Although the markets in NAFTA and Asia did very well in the first months of 2012, the market situation is rather difficult in Europe and in particular in Latin America. Daimler Trucks expects conditions to improve in the second half of the year. Daimler Trucks is on track to reach its strategic return on sales target of 8% as measured across the business cycle. The target figure is a sustainable average that the division aims to achieve from 2013 on.
“In 2012 we will once again prove that our Global Excellence Strategy is working well. We operate worldwide, our by now five truck brands offer the right products for every region, and we are now just hitting our stride in the growth markets of India and China”, said Andreas Renschler, the Daimler Board of Management member responsible for Daimler Trucks and Daimler Buses, in Stuttgart. The division aims to increase its market share in all regions.
A few weeks ago Daimler Trucks presented the wide range of products offered by the new truck brand BharatBenz in India. These “Made in India” trucks are manufactured in Chennai in the southern part of the country. A total of €700 million was invested in the facility, where the first series-produced vehicles will begin leaving the plant this fall. In the medium term up to 70,000 units can be produced in India each year, and the brand’s product lineup will cover the entire range of vehicles, from light-duty to heavy-duty trucks. At the same time as the subsidiary Daimler India Commercial Vehicles (DICV) makes its preparations for the launch of series production, it is also setting up a sales network, which will consist of around 70 dealerships this year.
In December 2011 the Chinese government gave its final approval for the Beijing Foton Daimler Automotive Co., Ltd., Daimler’s joint venture with the local truck manufacturer Foton. The two companies will cooperate on producing medium and heavy-duty trucks for the world’s largest commercial vehicle market. These trucks will be sold under the well-established Auman brand. The joint venture will have an annual production capacity of 160,000 units, and the first jointly manufactured truck is scheduled to roll off the assembly line in the third quarter of the year. The Chinese market for medium and heavy-duty trucks is expected to grow to around 1.5 million units by 2020, compared to around 1.2 million units in 2010.
The outlook for the Indian and Chinese truck markets is therefore very promising for the years ahead. This applies especially to the modern domestic segment, in which both BharatBenz and Auman trucks are offered. According to experts, this segment will account for around half of the global truck market in 2020. The quality of modern domestic trucks is much higher than that of the “low cost” vehicles that are still common in many growth markets. Although the new trucks are more robust than these “low cost” vehicles, their technology is not comparable to that of the premium vehicles from the triad markets. “The rise in truck standards in the growth markets is opening up new opportunities for us — not only for our existing vehicles and components, but also for our new, locally manufactured products,” Renschler said.
The product offensive in the modern domestic segment is meant to help Daimler Trucks attain its medium-term sales targets, amounting to about 500,000 trucks worldwide in 2013 and more than 700,000 units per year by the end of the decade.
In another BRIC country, Russia, the cooperation between Daimler Trucks and the local market leader for heavy-duty trucks, Kamaz, is going well. Sales of Mercedes-Benz truck and Fuso Canter models rose sharply in Russia after the Chelny plant in the Russian republic of Tatarstan began assembling these vehicles in 2010. As a result, more than 1,200 Fuso Canter and around 2,800 Mercedes-Benz trucks had been sold in Russia by the end of 2011.
In order to offer customers in Europe’s largest truck market a customized product bearing the familiar Kamaz brand, the partners presented their first joint truck in Moscow last fall. The vehicle is a Kamaz that contains Daimler components which enable it to comply with the Euro V emissions standard. The truck will be launched on the Russian market in 2014.
The expansion of the division’s global presence and the massive increase in local manufacturing operations are rounding out Daimler’s global truck organization, and the advantages of this arrangement are becoming more apparent day by day. An example of this is the division’s new Global Powertrain, Procurement and Manufacturing Engineering Trucks unit, which bundles the worldwide activities in these fields.
Because the powertrain accounts for more than half of the total costs of a truck, the synergy benefits are obvious. An example of this is the new heavy-duty engine family, in which Daimler invested more than €1 billion. This new generation of engines has streamlined the previous portfolio of four engine families from four plants down to just one global engine platform for four displacement variants, which is manufactured at two locations.
After the engines were introduced at Fuso in Japan and Daimler Trucks North America (DTNA), a European adaptation of this engine is now also used to power the new Actros. Mercedes-Benz’ new OM47x engine generation, which is already available in the new Actros, meets the Euro VI emissions standard, which will go into effect in 2014. The engines share more than 80% of their components worldwide. This results in corresponding benefits due to economies of scale.
