When American poet Henry David Thoreau famously stated that all misfortune is but a stepping-stone to fortune, he most certainly didn’t have the transport equipment industry in mind. But in the face of a slowing Chinese economy and on-going political quarrel in Europe, his 150-year-old observation is now seeing an unlikely revival in the truck body building community.
Scarred by the Global Financial Crisis and shaken by a shortfall in productivity growth that is weighing on economic expansion all around the world, the global truck body building fraternity would have every reason to renounce faith in the notion of on-going growth and prosperity: Despite freight volumes recovering and money remaining cheap, equipment turnover is still slow and sales remain volatile – a toxic mix for a market comprised of regionally focused Small and Medium-Sized Enterprises (SME) that mainly service municipal/government customers and private transport businesses, where the macro-economic setting is the primary determinant of demand.
But, instead of letting negativity become the new normal, the industry has turned adversity into opportunity by catering to changing consumer behaviour and tapping into future growth markets like online shopping, which amounted to more than $1.2 trillion (€1 trillion) of global revenue in 2013 alone.
While most manufacturers still derive revenue from the sale of only the body – with the chassis being either customer-supplied or under a pool agreement with the OEM – they are now more proactive than ever before to provide creative solutions for these new pockets of growth, knowing they may soon be competing with drones as well as crowd transport services like Uber.
Part of that innovation offensive is a renewed focus on strong, lightweight building materials, which are now becoming the norm for almost every product category – from dry van to tanker truck. Another focus area is the automation of manual tasks, for example by fitting automated mezzanine decks and load restraint systems that re-tension freight on the fly. A third megatrend is the integration of telematics technology that can survey everything from the door locking mechanism through to axle weight.
There is a distinct lack of data to quantify that innovation push on a global scale, but a range of revealing third party information may help complete the picture: A recent IBISWorld report, for example, stated a 13.5 per cent jump in online grocery sales between 2010 and 2015, indicating that ‘in home’ consumption is rapidly catching up with ‘in store’ sales, in turn demanding a more comprehensive home delivery fleet. Combined with the on-going battle for market share in the courier market, recently spurred by the planned €4.4 billion acquisition of TNT by FedEx, the metropolitan delivery market is widely considered a significant growth opportunity for truck body builders.
Yet, margins are still tight, so only the most innovative manufacturers will survive. “Loading habits are changing all the time and as a supplier, we need to keep up. Fleets now require rigid bodies that can carry a variety of goods in the one trip,” a spokesperson for a North American supplier told Global Trailer. “Customers demand more doors on a modern truck body, with rear and side, sometimes even three access points; and most often they want it compartmentalised according to the stock they carry. That’s a real challenge for body builders and suppliers alike.”
Next to seeking differentiation through innovation, OEMs and component suppliers now also turn to the developing world for additional growth. German company Krone, for instance, recently partnered with Bangalore-based truck body and trailer manufacturer Satrac Engineering to gain a foothold on the Indian subcontinent, which is widely considered the largest market for rigid chassis trucks in the world.
According to research company Frost & Sullivan, Krone’s move could have come just at the right time, as the truck markets in emerging economies continue to mature and open up to the notion of added value brought to them by a body building community that is feverishly looking for ways to remain relevant.
“While developed markets were reeling under recessionary pressures, emerging markets gave a much needed boost to the global truck market throughout the time period ranging from 2008-2013,” Frost & Sullivan’s Sandeep Kar summarises. “However, these markets … are now entering an interesting phase with truck sales; growth rates are posting less dizzying heights, which is a typical phenomenon for any high growth economy as it begins to mature. Another manifestation of this market maturity is a rising demand for better and more value/total cost of ownership delivering trucks, as can be seen in markets such as China and India.”
Kar argues that the global medium to heavy-duty truck market is entering a phase “where the world will look equally at developed and developing markets” to offer concerted efforts to lift medium-heavy duty truck sales – a development that could also see body demand rise and open up new opportunities for established players struggling to handle the complexities of the post-GFC market.
The same scenario, however, could also lead to the contrary, according to Market Watch – the proliferation of low-cost Chinese and Indian equipment back in the developed world as a commoditised alternative to high-tech equipment. Although demand for such vehicles – most likely delivered in a truck and body package – is expected to spike in South America and Africa first, it could also reach North America and Europe if markets remain volatile, Market Watch argues.
With both scenarios plausible in an economy where the only constant is change, the pressure is on for OEMs in North America and Europe to remain relevant in the body building market. But with rising demand in the rental market and the on-going e-commerce boom creating new opportunities, they still have every chance to follow Thoreau’s example and turn misfortune into success – as long as they remain flexible enough to react to changing consumer behaviour and regional trends around the globe. As the Thoreau himself put it, “It’s not what you look at that matters, it’s what you see.”