market dynamics?

What are the supply or value chain issues

and implications?

Truck owners demand technology solutions enabling greater

transparency1

transparency

How will demand for trucks and buses

Regulations drive changes for truck owners and OEMs

Globalization and economic uncertainties expose industry to

supply chain, manpower and economic risks

trucks and buses evolve?

26

Operating environment

How will productsneed to adapt?

What are the supply/value chain

issues andimplications?

Fleet operators and

managers

CV Suppliers

OEMs to expand geographical footprint and review

ti l ffi i

Suppliers offering innovation, operational flexibility and

implications?

35 manufacturerSuppliers operational efficiency

p yentering new product/service

markets

What are the new How will business models need to

35at a e t e e

market dynamics?models need to

adapt?

OEMs increase “glocalization” and offer customized value added

services4

This is an executive summary of a detailed analysis conducted by Ernst &Young's Global Automotive Center. Please contact our automotive professionals on the back of this document for more in-depth information.contact our automotive professionals on the back of this document for more in depth information.

Truck owners demand technology solutions enablinggreater transparency► Fleets tackle increasing TCO by increasing prices,

1 4 OEMs increase “glocalization” and offer customized value added services► OEMs reinvent portfolio with products such as low-g y g p

adopting telematics and revamping HR strategies► OEMs, suppliers and aftermarket players compete to

offer innovative vehicle and fleet management solutions

5

p pcost trucks for emerging and developed markets alike

► Bundling of products with value added services key to maintaining margins

S li ff i i ti ti l fl ibilit dRegulations drive changes for truck owners and OEMs► OEMs consider future regulations in developed and

emerging market while developing products► Fleets increase vehicle usage diversify product range

2 5 Suppliers offering innovation, operational flexibility and entering new product/service markets► Suppliers concentrate on operational efficiency and

follow OEMs into product modularization ► Fleets increase vehicle usage, diversify product range

and adopt new technologies

OEMs to expand geographical footprint and review operational efficiency3

6 Globalization and economic uncertainties expose CV industry to supply chain, manpower and economic risks► Industry invests in restructuring supply chain and

flexible capacity managementp y► Expand geographical footprint to meet emerging

market demand and localize production► Focus on operational efficiency to tackle demand

cyclicality

p y g► Investing in manpower skill development and

increasing transparency in relationship with suppliers

CV manufacturers Suppliers VAS providersCV manufacturers Suppliers VAS providers

Evolution of demand for commercial vehicles

► Adaptability of products to meet emerging market regulations

► Visibility of ROI for products/services

► R&D collaborating with OEMs► Scalability of product portfolio to match

OEMs’ line upS ti OEM t l li d t

► Transparent view on ROI associated with products/services

► Common platform architecture

lder

s

► Supporting OEMs to localize productsand technologies

► Design to meet future regulations

► Common platform architecture to support multi-brand fleets

► Enabling fleets to manage driver/vehicle/transport operations and costs

n of

sta

keho

l

Adapting products

► Product strategy catering to regional demand diversity

► Localising development/adoption of unique/differentiating technologies

► Design modularized products► Cooperating with peers to develop

common product and distribution solutions

► Enable use of smart mobile devices

► Solutions/innovative business models for new segments such as low cost trucks and electric

onsi

dera

tion as low cost trucks and electric

trucks

Adapting business models

► Value added services to retain/add customers and compensate for demand cyclicality

► Shift from cost-driven to innovation driven product portfolio Collaboration based net ork to offer

► Collaborating with tier-1 supplier to increase aftermarket presence and penetration

ateg

ies

for

c models cyclicality ► Collaboration-based network to offer value added services

presence and penetration► Collaborating with OEMs to offer

solutions at point of sale

Preparing for new

► Network of partners to offer fleets value proposition with visible ROI

► Modularization and vertical integration to tackle cyclicality

► Customize offer to cater to emerging markets commercial

Key

stra for new

market dynamics

proposition with visible ROI to tackle cyclicality► Cost effective products catering to low-

cost truck demand

emerging markets commercial vehicle demand

Addressing supply/

► Shifting investments to flexibility rather than capacity expansion

► Emerging market supply chain to meet local OEM demand supply/

value chain issues

than capacity expansion► Supply chain efficiency in terms of tax

and regulatory compliance► Talent management strategy► Comprehensive risk management system

local OEM demand ► Efficiency of supply chain in terms of tax

and regulatory compliance► Talent management strategy► Comprehensive risk management systemp g y p g y