DALLAS, TX. A mix of major trends, from increasing urbanization to the need for greater freight transport profitability, are combining to spur the development of “low-cost” trucks – especially as mandates for expensive emissions control and safety systems continue to impact trucking operations around the world.
Sandeep Kar, global director-commercial vehicle research for global consulting firm Frost & Sullivan, stressed repeatedly recently that the term “low-cost” truck should not be interpreted to mean “cheap” truck.
(Watch as Sandeep Kar discusses the development of low-cost commercial trucks for the North American market).
“This trend is not about making cheap trucks; rather, it is about building trucks more cheaply,” he explained, and the reasons behind growing demand for such lower cost units relate to the tighter economics faced by fleets.
“Among the top issues today for fleet managers are restricted access to capital, higher truck prices due to emissions control systems, and rising operating expenses due to higher energy costs and the need to pay higher wages to attract drivers,” Kar pointed out. “As a result, fleets are trying to drive harder bargains in terms of lowering the cost of equipment. OEMs thus will respond with lower cost products.”
Frost & Sullivan produced a report earlier this year on the low-cost truck trend and projects that by 2016 there will be 29 low-cost truck platforms available worldwide encompassing the entire spectrum of commercial vehicles, from light to medium and heavy duty trucks.
Five years from now, Frost & Sullivan predicts that one out of every six commercial trucks built across the globe will be a low cost model – representing 3.2 million vehicles out of a total global CV population, from light to heavy models, of 17 million units.
“These are trucks that will be compliant with all emissions and safety regulations governing commercial vehicles operations in Europe and the U.S. as well,” Kar stressed.
Frost & Sullivan’s research concluded that low cost trucks should achieve a 19 to 29% lower sticker price than standard models through the accumulation of small savings from changes to every part of the vehicle.
For example, Kar noted that powertrain downsizing to smaller engines and more basic manual transmissions will be expected to produce the bulk of the low cost design savings, some 5 to 8% of total. Chassis design changes account for 3 to 4%, reduced “comfort and convenience” features cutting another 3 to 4%, reduced electronics shaving off 1 to 2%, and on down the line.
The firm’s analysis of this trend concludes that low-cost light commercial vehicles (LCVs) featuring a gross vehicle weight (GVW) of 1.55 tons should be priced around $8,000 additionally, with medium commercial vehicles (MCVs) with a 16.2 ton GVW costing $35,200. Finally, low cost heavy commercial vehicles (HCVs) sporting 23-ton GVWs should be priced around $72,000.
Yet this low-cost trend is in many ways already occurring now as many TL fleets are changing their specifications to try and drive down equipment costs. Max Fuller, co-chairman of U.S. Xpress Enterprises, used the term “de-contenting” to illustrate how fleets are trying to mitigate the rising costs of Class 8 tractors, particularly due to costly emissions control systems.
“We’ve gone to smaller engines with our new orders and back to a 10-spd. manual from the automated [mechanical transmission] models we used to order,” he said during a panel discussion following Kar’s presentation.
Fuller noted that U.S. Xpress’s equipment costs have jumped 30 to 40% over the last four years due to the last two rounds of emission control mandates, which occurred in 2007 and 2010, while freight rates only increased 2% over the same period. “That’s a difficult ROI [return on investment] for us,” he said.