South Africa


  • Industry: Automotive
  • Type: Press release, Survey report
  • Date: 2011/09/20


KPMG’s Automotive industry team advises clients with a range of critical company and automotive industry matters.

Picking up speed: Trucking and the rise of the emerging markets 

The global commercial vehicle market is starting to motor. Rather than the fuel-injected, western-dominated growth that characterised the industry in the past, this time the engine is being fuelled by the emerging markets.
Download Now
PDF files require Adobe Reader to view

Last year, Dongfeng – a Chinese manufacturer – became the world’s highest-selling original equipment manufacturer (OEM) for heavy commercial vehicles. Whereas just five years ago, the ‘Triad markets’ (Western Europe, North America and Japan) dominated the leader board with seven of the top 10 companies based on sales, by 2010 the opposite was true: seven of the top 10 companies hailed from either China or India. What is more, the US and Japan had dropped off the list entirely.


So, while North America saw its share of worldwide commercial vehicle registrations fall from 50 percent in 2006 to around 32 percent in 2010, China sharply increased its global market share to 28 percent by the end of 2009 and to more than 30 percent by 2010. 


Demand shifts to emerging markets


However, these statistics must be viewed in the context of rapidly growing demand in the emerging markets, which is most likely to be satisfied, at least for the near future, by local manufacturers. Asia is now (by far) the largest region for commercial vehicle sales, accounting for nearly one in two commercial vehicles sold worldwide. Any incremental growth in, for example, Chinese demand for trucks will likely be served by one of the existing Chinese manufacturers (Dongfeng, FAW, CNHTC, Torch or Beijing Automotive).


Nevertheless, the emerging markets overall are also starting to open up to foreign ownership and participation (with the obvious exception of China, where market entry for foreign commercial vehicle manufacturers remains substantially more difficult). In India, for example, most protectionist measures have now been dismantled, and import regulations and customs duties no longer create a barrier to foreign participation. Despite the fact that the Chinese vehicle market is heavily regulated, foreign OEMs are not willing to surrender right away, but are trying to get a foot in the door to the world’s largest commercial vehicle market via joint ventures and production agreements.


In particular in China, foreign OEMs will find a largely fragmented industry structure: 24 companies produce light commercial vehicles (less than six tons), 18 service the heavy commercial vehicle market (over six tons), and around 16 full-line companies cover both market segments. The Triad markets, on the contrary, have largely exhausted opportunities for consolidation, leaving the market dominated by a handful of global full-line, multi-brand manufacturers with the scale and reach to serve a variety of markets properly.


Purchase price vs TCO – regional adaptability is the key to success


Of course, Triad manufacturers will quickly find that strategies that were ‘tried-and-true’ in western markets will not necessarily return the same results in the emerging markets.


Emerging market customers tend to focus on different ‘selling points’ depending on their market. For example, there is a tendency for operators in the emerging markets to overload their commercial vehicles drastically, meaning that manufacturers must address the fact that vehicles will bear a higher payload than intended. In other words, it is not revolutions per minute (RPMs), but torque, that counts in order to get overloaded trucks into motion in the stop-and-go traffic of the emerging markets. Vehicle design must also take into account the condition of the local road networks, which are often of poor quality.


Whereas Total Cost of Ownership (TCO) sits high on the purchasing agenda for buyers in the more evolved markets, customers in the emerging markets tend to focus strongly on initial cost and ease of DIY-style repair. As a result, the strategy of charging a premium for vehicles that – over time – deliver cost savings through innovation or enhanced safety is currently a difficult sell in China or India. Furthermore, wide-scale fleet management solutions are also not in high demand in places like India, where only 10 percent of truck operators own a fleet of up to 25 trucks, and less than two percent own between 200 and 1 000 vehicles.


World Truck or modular systems: Strategies for a successful future


While it seems clear that most Triad manufacturers are likely to focus on the emerging markets going forward, this does not spell the dawn of the ‘World Truck’. Rather, vehicle concepts will need to be geared towards the demands of local customers, which will also often mean reducing product complexity and using local resources and suppliers. In response, many global players are now focused on developing modular systems that use the same aggregates and components in a variety of different models and brands.


