11 years of fascinating industry development
In his final review of global news for local truckers, FRANK BEETON revisits some of the key issues that have been covered over the past 11 years, and discusses possible outcomes for these subjects going forward
In this, the final Global Focus, we will be revisiting some issues that have most occupied our minds over the past 11 years, and venturing some comments on how we see things panning out in the years immediately ahead.
Writing this column has been a real labour of love, as it has allowed me to continue an interest in trucks and buses that first commenced in 1958, and dominated my working life from 1968.
During the intervening almost half-century, I was privileged to work in many areas of the commercial-vehicle and road-transport industries; including operating, sales, marketing, bodybuilding, vehicle engineering, assembly and consultancy. This has given me a unique perspective from which to comment on events and strategic direction in the industry, much of which has provided the content for Global Focus.
I hope you have enjoyed it!
THE VOLKSWAGEN SAGA
In our opinion, the single most important topic that will be discussed in the industry in the years ahead will be the unfolding of Volkswagen (VW) AG’s global strategy for its now very substantial interests in the commercial vehicle field of activity.
Not that many years ago, mention of “VW” and “commercial” in the same breath would only have conjured up an image of a Kombi/Microbus van variant with no side windows, which was about as far as the German manufacturer went in the truck and bus business.
The major shift in corporate direction first became evident in 2000, when VW purchased a stake in Swedish heavy truck and bus manufacturer Scania. By 2014, both it and German rival MAN were firmly under VW‘s control.
Since then, there has been some reorganisation of the group’s assets, which also include the MAN-controlled Volkswagen Caminhöes e Önibus in Brazil, and the Indian operation which builds MAN’s CLA Series trucks.
The formation of the “VW Truck and Bus Division” was announced in May 2015, and the following month VW’s CEO, Matthias Müller, announced details of the group’s latest long-term corporate strategy, which included the goal of making VW Truck & Bus “the most profitable company in the sector, with a significant presence in all key regions of the globe”.
These were strong words indeed, and a definite indication that the foray into commercial vehicles was deadly serious stuff. At that point, the global coverage was still an ambition, but the announcement, on September 6, 2016, that VW Truck and Bus had agreed to acquire a 16,6-percent stake in Navistar International Corporation, at a cost of approximately $US 256 million (R3,38 trillion), added a very important additional dimension.
We had first heard, as early as 2012, that VW AG was showing interest in Navistar International, in an effort to gain access to the North American heavy-duty truck market. Neither its Scania nor MAN truck operations had any substantial presence there, nor manufactured the conventional cab (bonneted) models that would be necessary to make any realistic inroads.
Important new directions
With Navistar in the family, the potential for VW to participate in a significant chunk of the North American truck market has grown substantially, with a ready-made domestic product range, manufacturing base and distribution/product support structure.
Another important announcement had been made earlier, in December 2015, when MAN Truck and Bus announced that it was to introduce a new light-commercial range, dubbed the MAN TGE, at the 2016 IAA exhibition in Hanover.
Predictably, this turned out to be a rebranded derivative of VW’s highly impressive new 5,5-t gross vehicle mass (GVM) stand-alone Crafter “heavy” van family. The 2016 version is the first edition to emerge following the dissolution of the VW-Mercedes Benz van-building joint venture that had been running since 1995.
However, the TGE launch was doubly significant in signalling a market position adjustment for MAN, which previously had not sold anything lighter than a 7,5-t GVM light-duty truck. (Please note that in this discussion, we are using global parameters for light, medium and heavy trucks, which would approximate to medium, heavy and extra-heavy categories, respectively, in the South African context.)
During September 2016, details also emerged of a new strategy to deepen integration of component and powertrain development within the VW Truck and Bus family. The main element of this strategy was the decision that Scania and MAN were to share development and platforms under a “lead engineering” principle, with teams consisting of engineers from both brands together developing core drivetrain components.
Scania would take leadership of the development of the heavier engines, gearboxes, and exhaust
after-treatment systems, while MAN would give direction on light- and medium-category equivalents. The components that come out of this process would also be shared with group entities VW Caminhöes e Önibus in Brazil, and Navistar in North America
More specifically, Scania is to lead in the development of a common 13-litre engine platform, together with the associated exhaust after-treatment system, while MAN will coordinate development of engines between five and nine litres displacement, plus their respective emission-mitigation equipment.
