SOURCE: Frost & Sullivan

March 09, 2011 06:02 ET

Frost & Sullivan: Global OEMs and Suppliers Bracing for Tremendous Growth in Demand and Production of Low-Cost Trucks

LONDON--(Marketwire - March 9, 2011) - The rising reliance of emerging economies on cost-effective light, medium and heavy commercial vehicles coupled with a recessionary environment in developed economies is creating tectonic changes in demand for trucks worldwide. The demand for low-cost trucks is set to experience steady and robust growth over the next 5 years.

New analysis from Frost & Sullivan (, Strategic Analysis of Global Low-cost Truck Market, reports that over 3.2 million low-cost commercial trucks will be manufactured globally in 2016. Around 29 low-cost truck models will be introduced by global OEMs by 2016, indicating the rapid expansion and pertinence of low-cost light commercial vehicles (LCVs), medium commercial vehicles (MCVs) and heavy commercial vehicles (HCVs) in global markets. Powertrain, chassis, safety, comfort and convenience and other marketing related expenses will be key focal points for cost reduction in an endeavour to create low-cost trucks.

"Opportunities in the global low-cost truck markets require OEMs to focus on creating trucks cheaply and not creating cheap trucks", notes Frost & Sullivan Global Program Manager Sandeep Kar. "The emergence of Asian OEMs, rising total-cost of ownership demands from both developed and developing nation truck buyers, economic uncertainty in mature markets, and strengthening urbanization trends are stoking demands for low-cost trucks, and some OEMs are moving faster than others to convert these drivers into revenue growth opportunities."

The low-cost truck will be initially fuelled by demand from BRIC nations, gradually finding traction in developed economies and eventually supported by the growth in the Next 11 economies. The changing nature of commercial vehicle activities under an environment of rising urbanisation, economic and energy price volatility and robust growth in demand for cost-effective commercial vehicles are compelling global truckmakers and suppliers to participate in this growing segment.

This implies that a new segment is being created rapidly in the global commercial truck market offering growth opportunities to truckmakers and suppliers alike. This is also offering the opportunity to mature market OEMs to attain rapid volume growth in both local and global markets.

In an endeavour to penetrate and grow in global markets, Asian OEMs have created low-cost truck platforms that are customisable to meet local market needs. The North American and European OEMs are acknowledging the threat and also realising the opportunities that they can avail through participation in the global low-cost truck market.

"The net result is creation of a new segment in the global commercial vehicle market which is experiencing deep-seated changes in the form of demand for trucks that not only feature lower upfront cost, but also lower lifecycle cost," remarks Kar. "The low-cost truck market is offering OEMs from all parts of the world to benefit from a swiftly growing segment that can offer economies of scale benefits to offset the lower margins offered by such vehicles."

While the growth potential is alluring, it is, nevertheless, clear that end-users do not just want cheap trucks, but trucks that can help reduce total cost of ownership. Therefore, participation in this fast growth segment requires recalibration of OEM and supplier strategies.

"Most major truckmakers are either creating new platforms, or creating new nameplates to create and introduce these low-cost vehicles," comments Kar. "These trucks will feature innovative technologies, optimised systems and components, developed through incorporation of aggressive design-to-price strategies. However, it will prove increasingly difficult to maintain low-cost advantage as stricter regulations, rising demand for reduced maintenance requirement, relatively lower margins, and rising labor costs will challenge market participants."

The global OEMs and suppliers will face strong headwinds in the form of rising regulatory requirements and increasing manufacturing costs while developing and marketing high-quality reliable trucks. This implies the need for unique and innovative approaches that cut across all corners of truck manufacturing.

Developed market participants must continue seeking partnerships with manufacturers in emerging markets. As a strategic response, market participants in North America and Europe should also consider creating new nameplates and well differentiated product platforms.

Diversification of supplier base and vertical integration of systems and components that enable attractive cost savings must be pursued. Decontenting and design to cost approaches will help OEMs achieve targeted price reduction while creating global low-cost truck platforms. The suppliers must develop innovative, virtual integration focused market participation and growth strategies.

"With competition in the already hyper-competitive global low-cost truck market set to intensify, market participants must look at seeking cost advantages through partnerships, manufacturing in low-cost destinations, and developing strong OEM-supplier relationships built upon virtual integration premise," advises Kar. "In addition to manufacturing related cost reduction, focus should also be on reducing marketing and sales related expenses. These, coupled with globally harmonized and standardised platform creation, will enable market participants to grow faster than their competitors."

Frost & Sullivan recently hosted a web conference on the Global and European Low-cost Truck Market. To receive a link to the recording of this briefing and/or more information on this study, please email Katja Feick, Corporate Communications, at with your contact details.

Strategic Analysis of Global Low-cost Truck Market is part of the Automotive & Transportation Growth Partnership Services programme, which also includes research in the following markets: global commercial vehicle technologies and their markets, powertrain, chassis, safety, telematics and regulation compliance technologies for commercial and passenger vehicles. All research included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants.

About Frost & Sullivan
Frost & Sullivan, the Growth Partnership Company, enables clients to accelerate growth and achieve best-in-class positions in growth, innovation and leadership. The company's Growth Partnership Service provides the CEO and the CEO's Growth Team with disciplined research and best-practice models to drive the generation, evaluation, and implementation of powerful growth strategies. Frost & Sullivan leverages 50 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from more than 40 offices on six continents. To join our Growth Partnership, please visit

Strategic Analysis of Global Low-cost Truck Market (M657)

Contact Information