Characteristics of the CV Industry

Question 1

4 key characteristics of the CV industry

Answer 1

1. customer requirements
2. regulations
3. product portfolio
4. business characteristics

Question 2

What are the customer requirements?

Answer 2

CVs are investment goods with a strong focus on the total cost of ownership (TCO)

Question 3

What are the regulations about?

Answer 3

Emissions and safety

Question 4

What is so special about the product portfolio?

Answer 4

Customer requirements and country-specific regulations drive complexity within the product portfolio

Question 5

What are the business characterisitcs?

Answer 5

Sales are highly cyclical. After sales as a major profit driver

Question 6

Key differences to passenger vehicles (PV)

Answer 6

• Required lifetime (km) 10x higher
• Annual runtime and milage up to 15x higher
• customers often stay with the brand: retention rate >65%
• fuel consumption a major cost factor
• product lifecycle twice of PVs
• unit volume only 1/25th of PV

Question 7

Required lifetime km

Answer 7

1.3m

Question 8

annual milage

Answer 8

130k km

- PV only 14k

Question 9

annual runtime in h

Answer 9

2000 to 8000

Question 10

Truck - Type of good

Answer 10

investment

Question 11

Fuel consumption l/100km

Answer 11

30-35l

Question 12

Emission reduction of NOx received

Answer 12

80%

Question 13

Vehicles sold annually

Answer 13

3m (PV 75m)

Question 14

Customers - Who has the largest fleet size?

Answer 14

Large fleet operators (>100 trucks; 30% market share)

- trend is a growing market penetration

Question 15

Customers - Who has 6 to 100 vehicles?

Answer 15

Municipalities (10% market share),
- ongoing privatisation (shift into large fleets)

Small-to-medium fleet operators (30-40% market share)
- Shrinking share due to consolidation

Question 16

Customers - Who has 1-5 vehicles?

Answer 16

Special-vehicle operators (<5% of market share)
- steady market penetration
Owner operator (20-30% market share)
- surviving in transport market niches and in businesses beyond transport

Question 17

For who is the vehicle the tool?

Answer 17

• Large fleet operators
• Small-to-medium fleets
• Owner operators
• > or the others only a tool not the tool

Question 18

OEM

Answer 18

original equipment manufacturer

Question 19

What should the OEM do with regards to the purchaser of transport services?

Answer 19

Needs and requirements of operators and purchasers of transport services are to be closely monitored. Although the OEM sells vehicles and service packages to the commercial vehicle operators the OEM needs to understand the purchaser.

Question 20

TCO breakdown worldwide

Answer 20

Fuel (40%)
Driver (30%)
Repair and maintenance (10%)
Vehicle (10%)
Admin and service (5%)

Question 21

Key value drivers for customer expectations

Answer 21

Purchasing cost, operational cost, residual value

Question 22

Key elements of the complex regulatory environment

Answer 22

Emission regulations
Safety regulations
Taxation, duties
Specific conditions

Question 23

Main consideration for truck OEMs of regulatory environment

Answer 23

• Powertrain technology and exhaust gas treatment
• Weight and size specification
• cabin space and crash stability
• technical assistant systems
• location of production site
• local sourcing partners

Question 24

Product Portfolio in North America

Answer 24

• conventional truck with engine in front. Driven by high comfort and safety requirements

Question 25

Product Portfolio in Brazil

Answer 25

- Advanced products built by European OEMs - in response to high safety requirements (not yet on European level. 20% European vehicles)

Question 26

Product Portfolio in Europe

Answer 26

High-tech product in cabover style - driven by strict regulations and customer needs

Question 27

Product Portfolio in China

Answer 27

- Fast follower driven by regulations, infrastructure and professionalisation (20 years older than in Europe)

Question 28

Product Portfolio in Russia

Answer 28

- Powerful products with four wheel drive; relatively low-tech - driven by market needs

Question 29

Is product complexity high or low? How many times is each configuration built?

Answer 29

Product complexity and relatively low volumes - every configuration only built 1.31 times on average

Question 30

What to now about the volatility of the CV market?

Answer 30

- Strong correlation of CV sales and economic development in developed markets - CV purchases often deferred in a hostile economic environment to make room for more urgent undertakings - in addition to economic reasons, sales are heavily impacted by regulations

Question 31

How much do after sales contribute to revenues and profits?

Answer 31

Revenues made mostly in new truck sales. After sales contribute with 20% to revenues, but make up >50% of profits. --> After sales business is far more stable revenue source - critical to stabilise OEM business. As revenues of truck sales decrease for one client over time the after sales increase.