Gearbox development will be similarly divided between the two manufacturers, according to the payload category of vehicle into which the transmissions are to be installed. On a broader front, generic responsibility for all group driven and non-driven axles will be entrusted to MAN, while Scania assumes responsibility for all group engine management systems.
The opportunity will also be taken to integrate group supply chain logistics and distribution arrangements. The increased volumes of components that are to flow between numerous production locations within the group will initially impact on logistics and production arrangements at Scania’s Södertalje gearbox plant in Sweden, and MAN’s axle plant in Salzgitter, Germany.
Russian production of MAN and Scania products is to be consolidated in St. Petersburg, while MAN and VW truck and bus production will be rationalised in Mexico and South Africa. Disruption of workforces will be kept to a minimum, but it is inevitable that some reallocations of responsibilities and staff redeployments will be necessary.
Discussion – Heavy trucks
As initially constituted, VW Truck and Bus is already a very substantial global business, but the cardinal rule of group consolidation is to ensure that the whole should end up being greater than the sum of its parts, and that any existing marketing “cake” should not just be cut into smaller slices. At first glance, the new strategy appears completely rational, but that does not suggest that there will not be challenges.
In particular, markets where MAN is traditionally strong as a heavy-truck contender may not take kindly to increased Scania influence, so the retention of a clear MAN identity will need to be carefully orchestrated.
This is likely to become more of an issue once the current generation of cabs needs to be replaced, as Scania styling is very distinctive, and not conducive to “badge engineering”.
The future insertion of Scania major components into Navistar International products, notwithstanding their undoubted quality, will also require clever marketing input. The Swedish brand is little known in North America north of the Mexican border, and confidence in the integrity of its aggregates will need to be built, before they can be expected to measure up effectively to the likes of Cummins, and Navistar’s own MAN-derived “big bore” engine series.
However, with Navistar now “in the VW family”, all the necessary promotional facilities exist for this to be possible, and, as we have said before, we would not be surprised if VW elects to further strengthen its
16,6-percent equity holding in the US truckmaker.
Discussion – Light/medium trucks
The most important area of opportunity for the group will be to move more strongly into the global light- and medium-payload truck arena, which is located between the 3,5 and 16 t GVM parameters.
MAN’s TGL, TGM, TGH and TGE families will cover most European opportunities (VW’s Crafter van falls, surprisingly, outside of the Truck and Bus area of responsibility). VW’s Brazilian Constellation and Worker families compete effectively in the Latin American market, while Navistar has a strong presence in the mid strata of the North American market.
However, Constellation’s export performance has proved to be unspectacular in highly competitive markets such as South Africa, presumably because of uncompetitive pricing. This situation may improve with the recent weakening of Brazil’s currency, but consideration could be given to building Constellation-derived vehicles at a more cost-effective Asian location such as India, which would also open up additional volume opportunities on the subcontinent and neighbouring markets.
This may require a change in the Constellation component-sourcing strategy, which is presently heavily geared to Brazilian suppliers, and necessitate increased inputs from VW’s in-family sources.
Discussion – Buses
We are not aware of any specific strategic announcements, as yet, regarding the group’s bus and coach brands, which include Scania, MAN, Volksbus, and, by implication, Navistar’s IC Bus line-up. However, we cannot think of any good reason why the modus operandi described above should not be successfully carried over into the passenger arena.
With particular reference to ladderframe and “buggy” bus chassis types, the interchange of components is a relatively simple task, with no considerations being necessary for differing cab sheet metal, for example.
We still believe in our earlier assertion that an opportunity exists for consolidating all group production of front-engined bus chassis in Brazil, where there is a continuing demand for this configuration, and both Scania and MAN/VW are already active in manufacturing.
There are many other directions in which VW Truck and Bus can potentially grow its business. For example, MAN has an existing joint venture with China National Heavy Duty Truck Corporation (CNHTC), and Scania has a long-running coachbuilding relationship with Chinese specialist Higer Bus Company.