Above all, multi-brand manufacturers will need to develop different business models to meet the unique needs of mature and developing commercial vehicle markets. The business model for commercial vehicle manufacturers in Triad markets is based on a product-service bundle with high technical quality, high-value vehicles as well as complementary services (such as spare parts logistics, financial services and fleet management). In contrast, a successful business model for emerging markets must place the low-cost truck at the forefront and focus on developing vehicles that are easy to repair.


The value of greening


Environmental regulation also creates a disparity between the markets. Manufacturers in the Triad countries continue to face tightening environmental restrictions with expectations that these will only increase in the future. In response, manufacturers have substantially cut particle and nitrogen oxide emissions and increased fuel efficiency.


These environmental regulations may pose a significant barrier to emerging market manufacturers seeking to enter the more developed markets. While emission limits in the emerging markets are currently less restrictive than those in the Triad markets, it is widely anticipated that environmental demands will rise in due course.


A number of Triad manufacturers are testing and selling so-called ‘micro-hybrids’ across many vehicle classes, and – less frequently – mild/full hybrid engines. But in the commercial vehicle segment in particular, buyers seem less willing to pay a premium for eco-innovation. As a result, commercial vehicle manufacturers will need to find ways to reduce the cost of hybrid systems substantially.


Achieving knowledge transfer between cars and trucks


Particularly in the more developed markets, there is an increasing opportunity for valuable lessons to be shared between manufacturers of cars and trucks. For one, the emergence of mobility solutions in the passenger car segment (eg, Daimler AG’s ‘Car2Go’ programme) could be enhanced by leveraging the mature practices of commercial fleet management and logistics approaches common in the developed world. Passenger cars used for mobility services will also necessitate more frequent maintenance and service, likely closely resembling the truck industry’s automated service management approaches.


Of course, truck manufacturers can learn a few lessons from the passenger market as well. For example, in the developing markets, where customers are very often owner/drivers, truck manufacturers may want to study the customer segmentation and targeting approaches of the passenger vehicle market to learn key insights into selling vehicles to individuals rather than fleet managers.


In South Africa, government plans to push for higher local content in automotive segments especially within the truck and bus sectors. The challenge according to Gavin Maile, KPMG Africa Automotive Industry Leader, is that truck assemblers receive duty rebates for semi-knocked down assembly, which means they are able to import a truck that is already substantially built up. There is a greater need for local content within the industry as a whole.


In terms of commercial vehicle sales performance, the extra-heavy commercial vehicle has been the biggest winner, with a year-to-August 2011 increase of 46 percent and a year-on-year increase of 40 percent. The light, medium and heavy commercial vehicles have had a reasonable performance, whereas the bus segment has performed rather dismally post the 2010 Soccer World Cup™, as anticipated.


About the study


The recent study titled Competing in the Global  Truck Industry: Emerging Markets Spotlight has been compiled by the KPMG Global Automotive Practice led by Dieter Becker, Head of Global Automotive, in co-operation with the Institut für Automobilwirtschaft (Institute for Automotive Research) under the leadership of the renowned automotive expert Prof Dr Willi Diez.


This study examines the challenges and winning strategies for future growth and provides a deep assessment of the emerging truck markets – China, India and Russia. Interviews with senior executives of the commercial vehicle industry (Daimler Trucks, SGMW, Foton, Tata and KAMAZ) allow the study to provide profound insights into the international truck market.


Author: Dieter Becker (46), Dipl. oec., is a Director with KPMG in Germany, where he is the global head of the firm’s Automotive practice. Since February 2010, he is also Head of Advisory and member of the Executive Committee for KPMG in Switzerland. He can be reached at




Gavin Maile
Africa Automotive Director
KPMG Automotive Practice
Tel: +27 (0)11 647 7165


Dieter Becker
Global Head of Automotive
KPMG in Germany