Truck industry 2020: The future is global - Roland Berger

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18 | Automotive Competence Center Market drivers India's general economic development, combined with large-scale infrastructure projects such as the Golden Quadrilateral, hydropower projects, port development and mining projects, have driven strong growth in the truck industry in the past. Even before the financial crisis struck, however, a slowdown in demand for medium- and heavy-duty commercial vehicles was foreseeable. Rising diesel prices and high interest rates pushed up freight prices and thus eroded profit margins on transporters. As a result, fleet customers postponed the purchase of new vehicles. Concurrently, changes in the regulatory environment (including bans on HCVs within some city boundaries at certain times) and innovative products (such as the Tata Ace) have encouraged a discernible shift toward LCVs. The market for medium- and heavy-duty trucks thus shrank by 6% even in 2007, when India's economy was still expanding at 9% per annum. Now that the global economic downturn too is making itself felt, stagnation or at best slow growth can be expected in these segments. On the other hand, the LCV market is benefiting handsomely. Changes in legislation, the affordable initial investment and low operational costs for these smaller vehicles is driving brisk demand, especially for trucks under 3.5 tons. This segment will also profit from the spread of urbanization and increased cargo shipment possibilities. Summary It is hardly fair to call a market of 1.1 billion people a microcosm. For the purposes of this study, however, this is precisely what India is: a microcosm that reflects all the key developments currently taking place in the macrocosm of the world's rapidly globalizing truck industry. While international players are targeting India with slimmed-down versions of their models for specific usages, local manufacturers are building up their knowledge and low-cost production capabilities to expand into other emerging countries and even triad markets.
19 | Truck industry 2020: The future is global 3. Convergence in a world of differences 3.1 Where the world's markets differ… As we have seen, our research reveals significant differences between the markets in industrialized countries and those in developing countries. These differences relate primarily to technical requirements, environmental legislation and safety regulations. We also find variations between markets in terms of what customers expect of products and what drives purchase decisions. To take just one example, while TCO considerations are gaining rapidly in importance in the triad economies, in emerging markets purchase decisions seldom come down to the total cost, surprising though this may seem. In fact, the price tag on the vehicle is still the dominant factor in the majority of cases. Emerging markets themselves also currently present a varied picture, and to some extent will continue to do so in the future (see Figure 9). Other differences relate to the features customers expect in different classes of vehicle. Particularly in emerging markets, driver comfort has a powerful influence on purchase decisions for heavy-duty long-haul trucks, but is less important for the medium-duty trucks that generally cover shorter distribution radii. The same goes for service packages and maintenance issues.
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Truck industry 2020: The future is global - Roland Berger

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