Further expansion into the massive Chinese market must, inevitably, be on the group’s strategic agenda. We have written before about discussions that took place between VW and Isuzu Motors, which, if resumed, could bring benefits to both parties, and it should also be remembered that VW and FAW have cooperative light-vehicle ventures in China.
All of these could make a significant contribution to filling gaps in VW Truck and Bus’s product line-up. We would advise readers to keep a close watch on the media for developments as they materialise.
ELECTRIC VEHICLES – HOW FAR WILL THEY GO?
During the lifespan of this column, we have regularly reported on developments in the area of alternative vehicle driveline technologies. These have ranged from fairly gentle “mild hybrids”, consisting of an alternator adapted to augment the internal combustion engine with stored electrical energy once the vehicle’s batteries were fully charged; to science fiction-like hydrogen fuel cells, which can provide the means for motive power, while emitting nothing more harmful than water into the atmosphere.
There was plenty to keep the technical buffs interested, but would any of these ultimately lead to the downfall of the traditional diesel engine, multispeed transmission and mechanically driven axles?
We must admit to a degree of initial skepticism on that possibility, or at least we thought that most of the new gadgets would be too expensive for universal adoption in the road-transport industry. Would it turn out that hybrid driveline and all-electric vehicles were merely means of enabling fuel saving and emissions mitigation for a percentage of the world’s fleet of otherwise conventional cars, trucks and buses?
During 2006, we read that this opinion was partially held by Nissan’s then supremo and heir to the Renault throne, Carlos Ghosn, who reportedly said that petrol-electric hybrid vehicles made little sense because of their high initial cost.
However, when the same Carlos Ghosn revealed Nissan’s Leaf all-electric car in August, 2009, we were obliged to sit up and take notice. What he had apparently seen was the obvious appeal of a zero-emission vehicle in an era when developing fossil-fuelled engines to comply with increasingly stringent emissions legislation was becoming progressively more difficult and expensive.
There had also been a sudden recent surge in battery development, spearheaded by the increased adoption of lithium-ion technology that would address the historic operational range, cost and mass limitations of electric vehicles.
Since then, there has been a rapidly growing number of all-electric vehicle launches by the world’s manufacturers. A whole raft of electric commercial vehicles was on view at the 2016 Hannover Truck Show, ranging from way-out concepts to eminently practical real-world designs. These were comprehensively covered by Charlene Clarke in a recent FOCUS article.
We have also noted that the Chinese, with their legendary city pollution problems, have embraced electric traction – particularly in buses – with alacrity. Another very persuasive argument in favour of electric vehicles has been Germany’s call for the European Union to permit only the sale of zero-emission vehicles from 2030.
If this call is supported, it will effectively rule out internal-combustion engines, and while by no means being a fait accomplice, Germany’s position as a major vehicle manufacturer will add tremendous credence to its request.
Add to this the growing manufacturer support for Formula E electric-car racing from the likes of Renault, Jaguar, BMW, Audi, Peugeot-Citroën, Mahindra and possibly Mercedes-Benz, and we can only conclude that the global motor industry intends going electric, in a big way.
What about electric trucks?
Clearly electric trucks work very well in short-distance metropolitan applications, as amply illustrated by Daimler’s comprehensive demonstration of its Fuso Canter e-cell prototypes. However, the revelation of the Nikola One concept, as fully described in the July 2016 issue of FOCUS, suggested that the start of a whole new ballgame was imminent.
This concept manifested as a sleek semi-forward-control, three-axle prime mover (intended for line-haulage duties) powered by a series-hybrid drivetrain working through six individual electric wheel motors, delivering 6×6 drive and a prodigious collective output of more than 1 490 kW (2 000 hp), coupled with 5 016 Nm (3 700 ft lbs) of torque.
Electrical power, said the launch blurb, would be drawn from a liquid-cooled, 320-kWh lithium-ion battery pack, which is recharged by a 400-kW gas turbine charger, plus regenerative power returned from the wheel motors when they are employed in the retardation mode. Much was made of the turbine’s ability to accept petrol, diesel or natural gas as fuel.
This concept was terrifyingly logical, and seemed to tick so many boxes. The only problem was that it only existed on paper at the time of the announcement, so we waited with baited breath for the prototype to be revealed at the beginning of December 2016.
