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It’s tough out there for stand-alone truckers 
Peter Schmidt | Editor

Published: Wed, 21st September 2016 15:16:08 GMT

Truck comment Editorial Western Europe 2016

Open quote signThe truck business is a man’s world. A relentless toil of countless lonely hours, night-time work and unsocial hours. For the driver, that’s it in a nutshell. Yet, almost the same goes for senior management of today’s few remaining heavy truck makers. And yet, almost everyone in this business is wary of the fact that the global truck business, unlike the highly volatile car business, is comparatively future-proof and is not subjected to the whims of fashion. Whatever the economic conditions, just like bread and water, trucks are a prime essential part of daily living. 

More so than in today’s still multifaceted car world, where dozens of brands compete with each other with countless different models in half a dozen of main car sectors and dozens of sub-segments, today’s truck manufacturers essentially compete with a largely generic product, designed chiefly to generate a regular and continuing payback for the world’s truck operators. 

And yet, while all of these trucks, regardless of the manufacturer, will be capable of performing the same arduous tasks day in and day out for an average of say 120,000 miles per year, in the image league of today’s truck world, some are ranked higher than others.

Arguably, Sweden’s Scania is perceived as a premium truck brand, while DAF and Iveco are placed at the other end of the spectrum. 

All heavies, regardless of the brand, will haul a full load from A to Z in near identical manner. 

Moreover, in terms of functionality, today there appears little between them. 

Given all that, it is difficult to justify a higher price or say all-in lease rate for brand A compared to brand B. 

So it almost goes without saying that this is a cut-throat business in which only the toughest will survive. 

No wonder then that Europe’s heavy truck clan - looking for a way out - formed an illegal price fixing cartel. 

Tough EU legislators, all too wary of the dangers of an operating truck oligopoly at their doorstep, got wind of that. 

This year, the offenders were fined €2.93bn – the largest cartel fine in EU history.

Europe’s heavy truck market is now essentially served by just half a dozen manufacturers. 

Apart from sector leading Mercedes, there is also Volvo, which owns Renault Trucks, Paccar-owned DAF, Fiat-owned Iveco and finally, Volkswagen owned Scania-MAN

Gone, and largely forgotten are former French brands Saviem and Berliet, Pegaso of Spain, Germany’s Büssing and Krupp, Britain’s Leyland Trucks and long-struggling UK independents ERF and Seddon-Atkinson.

This gradual consolidation of the truck industry, a market dominated by just a few manufactures, is testament to the looming ‘dog-eat-dog’ competitive scene of this industry. 

This tough world of survival is echoed no less in North America. 

So much so that today there are just two intrinsic US truck makers, the rest of the US heavy truck world is owned by European truck makers. 

No prizes to be won for suggesting that Volkswagen, which just took an initial stake in America’s deeply troubled Navistar, will eventually take full control, something it did only fairly recently with both MAN and Scania

The future American sales opportunities for an enlarged VW Truck business, thanks in part to a common Scania/MAN/Navistar platform/engine/axle strategy, are potentially substantial and lucrative. 

Last year, Paccar’s pre-tax margin hit 8.4 per cent.

Mercedes’ global truck business, testament to the view that in this business ‘big’ is good, last year generated a pre-tax profit of €2.6bn, lifting the division’s pre-tax margin 1.1 percentage points to 6.9 per cent. 

Better still, prior to one-off charges, the margin reached 7.3 per cent. 

Cheered by Scania’s near double-digit first half 2016 operating margin of 9.9 per cent, Volkswagen’s visionaries, for their enlarged VW Truck business, might conceivably pencil in a future Truck Group operating margin of say 8 per cent. 

If it turns out that way, put into perspective, that’s equal to the high 8 to 10 per cent target corridor now targeted by the world’s premium car makers, BMW, Mercedes and Audi
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