WASHINGTON, DC--(Marketwire - Feb 28, 2012) - Western and Japanese truck manufacturers risk stagnation if they miss out on a new product segment that is currently emerging in developing markets and is projected to make up almost half of global sales by 2020, says a new report by The Boston Consulting Group (BCG).
The report predicts that this new segment will be dominant in the BRIC nations (Brazil, Russia, India, and China), accounting for more than 70 percent of trucks sold there, or 44 percent of the global total, by 2020. Titled Winning the BRIC Truck Battle: How Global and Local Players Can Tap the Full Potential of BRIC Truck Markets, the report is being published today on www.bcgperspectives.com.
BCG's study focuses on commercial freight-transport vehicles whose gross vehicle weight is at least 3.5 tons. These vehicles include heavy vans, medium-weight trucks, and heavy trucks such as tractor-trailers.
Although the so-called Triad markets -- Japan, North America, and Western Europe -- will remain important, producing 33 percent of global truck revenues and 37 percent of global truck profits by 2020, truck OEMs that want to be global players will have to be competitive in emerging markets. The BRIC markets are expected to generate 64 percent of global truck-sales volumes and about 50 percent of global truck revenues and profits by 2020, according to BCG.
The key to winning the BRIC truck battle will be meeting demand for this new midmarket segment. Midmarket trucks will be more sophisticated than today's vehicles from BRIC OEMs but less so than the premium trucks produced by global OEMs, such as Mercedes-Benz, MAN, Scania, Freightliner, Volvo, and Isuzu. BRIC customers will demand more powerful engines, more comfortable cabins, and better fuel efficiency than are offered by the low-cost vehicles that currently dominate the BRIC markets.
"Triad manufacturers need to get into these countries and develop their midmarket products soon or they will be shut out," said Nikolaus S. Lang, a partner in BCG's Munich office and coauthor of the report. "Local OEMs such as Tata, Kamaz, and Dongfeng are big and profitable and have local knowledge and networks. Some Triad manufacturers have started to localize, but BRIC companies seem well ahead in developing midmarket concepts. Wait and it will be too late."
Based on interviews with more than 75 senior executives from the world's leading truck makers and suppliers, the report offers advice to both global and local OEMs on how to operate most effectively in these new market conditions. The authors argue that Triad companies will need to localize more of their full value chains -- including R&D, sourcing, manufacturing, and sales and distribution -- in the BRIC countries.
"They will have to develop products appropriate for those markets, and this cannot be done in Germany, Japan, or the U.S.," Lang emphasized. "In addition, the great variation in local requirements makes local value chains key to long-term success. To compete with local BRIC players, global OEMs will have to downgrade specifications and reduce costs."
As competition converges on this sector, local OEMs will develop more sophisticated products. Midmarket vehicles such as the Dongfeng Kinland and the Tata Prima are already in the field. Midmarket trucks will cost around 20 to 50 percent more than current low-cost trucks.
To download a copy of the report, please go to www.bcgperspectives.com.
To arrange an interview with one of the authors, please contact Eric Gregoire at +1 617 850 3783 or gregoire.eric@bcg.com.
About bcgperspectives.com
Bcgperspectives.com is a new website -- available on PC, mobile phone, and iPad -- that features the latest thinking from BCG experts as well as from CEOs, academics, and other leaders. It covers issues at the top of senior management's agenda. It also provides unprecedented access to BCG's extensive archive of thought leadership stretching back almost 50 years to the days of Bruce Henderson, the firm's founder and one of the architects of modern management consulting. All of our content -- including videos, podcasts, commentaries, and reports -- can be accessed via PC, mobile, iPad, Facebook, Twitter and LinkedIn.
About The Boston Consulting Group
The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 75 offices in 42 countries.