THE commercial vehicle market has experienced extreme volatility in recent years as truck systems and components have continued to grow in integration and sophistication.
Caring for the parts and service needs of these vehicles will require equally advanced tools, training, and talent. Companies may not have a crystal ball, but they need to be forward-thinking to discern what's coming in the truck of tomorrow and how they can prepare to meet the needs and exceed the expectations of customers tomorrow.
In “Today's Tactics for Tomorrow's Trucks,” Mary-Beth Kellenberger, Frost & Sullivan's global program manager/automotive aftermarket, explored what to expect from ever-evolving truck technologies and their future aftermarket requirements.
“When new technology comes in, it's very evolutionary in its impact, so you see a slow, steady creep,” she said. “Regulations are different. Boom! By 2010, everybody has to have this. Typically, when a regulation comes in, vehicle manufacturers have five to seven years to implement it completely. So within five to seven years, you'll see a market that never existed for a product category.”
She said it's important to understand four key elements that impact truck repair: truck population; emerging truck legislation and technologies that influence repairs; repair technician numbers and skill levels; and service-location accessibility.
Customer needs and valuation of features determines the vehicle population mix and sets the tone for the repair industry. The vehicles that will be around 10-15 years from now are based on decisions fleet managers and owner-operators are making today and what they are telling vehicle manufacturers they want on their vehicles three to five years from now.
Kellenberger said Frost & Sullivan asked fleets: “When purchasing telematics technologies, what are the top three
Benefits that are most important to your fleet?” Cost savings (41%) and mobile-resource (driver and vehicle) productivity maximization (20%) were clearly the top two benefits, with cost savings mentioned in the top three by 77% of fleets.
“Get it back on the road as quickly as possible so they can start generating profitability again,” she said.
She said the truck population is forecast to grow through 2015, with the highest growth coming in the Class 7-8 vehicle categories. In 2010, the truck population consisted of 5.94 million vehicles, with just under 50% of them in Class 8. She said the vehicle population will grow modestly — 1.5% between 2010 and 2015, with Class 8 going from 2.83 million to 3.1 million of 6.5 total vehicles.
Technologies and regulations
There are significant technologies and regulations already in place or in development that will impact the future of commercial vehicle repair, she said. Three key factors influencing that: safety, environment/fuel efficiency, and labor.
Technologies include telematics and prognostics, which will help improve information about what a vehicle needs on the repair cycle or how it's being used; hybrid powertrains; electric powertrains; and automatic and semi-automated transmissions.
Regulations include FMVSS 121 (braking distance); Hours of Service limiting continuous driving time to eight hours; TPMS (tire-pressure monitoring system), which “will impact the aftermarket rapidly once it comes in”; EPA 2010; selective catalytic reduction (urea and diesel particulate filters); and cooled exhaust gas recirculation.
Fleet managers' current and future intentions provide direction and insight into the future of repair-industry demand. According to research conducted in 2008 with fleet managers, the top three safety technologies used by fleets are disc brakes and larger drum brakes (27%), TPMS (20%), and electronic stability control (ESC) 12%.
“Those are actually systems that have mechanical capabilities that you need to repair,” she said, “so those are developing technologies that are going to impact the aftermarket quickly — the main repair items. Fleet managers believe these systems directly enhance vehicle stability and fuel-efficiency that provide a solid ROI case.
“The things at the bottom of the list (driver-drowsiness distraction warning, automatic collision mitigation system, and forward collision warning) are things that last a long time and don't have wear and tear, so their impact is very minimal.”
Frost & Sullivan also asked: “When purchasing powertrain technologies, what are the top three benefits that are most important to your fleet?” Fuel efficiency was the clear top item (59%) and was mentioned in the top three by 88% of fleets, followed by reliability (17%, 54%) and reduced maintenance requirement (5%, 47%).
“If there is a dramatic increase in components' reliability, it will have a dramatic impact on the aftermarket,” she said. “I was involved in exhaust products when stainless steel began being used. The impact of stainless steel on exhaust systems is obvious.
“The aftermarket is excellent at providing enhanced technologies to improve on the OEs. That's one of the reasons we exist. So be looking for opportunities where you can retrofit certain vehicles and systems to enhance that. Sometimes they are a bit tougher sell. Sometimes when the ROI case is made, it can be easier.”
Kellenberger said easier operation and improved fuel efficiency will drive automatic and automated representation in the population.
In 2005, just 19% of new trucks were sold with automatic transmissions, but that number is expected to be 35% in 2015.
“How are we going to repair these?” she asked. “Where are you going to get that technician? If the technician you have doesn't have those skills, they are going to return to the origin equipment service channel, which is the dealer. You may not see these types of vehicles at all in the aftermarket. You may see them only when they are significantly older and provide less revenue opportunities. The parts and repair industry must evolve with the technology to support the industry.”
Hybrids to boom
She said hybrids could make up 15-20% of total Class 6-8 sales in North America by 2020. In 2010, there were 2300 hybrid Class 6-8 vehicles, most used by fleets and not owner-operators. By 2015, there will be an estimated 39,400 hybrids, with Navistar (39%) and PACCAR (23%) leading the way.