The division’s platform and module strategy will extend beyond the powertrain, affecting many more components than just the engines, transmissions, axles, and exhaust treatment systems. The Axor cab, for example, will also be installed in the Indian BharatBenz models in the future.
Daimler Trucks’ platform and module strategy allows it to generate extensive synergies, which will help the division to reach its margin goals. “The message is clear: We aim to become the regional champion wherever we enter the market, and thus also become Number 1 worldwide in our industry,” said Renschler. “Ultimately we want to achieve a sustained average return on sales of 8% per year beginning in 2013 and extending across the business cycle.”
In 2011 Daimler Trucks made considerable progress toward achieving this goal. The return on sales rose to 6.5% from 5.5% in 2010. The return on sales would have even risen to 6.9% had it not been for €32 million in write-offs from the involvement in Kamaz and one-time expenses of €70 million caused by the natural disaster in Japan.
However, Daimler Trucks significantly increased sales, revenues, and earnings compared to the prior year. Vehicle sales substantially exceeded the prior year’s figures in the division’s core regions (NAFTA, Europe, Asia, and Latin America). Total sales worldwide rose by 20% to 425,800 units. Revenues also increased by 20%, to €28.8 billion, while earnings before interest and taxes (EBIT) jumped twice as much, or over 40%, to €1.9 billion.
All of the division’s operating units contributed to these good results, with Daimler Trucks North America (DTNA) providing the biggest boost. DTNA’s sales skyrocketed by 50% to 118,800 units last year. Demand was particulary driven by the need to renew the aged truck fleets. For the past three decades, the average age of trucks in North America has not been as high as it is today. Thanks to the outstanding market response to its product lineup, DTNA was able to further strengthen its leading position in the segment of vehicles in Classes 6 to 8, where it now has a market share of 31.9% (2010: 31.6%).
Total sales of Trucks Europe/Latin America rose substantially once again, climbing to 159,300 units (2010: 135,200). Sales were therefore back up to the high pre-crisis level achieved in 2007. Western Europe contributed considerably to sales growth. Daimler Trucks once again led the market for medium and heavy-duty trucks there, boosting sales by 14% to 57,100 units. Although the division’s market share dropped slightly in Europe, the full availability of the new Actros “Truck of the Year 2012” in all of the key markets will once again push up market share this year.
Fuso’s performance is particularly impressive. Contrary to the expectations that still prevailed in mid-2011, Fuso was able to increase sales throughout the year by 5% to 147,700 units, despite the disruptions resulting from the natural disaster in Japan in March 2011. The increase was due to the rapid progress of reconstruction work in Japan after the natural disaster, which led to increased transportation needs and thus to a greater demand for commercial vehicles. In Japan itself, Fuso increased truck sales by 9% to 27,000 units.
At 61,900 vehicles, Daimler Trucks achieved a new sales record in Latin America. Despite intense competition, sales remained at the previous year’s high level of 44,100 vehicles in the region’s biggest market, Brazil. Vehicle production in the region was also at a record level.
Daimler Trucks has no intention to slacken its efforts after achieving these successes. The division’s Shaping Future Transportation initiative brings together a wide range of technologies and services that not only make commercial vehicles safer, more economical, and more environmentally friendly, but will also contribute substantially to Daimler Trucks’ future success. The CleanDrive concepts, for example, help to drastically reduce commercial vehicles’ fuel consumption and exhaust gas emissions.
Daimler Trucks has already put more than 500,000 environmentally friendly BlueTec trucks featuring SCR technology on the road. In addition, it has delivered more than 8,000 vehicles with alternative drive systems, including around 2,700 hybrid trucks. What’s more, the new, fourth generation of the Mercedes-Benz Actros is the world’s first long-haulage truck to rigorously meet the future Euro VI emissions standard. Despite the fact that this standard represents a big technological challenge, the new truck also consumes far less fuel than its predecessor.
Fuel consumption isn’t the only important issue for truck customers, however; the total cost of ownership is also a primary concern. These costs can be reduced by a number of truck-related services, including customized financing offers (Daimler Trucks Financial), the renting of trucks at short notice to cover peaks in transportation demand (Mercedes-Benz CharterWay), electronic assistance systems that make workshop stays as short as possible, and technology for managing entire truck fleets (FleetBoard).
These services become especially important for customers in times of economic uncertainty. Services, after-sales activities, and telematics systems now account for around 20% of Daimler Trucks’ revenues.
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