New research from Interact Analysis reveals increasing competitive threats and faster pace of change in the future
- 10% growth forecast in 2018 for the Americas, driven by strong demand across all countries
- Truck sales to drive market growth, with bus sales stagnating out to 2022
- Competitive pressure to be accelerated at both high-end and low-end of market from new entrants and technologies
Faster pace of change
A positive economic environment and a drive to replace ageing vehicles and expand fleets is forecast to drive the truck market across the Americas in 2018 and 2019. Close to 700,000 class 4-8 commercial vehicles are forecast to be sold across the region in 2018 .
This is proving to be a really exciting time for the commercial vehicle market in the Americas. Strong growth in the short term, competitive pressures and new technologies like platooning and electrification mean that the industry as a whole will experience an untold pace of change over the next five years
As ecommerce continues its inexorable rise, supply chains across the Americas are having to adapt. There is a trend toward smaller, urban delivery vehicles and, with this, a rise in low-emission vehicles designed to reduce air pollution in cities. We see certain vocational segments perform well: The construction segment has performed strongly over the last couple of years, rising oil prices are seeing growth in the oilfield truck market, and there is pent up demand for first responder vehicles too.
Increasing Competitive Pressure
One notable feature of the Americas market will be the increase in competitive pressure that established OEMs face in both the truck and bus markets over the next 5 to 7 years.
In the Class 8 truck market, new entrants focusing on electrification – Tesla and Nikola – are already winning substantial pre-orders as major fleets look to trial newer technologies to reduce emissions and lower operational costs. We forecast that by 2022 these new vendors will be in a position to deliver several thousand trucks per year.
Although legitimate questions remain about whether these new vendors can execute on their production plans, it is clear they have first mover advantage, getting more electrified trucks on the road sooner than most of their established rivals. This will enable all-important ‘real world’ data to be collected and iterated into future vehicle enhancements.
Furthermore, in price sensitive markets like Mexico and other South and Central America countries, Chinese vendors are gaining share in the truck market as they develop better sales networks and offer comparable products at a lower price point.
Competition is, arguably, more intense in the bus market. We expect substantial changes to the competitive market in the Americas over the next 5 to 10 years. Across the region a drive towards using low or zero emission vehicles for urban transportation is creating opportunities for the likes of BYD and Proterra. BYD recently announced that it had increased the capacity of its US production facility to 1500 buses per year. Those manufacturers that don’t have a strong electric or hybrid product portfolio will miss opportunities in the coming years.
In Mexico, South and Central America, Chinese vendors are already well established in the bus market and very likely to gain market share over the next 5 to 7 years. Backed by large domestic demand for buses in China, they can produce large volumes of buses quickly and at a lower price point than their European or North American counterparts. Since bus OEMs like Daimler and Volvo typically operate with a 3-5% margin on their bus businesses, they may find it “painful” to compete in these price sensitive markets. Their strategy may be to focus on build quality and/or provision of local service and maintenance since these are strengths that the Chinese OEMs need to develop.
Bus Market Challenges
We forecast that bus shipments to the Americas will remain relatively stagnant out to 2021, with a decline in 2022 driven by a slowing of regional economies.
In the US and Canada, much of the demand is driven by the school bus market. This market is not particularly dynamic and is unlikely to change substantially in the short to mid-term. For the urban bus market, there is the long-term and complex impact of ride-sharing services like Lyft and Uber to account for.
Mass transit by bus is clearly a low-cost and efficient way to transport people point-to-point. Ride-sharing can provide last mile coverage from transport hubs or coverage in areas with limited access to mass transit. As an example of this, Pinellas Suncoast Transit Authority (PSTA) in Florida partnered with Uber to subsidise Uber rides to and from bus stops, increasing access to public transport.
However, as usage and business models for ride-sharing evolve, we expect to see an impact on the urban bus market. An extension of the PTSA program could see routes will low usage and high operational costs replaced entirely with ride-sharing. Other models, such as that developed by Vugo which allows ride-share drivers or fleet operators to display advertising to passengers, could see advertising revenue used to offer heavily discounted or free journeys. This would put increasing pressure on public transit operators.
Furthermore, as mobility-as-a-service (MaaS) becomes more commonplace – for example, paying a monthly fee to have a car available on demand – people who currently rely on public transport may choose to pay for access to a mobility service instead. Bus manufacturers would be wise to monitor ridership and revenue numbers in major urban areas to assess the on-going impact of ride-share on bus demand.
In South and Central America long distance public travel has, historically at least, been via bus or coach. The low cost and lack of an established, low-cost airline industry has made it the only means of travelling long distances for the vast majority of people. However, that may be set to change. Following the loosening of regulations in Argentina, several low cost carriers, including Flybondi and Norwegian Air have secured licenses and our offering flights in 2018. They join Irelandia (which operates Viva Air Peru and VivaColombia).
Whilst it will take time to develop routes and build up the supporting infrastructure, this could be the beginning of the slow decline of the long distance bus market in South America.
 USA, Canada, Mexico, Brazil, rest of South and Central America. Class 4-8 trucks and buses.