There is no shortage of stuff kicking around just below the surface of the global truck industry at the moment. The European end of the business has something of a track record in returning from the August break and undergoing seismic shifts during September, so now seems like not a bad time to give the future some thought.
These are opinions - predictions as to what is likely - in our view - to happen over the next few months. Now, given that we have riled one or two for proffering opinions in the past, let us make this suggestion here and now: for those who don't like this approach, go and read something else. We do not represent the following as fact, but as views. No more, no less.
There are three specific drivers that we believe are set to shape the structure of the (Global) truck business over the next five years.
1) Within the Triad, too many trucks are still being built. Installed capacity does not reflect current or likely future demand, and, as we have argued previously, anyone who tries to form an argument for a return to the level of truck sales witnessed prior to the 2007 / 2009 downturn in Europe and North America is guilty of a gross act of self delusion. The customer base is consolidating, and the middle ground is being squeezed. Despite signs of life in both markets, it is almost inconceivable that the next market peak will be anywhere near that witnessed previously.
2) Any vestige of emotion has now left the transport industry. Or, if it hasn't, it will be soon. The notion of the truck operator as an individual possessed of veins through which diesel courses is fast becoming a quaint matter of historical detail. Transport used to be almost a lifestyle profession; this can no longer be said to be the case. None of us are involved within this industry - as practitioners, investors, manufacturers or spouters of invective - because we promised our grandmothers we'd do so. We're in it for the money. At this point, we'd better pause for the hollow laughter to subside.
3) People want more for less. Trucks are merely a component part of a supply chain, and represent a cost to be saved as opposed to an opportunity to be maximized. Today's European truck is 38 per cent more productive than one from 15 years ago, and yet costs, in real terms, rather less. The writing on the wall here is very clear; the truck is becoming a lowered cost, commodity product. That which surrounds it - service, network, financing offers and the like - still offers something by way of a competitive landscape, but the actual, physical product itself is merely a lump of metal with wheels attached. A high tech lump of metal we grant you, but a lump nevertheless.
With these three drivers in mind, what can we deduce about the likely direction of the supply side of the truck industry over the next few months and years? The easiest way of making sense of things is on a supplier-by- supplier approach, and, for the sake of fairness, we'll question the orthodoxies on a biggest first basis.
Daimler Trucks.
Uncomfortable in its current guise, we predict that Daimler Trucks will have offed Fuso, and invited an investor into DTNA within 24 months. Fuso will continue to provide Daimler with what it needs - namely a commodity freight moving product for EMEA / Asia - but the relationship here will be one of general global importer rather than manufacturer. Daimler gets to retain control over assembly quality, and will continue to offer its customer base a retail product. It will, however, outsource a vast swathe of fixed costs. MTFBC products show no sign of scaling with Daimler's other products, and so off they go. To whom? We reckon MTFBC becomes some form of a bargaining chip, as Daimler looks to salvage some toehold within the nascent Indian market; effectively, MTFBC becomes a dowry payment for access to an existing Indian OEM, with whom Daimler partners up in a manner reminiscent of Volvo and Eicher.
DTNA is a trickier one to call, but, on balance, the scale argument has been and gone here. DDC will remain - we have no doubt - as a wholly owned Daimler company, but there seems to be the potential for at least a partial divestment of DTNA. We like Penske and Hino here, and whilst RP's relationship is with the sales side of Hino's North American operation, we do wonder if there might be some room for discussion. Daimler continues to draw revenue from a less than 100 per cent owned NA operation, maybe gets an opportunity to introduce the Hino MD product into the DTNA network yet retains a captive customer for DDC. Fixed costs are reduced, platform benefits are optimized and profit thus maximized.