However, we were surprised to see that the power-generation system had changed from the initial gas-turbine charger to a hydrogen-fuelled fuel cell, and that hydrogen production and supply had become an important part of the Nikola Motor Company business case.
This seemed to reduce the potential for rolling out the concept, particularly to offshore areas where hydrogen production is not yet contemplated, but we suppose that the multi-fuel option can still be developed. We still believe that the electrical nature of Nikola One’s systems would fit well with the thinking behind autonomous vehicle and truck platooning, both of which are subjects receiving so much attention at present.
Nobody doubts the fact that self-driving vehicles are possible. In fact, they already exist. The main question concerns their ability to co-exist on roads shared with fallible human beings. Once the methodology has been fully accepted, the world can move on to truck platooning.
In our view, this methodology has the potential to make many of the world’s railway systems obsolete. It offers similar benefits to rail operation in linehaul hub-to-hub applications, but at a fraction of the investment costs associated with new rail infrastructure. Platooning recognises that, by running a convoy of rigs together, head-to-tail with very little separation, considerably improved fuel efficiency can result.
However, “tailgating” by drivers at high speed is extremely dangerous, and illegal in most civilized countries. In platooning, only the human being in the lead vehicle is actually driving, while the following autonomous vehicles conform to the leader through electronic communication and control technology, which ensures safety at high operational speeds.
When the platoon reaches a destination “hub”, it can be split up and individual drivers then take their mounts on to diverse offloading points. In April 2016, this technique was successfully demonstrated by Daimler Trucks, DAF Trucks, Iveco, MAN, and Scania, while participating in the European Truck Platooning Challenge, which was organised by the Dutch government. The platoons converged on Rotterdam, in the Netherlands, using public roads and crossing national borders.
We have been recording the re-emergence of electric traction in public road transport for some time in the sister “Global Bus” column. “Re-emergence” because electric trams and trolleybuses were ubiquitous in the first half of the 20th century, and never really went away completely.
However, even the most vociferous advocates of trolleybus operation, such as our esteemed colleague Vaughan Mostert, would concede that their connection to, and total reliance on, overhead power supply, was an operational disadvantage.
The advance of technology in recent times has made electric buses increasingly independent of fixed infrastructure, so their appeal through silent, clean and smooth operation has been able to once again regain prominence.
Chinese acceptance levels are high, compared to other major market areas, but this is understandable, given that country’s legendary pollution problems. Urban bus operation on fixed routes and adjacent to technical support also provides an ideal operational environment for new and developing technology.
An emerging American electric-vehicle manufacturer, Proterra, has predicted that all urban vehicles (including transit buses, refuse trucks, delivery vans and food trucks) will be of the all-electric type in the next decade, because of the rapidly reducing cost, price and mass of batteries, and the fast-charging technology that is currently being developed.
We can also see a substantial benefit in the reduced technical complexity of the all-electric solution, which, through individual wheel motors, eliminates the need for a mechanical driveline and, in the case of city buses, enables ultra-low-floor saloon layouts without requiring portal or drop-centre axles.
Cynics may argue that, by building vehicles that draw electricity from a national grid, manufacturers are passing the emissions ball on to power producers, and not addressing the problem themselves. However, it may be more practical to implement renewable power solutions at fixed generation venues, rather than on countless millions of vehicles running around the countryside.
To answer our own question, we think that electric vehicles will go very far!
THE CHINESE CONUNDRUM
For our final topic, we have chosen to discuss the future of the Chinese truck and bus industries in a global context. Technology and environmental issues aside, the main elephant in the room, as far as the global motor industry is concerned, has got to be the role that China will play in the future as a participant in, and supplier to, the international market.
Until now, Chinese manufacturers have largely chosen not to take on their foreign competitors – who are also sometimes their domestic joint-venture partners – in the world’s more developed markets, such as North America, Europe, Australasia and Japan.
They have, instead, concentrated their efforts in their own domestic market, which has grown rapidly to become the biggest in the world with total sales of 24,6-million vehicles in 2015, and certain export markets, principally in Asia, Latin America, the Middle East and Africa.
