Core Challenges for CV OEMs Flashcards
Three key challenge areas
- Macro economical challenges
- Customer-related challenges
- Technical and regulatory challenges
Key macro economical challenges
- Highly cyclical CV market
- Ongoing globalization in the CV market
Key customer-related challenges
- Heterogenic customer-specific product requirements
- Strong TCO driven product design
- Rising demand on offerings optimizing customer value chain
Key technical and regulatory challenges
- connectivity and digitalization
- increasing importance of electrification
- advancing emergence of autonomous driving
- tightening of regulation especially concerning emission & safety
- high investment needs for future product development
Are the European and North American markets correlated in terms of CV sales?
Yes
Are truck sales highly correlated to the GDP?
Yes, in developed markets
–> Need countermeasures to overcome cyclic market environment
When did Europe have industrial peaks and when significant decreases in truck sales?
- Europe with industry peaks in 2000, 2007, 2011, 2019
- Significant decrease of truck sales in 2009
How are the percent swings of the CV market compared to the GDP changes?
Higher. (larger beta)
V Scenario
- GDP level: Return to pre-shock level trend and growth rate (same slope)
- GDP growth: growth overshoots on rebound and then levels back to former GDP growth (Shape: down 2%, up 4%, and then down 2%).
Examples:
- Classic economic shock leading to an intertemporal displacement of demand, resume original output path.
U Scenario
- GDP level: Growth resumes at lower level (trend); but at pre-shock growth rate
- GDP Growth: Lost output during recession is permanently lost, but no perpetual loss (Downward V shape GDP growth for a few time periods; negative then positive slope and then same GDP growth again).
Example:
- A shock that breaks growth trend, even as trend growth remains same - typically financial recession or major public error
L Scenario
GDP levels: Growth resumes at lower level (trend) and at lower growth rate (slope)
GDP growth: Loss in output perpetuates (shape: down 2% up 1.5%, then it stays at that gdp growth).
Example:
- Shock that perpetually breaks a part of the growth model. A structural impact that shifts the output path lower and establishes a lower growth rate.
How does the economic effect of Covid-19 compare to other flues?
Unlike covid-19 past flues have all been v-shaped
Expected sales decrease in 2020
10-18% with pessimistic scenario suggesting up to 28% decline
In which region where sales expected to decrease most during 2020?
Most in Europe like 30-40%. Second US and in China only 0-5% decline in sales.
TCO breakdown in Germany
Driver 34% Fuel 25% Admin 11% Toll 10% Depreciation 9% Repair and maintenance 7% Insurance and taxes 4% --> Revenue = 98% costs; 2% margin
Customers have a pressure to reduce costs. This can be achieved by:
- efficient planning and dispatching
- driver monitoring and customised training
- route optimization
- intelligent maintenance scheduling
Options for the customer to increase revenue
- short-term management of idle capacity
- long-term mitigation of network imbalances (contract)
- better access to profitable loads
What is important to customers next to TCO?
Additional non-and vehicle-related services and products are increasingly requested.
- Economic benefit along value chain including additional revenue streams: Like overall effectiveness and additional services
What is meant with overall effectiveness?
- Vehicle utilization
- idle times
- sustainability
- fill rates of trucks
- personell productivity
What is meant by additional services?
- security & safety
- predictive maintenance
- optimized interface
- load monitoring
Which regulation was targeted at pollutants?
Euro VI
Which pollutants were reduced by min 85% to 97%
CO, PM, HC, NOx
- carbon monoxide
- Fine particulate matter
- Hydrocarbons, or more appropriately organic emissions, are the consequence of incomplete combustion of the hydrocarbon fuel
- Nitrogen Oxides are a family of poisonous, highly reactive gases
What will come beyond Euro VI?
- further reduction is difficult, costly, and may lead to increased fuel consumption (C02 emission)
- Post Euro VI standards are likely to focus on real-world emissions.
- new standards are expected to take a more holistic view, measuring emissions in-use or by use-case (real-world)
Example of new regulations
- China VI-b standards to be implemented from 2023 already leading the way with more stringent in-use testing and monitoring requirements
Will Euro VI and equivalents soon become compulsory in all major truck markets?
Yes. In Europe since 2014 already. In north america since 2010.
Brazil coming in 2023.
Russia, India, China 2021.
What is special about India when it comes to emission regulation?
They move directly from Euro IV to Euro VI
Are emerging markets adopting regulations early?
No. Emerging markets emissions norm implementation historically often with delay.
What is the 2018 European Commission legislative proposal for heavy duty CO2 emissions about?
- reduction from 2019 baseline
- incentives for zero and low-emission vehicles, relaxed length limits, improved cabins
- 15% lower emissions by 2025
- 30% lower emissions by 2030 (cumulative)
- -> China and US have similar policies
What to do about the high investments needed for technological innovation?
The industry needs to recover their investments with an approximately similar amount of vehicles sold.
What do customers want regarding TCO?
A significant decline of TCO.
Also additional services and products to reduce related cost positions.
What are the key technological developments?
- Connectivity and digitization
- electrification
- autonomous driving