The future of commercial electric vehicles is dependent on government manufacturing and infrastructure support as well as application use, she said. By application, EVs will be more attractive to depot-based, urban-delivery fleets that cover known routes (typically less than 100 miles daily). She estimates a total of 18,929 units sold in 2016, compared to 1982 units in 2010.
Kellenberger said the rising install rates of technologies that require routine maintenance will drive revenue opportunities for heavy-duty repairers. The biggest changes between 2005 and 2015 will be seen in diesel particulate filters (100%), SCR (76%), diesel oxidation catalyst (72.9%), and TPMS (47.6%).
“You can see what the impact is going to be and what technologies and services you need to focus on so you have appropriate parts and skills,” she said.
The value of telematics technology continues to be proven, she said, and continuous evolution will provide both installation and repair opportunities. The first wave featured operations automation (automatic vehicle location and scheduling), security (stolen-vehicle tracking and geofencing), and communications (short messaging and voice communications), the second wave monitoring (remote vehicle diagnostics and driving behavior), and the third wave Internet (access, content download, and streaming audio/video).
“As we move through different waves, we're seeing that the complexity of each of the technologies continues to evolve,” she said. “As it's moving through, you have to be prepared for development in multiple ways.”
The shortage of heavy-duty technicians poses a significant challenge. The number grew from 114,000 in 2002 to 122,000 in 2006, but has leveled off to just 123,000 in 2009. And there are fewer HD truck-service locations now (30,090) than there were eight years ago (30,550).
“We're tapering off and finding it is extremely hard to find young people in the market,” she said. “Tools, equipment, and components are much heavier, it can be dangerous work if they're on the side of the road, and it's often cold. It's a very challenging environment. The only other areas where technicians are complaining that it's even more severe is in collision repair — the body guys who spend a lot of times on their knees.
“We're seeing the challenge of attracting them in the marketplace and keeping them motivated. We need to encourage them to learn and have an area of expertise. They can then see the significant value they bring. That seems to boost their credibility and value to the organization.
“Vehicle manufacturers have stronger holds on proprietary technology, and that means it's harder to access that technology. You may have to determine, ‘I'm going to support Navistar and Freightliner and not something else,' because of the investment costs of accessing all of information you need.”
Where do we go from here?
She listed these challenges and opportunities for heavy-duty trucks and the repair industry:
“The slow and sporadic rebound of the US economy and lower freight volumes could mean we have fewer trucks on the road, but it also could mean more trucks with less in them. Each has an impact on freight miles and wear and tear on components.”
Increased truck production/sales from 2004 to 2006 has generated repair opportunities from 2008 to 2012.
The rising average age per truck is driving aftermarket repair demand, so technicians need to be as versatile as possible.
The strengthening of EPA regulations is expanding aftermarket demand and also aftermarket demand to repair.
The OES channel is growing by capitalizing on proprietary OE technology.
The combination of raw-material costs and technology advancements have increased prices.
Growing vocational truck demand has driven repair opportunities.
Key research findings on impact of regulations:
Total aftermarket revenues of EPA 2010 compliance-related business will increase from $1.11 million in 2007 to $1.315 billion in 2015.
SCR is the preferred OEM technology to meet the EPA 2010 NOx emission standard. The wide application of this technology will foster aftermarket sales of diesel exhaust fluid (DEF) and development for urea filters.
Advanced Cooled EGR is another proven technology applied to meet the EPA 2010 NOx emission standard. The introduction of this technology will push aftermarket sales of variable geometry turbochargers (VG Turbo).
The development of new engines, turbochargers, radiators, etc, that are more costly, due to incorporation of higher priced EPA compliance technologies, will create opportunities for the remanufacturing industry.
A group of sensors will be applied to EPA compliant systems. NOx sensors and exhaust pressure sensors — will have additional placements within the system driving increased demand. Others — such as urea level sensors — are new and create an additional replacement opportunity.
New stopping distance regulations (FMVSS 121) will drive adoption of pneumatic disc brake systems as well as the evolution of drum brakes and linings.
She said truck dealers are expected to gain share in the distribution channel because of increased vertical integration and rising proprietary technology on new vehicles. The number of smaller truck fleets (one to five trucks) is forecast to increase at a faster rate than larger fleets (over 25 trucks). These fleets do not have on-site repair, and this will increase demand in the HD specialist and ISP channel.
Despite the economic slowdown, regulation and technology changes provide aftermarket growth opportunities. She gave these action items for the heavy-duty repair industry:
Emission regulations mandating expensive aftertreatment technologies create first-time installation opportunities in the aftermarket, so prepare for increased demand for new aftermarket parts, service, and maintenance; and explore new opportunities, including DEF replenishment and DPF cleaning machines.
New technologies are challenging all levels of the aftermarket value chain, so develop a long-term view on servicing and maintaining EPA 2010 compliant trucks; monitor advancements in hybrid and electric CV technologies, and other disruptive technologies; and leverage remote diagnostics and prognostics technologies.
There is an urgent need for the acquisition of knowledge and skills, so develop closer partnerships with system suppliers and OEMs to acquire new product knowledge and enhance the spectrum of repair skills; invest in knowledge-management technologies for 2010 EPA-complaint trucks; and hire skilled technicians from closed dealerships and build a strong technical knowledge base.