Ready or not, here comes the world

April 1, 2008
It's a lot easier to export ideas than it is to ship trucks and trailers halfway around the world

It's a lot easier to export ideas than it is to ship trucks and trailers halfway around the world. But regardless of whether it's tangible or ideological, expect to see things in the U S soon that today you only see elsewhere.

Such was the message from Tim Campbell, managing director of Campbell's Commercial Vehicle Marketing Group in Leyland, England.

Speaking at the “Surviving and Thriving” session at The Work Truck Show, Campbell said the world is changing. Some of the changes are for good, others are bad.

“You have to decide what you want to do about it,” Campbell said.

Several underlying trends in the commercial truck market promise to show up in many ways. These trends include rising energy prices, global regulations, the need for truck manufacturers to achieve greater economies of scale, and strong growth in the world's emerging markets.

Opportunities elsewhere

Three markets in the world are difficult to enter: Europe, Japan, and the U S. The rest of the world market — India, South America, Africa — is easier to enter and is growing rapidly.

Competition for the world truck market, however, is growing rapidly. Campbell listed the names of truck manufacturers in various nations.

“We now have companies that produce hundreds of thousands of vehicles annually,” Campbell said. “That was not the case 10 years ago. China did not have high-volume manufacturers of commercial vehicles. Neither did India. Tata — an Indian truck manufacturer — just bought the third-largest steel manufacturer in the world in order to protect its steel supply.”

Russia is expected to become the largest automobile market in Europe next year. That was not the case 10 years ago, but more importantly, Russia did not have an interest in U S products 10 years ago.

“The important thing to ask is ‘What do I do?’ You need to start making decisions about the next 15 years,” Campbell said. “Major markets have all gone down recently. But look at China, Africa, and Asia. They have all gone up. Should you go after these markets or not?”

The U S market is too big for most global companies — but not all. Most will pursue these other global markets. The U S, Europe, and Japan will be the last places they will go.

European heavy truck manufacturers currently have 12-month backlogs because all of their production has gone to eastern Europe.

“Demand will get satisfied eventually. Five years, six, seven,” Campbell said. “But do you want to become a distributor? Do you want to form a joint venture? There are phenomenal opportunities for U S companies to do business.

“Chinese and Indian truck manufacturers are busy satisfying demand within their own countries. What happens when that demand is satisfied and they start looking beyond their own borders?”

What drives manufacturers?

It's nice to think that manufacturers design trucks to satisfy customers, but increasingly truck design is driven by legislation, Campbell said.

“Emissions regulations are protectionism to an extent,” he added. “These regulations determine who gets into a country and who doesn't.”

Technology, like the design of the truck, is also driven by legislation.

The result, according to Campbell, is reduced life cycles. While fleets in Europe may want to keep trucks for 10 years or more, the emissions laws change every 3-5 years. The demands for new technology are costly, further leading competing manufacturers to collaborate to develop technology to meet the regulations.

Some of the regulations already in place in Europe have led manufacturers to equip trucks with antilock brakes, speed limiters, disc brakes on every wheel, computer networks throughout the vehicle, SCR/EGR emissions systems, and digital tachographs.

Digital tachographs enable fleets to track the time the driver started, when the truck stops, and when it is idling. Police officers have a reader that can read the card that the driver uses. If the truck is stopped, the driver must have his card in addition to his driver license. The card contains all pertinent data for that driver for the past 30 days.

Legislated into oblivion?

Could legislation force chassis manufacturers to eliminate the truck equipment industry as we know it? Proposals in Europe, if adopted here, could lead chassis manufacturers to manufacture and install their own commercial truck bodies.

As in the U S, European truck manufacturers produce the chassis, while third parties manufacture and install the truck bodies and equipment. Areas of responsibility for regulatory compliance are defined, analogous to U S vehicle certification.

That is changing. Instead of pass-through certification, the European Community will require that completed vehicles be certified for compliance with applicable regulations beginning next year. This will include a requirement for destructive testing.

Paccar's DAF already has responded by expanding its Leyland Trucks plant to produce truck bodies.

Standardization on steroids

Legislative demands and other forces are leading truck manufacturers to standardize their products and to reduce options.

Campbell pointed to Sterling, Mitsubishi Fuso, Freightliner, and Western Star all using a single new global heavy-duty engine platform. Seven engines are combined into three worldwide. Furthermore, 90% of the parts are common to all of the engines.

“Globalization is happening here in your streets today,” Campbell said. “Be aware of it.”

Nowhere is the practice of standardization taken to the extreme more than in the concept of “badge engineering,” the practice of otherwise competitive European truck manufacturers who combine resources to develop a single truck for all to sell.

“They are literally the same vehicle coming from the same factory,” Campbell said. “When you have different companies selling the same vehicle, it is the dealer that makes the difference. How close you are to the customer, the level of service that you provide, these are the things that make the customer buy a Peugeot over a Citroen.”

The Dodge Sprinter is the same vehicle as the Volkswagen Crafter, even though the two companies are competitors in Europe. Campbell said this approach to manufacturing will come to the U S because U S manufacturers also will need to achieve economies of scale. He expects this to develop here in the next 10-15 years.

Campbell showed pictures of compact vans — virtually identical vehicles sold by competing companies, as well as a series of medium-duty trucks that use this practice. The cabs are built in France and licensed to Volvo. The same cabs are used by Mack and Paccar, Campbell said.

Campbell contrasted the use of pickups in the U S with the way Europeans use compact vans for the same commercial applications.

He listed several factors that have led to the popularity of compact vans and Europe. They included population density (which is comparable to some parts of the U S), weather (vans do a better job than pickups for protecting cargo), health and safety issues, environmental issues, and legislation. The biggest difference between the U S and Europe that give pickups an edge: tradition and history, along with the wider streets compared with those of Europe.

“It may be that a van with a small engine might make more sense,” Campbell said. He pointed out that at the Work Truck Show, Ford introduced a Turkish built van called the Transit that has been in use in the U K. “One in every three vans in the U K is a Ford Transit,” he said.

Rising fuel costs may accelerate the change to small vans.

“At what point do rising fuel prices cause fleets to accept less power in favor of greater fuel economy?” Campbell said. “In the U K, fuel sells for $9 per gallon. There will be a point where the fleet says that power is secondary and the emphasis is on making more money.”

Campbell summarized his presentation with these points:

  • The next 15 years will present opportunities for dealers and manufacturers alike.

  • Legislation and regulations will increase.

  • Expect even greater use of technology.

  • New markets are opening.

  • Vehicles will be different.

  • Use of alternative fuels will increase.

  • Hybrid electrics will make inroads into the light-duty commercial vehicle market.

  • We are heading for a global economy whether we like it or not.