Anyone who thinks that this situation will continue indefinitely, is clearly not thinking at all. Recently, we have seen signs of growth in the Chinese market flattening out, and that is sure to be a trigger for increased interest in international participation.
Casual observation also reveals the bewildering selection of makes and models now being manufactured and sold in China. Some of these are legitimate license-built versions of well-known international models, some are not so legitimate clones of other iconic international models, and others are totally unique, but very modern, and appear to be highly marketable.
However, recognising the main area of interest of our readers, we will break away from a general discussion on the Chinese automotive industry at this point, and concentrate on trucks and buses.
In 2015, the Chinese market absorbed no fewer than 2 855 881 trucks, and 595 302 buses. These volumes were actually lower, by margins of 10,3 percent and 1,9 percent respectively, than the equivalent 2014 totals, which is noteworthy given our comments above.
The truck market was made up of mini trucks (less than 1,8 t GVM), light trucks (1,8 to six tonnes GVM), medium trucks (six to 14 t GVM) and heavies (over 14 t GVM) which took shares of 19,1 percent, 54,6 percent, seven percent and 19,3 percent respectively.
The bus market is divided into three size sub-categories, these being large (over ten metres in length), medium (seven to ten metres) and light (less than seven metres), which accounted for market shares of 14,2 percent, 13,2 percent and 72,6 percent respectively. There were more than 19 participants in the total truck market, and more than 18 players in the total bus market.
Buses lead the way
Chinese bus manufacturers have shown a greater appetite for competing internationally than most of their counterparts in the light-vehicle and truck sectors. During 2014 and 2015, no fewer than 125 Yutong and King Long buses were sold in the United Kingdom, while, as pointed out earlier, Higer is continuing its long-running coach-building association with Scania.
Electric bus manufacturer BYD has been active on a wide global stage and now has a substantial number of its products running in London, while Chinese manufacturers such as Higer, King Long and Yutong have been making regular sales to private operators in Australia.
Undoubtedly, these successes will help in establishing generic credibility for Chinese products in important international markets.
The trucking fraternity has not been as overtly bold, but it must be remembered that a number of Chinese truck manufacturers already have potentially powerful joint-venture arrangements with iconic global brands.
These include Jiangling Motors Corporation’s association with Ford; Dongfeng Commercial Vehicles’ membership of a potentially world-leading grouping revolving around Volvo; the partnership between Sinotruk (CNHTC) and MAN and, by extension, the VW Truck and Bus grouping; Beiqi Foton’s links with Daimler; and the multi-faceted relationships that already exist between Iveco and Naveco Nanjing and SAIC-Iveco Hongyan.
None of these partnerships have, as yet, made a highly visible impact on the global market, although individual model ranges have found their way into some export territories, sometimes carrying the nameplates of the non-Chinese partner.
Logically, shared distribution and support channels would facilitate the acceptance of Chinese products over a wider geographic footprint, but it is questionable whether the Chinese principals would want to accept foreign leadership of their export efforts.
The local perspective
The South African market, while miniscule by world standards, remains highly competitive. It plays host to many global brands, and also provides a springboard into much of the African market.
It is significant, therefore, that Chinese manufacturers FAW and Powerstar (Bei Ben) have established consistently successful businesses here. It is true that they have not chosen to take on the market leaders with leading-edge technology, but rather to play in a space that emphasises value for money within targeted applications, such as construction.
Our perception is that they have been proportionately more successful in South Africa than their light-vehicle compatriots.
It has been said that the Chinese industry needs to improve technology and quality, adopt an international mindset, and develop clear brand identities. This latter point has been discussed before in this column, and we believe it is particularly important if indigenous Chinese brands are to become important players in the global firmament.
Any tendency to grant offshore agencies to organisations that are primarily interested in making a “fast buck”, and have no intention of developing adequate infrastructures to build and support the brand, will not work in the commercial vehicle arena.
FAW and Powerstar have closely guarded their brands, and supported their products, thus ensuring a measure of consistent local success. This is an important lesson that needs to be absorbed by their compatriots as they aspire to broader global participation.
Global FOCUS is a monthly update of international news relating to the commercial vehicle industry. It is compiled exclusively for FOCUS by Frank Beeton of Econometrix.