Thailand Trucking Market 2009
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Transcript of Thailand Trucking Market 2009
Solidiance examines the current Thai truck market and growth perspectives
November 2009
Trucking industry in Thailand:
no crisis
Thailand commercial vehicle market outlookTrucking Industry in Thailand: resilient to crisis
Commercial vehicle market in Thailand has shown unexpected resistance to crisis
“At the beginning of this year, Hino believed that exportindustry which contributes for about 70% of Hino salesin Thailand will completely stop expanding. Thus, theydecided to decrease their production to 30% of what isnormally produced.
It turned out that a lot of clients here believe that theeconomy will be better by the end of this year, so theydo not stop buying trucks. These cause Hino trucks torun out of stock and loose sales opportunities.”
Hino Dealership Manager in North East Thailand
The Thailand truck market is relatively modest in terms ofsize; with only 17,620 units sold last year, compared to thepassenger vehicle market with more than 1 million unitsproduced and nearly 600,000 units sold in 2008.Nevertheless, Thailand is the first market for commercialvehicles in ASEAN, beyond Malaysia and Indonesia.
Japanese truck manufacturers, who dominate the passengerand commercial vehicle market in Thailand, estimated inearly 2009 a negative growth of 30% to 40% in the truckmarket. But the situation is not as dramatic as they imagined,and mid this year, they have re-forecasted about negative5% to 15% growth for the same year.
Solidiance study shows that in some parts of the country,truck manufacturers have difficulties to keep up withdemand of new trucks. For instance, Hino predicted forecastaccording to the Consumer Confidence Index andimport/export forecast for Thailand. For 2009, Hinoforecasted negative growth of 30% as compared to 2008and ultimately reduced production of trucks by 30% for 2009.As of August 2009, Hino already had run out of stock onmany models.
Sales, which in general have dropped far less than expectedshould rebound in 2010. Many businesses in Thailand havepostponed purchases of new and replacement trucks for thenext following years. This is a major force that will pushsales of trucks to approximately 24,000 by 2012, reachingthe levels of 2006.
Market size of commercial trucks, Thailand
Units GDP Growth
Source: DLT Thailand
OEMs in Thailand have underestimated the rebound of
the Thai commercial vehicle market and are now facingdifficulties to supply trucks in some parts of the Kingdom
-6%
-4%
-2%
0%
2%
4%
6%
0
5,000
10,000
15,000
20,000
25,000
2006 2007 2008 2009F 2010F 2011F 2012F
Fuso Hino Isuzu Others GDP
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Thailand commercial vehicle market outlookTrucking Industry in Thailand: resilient to crisis
Japanese OEM largely dominate the Thai truck market withIsuzu, Hino, Mitsubishi Fuso and Nissan UD heading themarket position with more than 97% of market share in2008. But out of these 4 companies, Isuzu and Hino seemto be definite leaders, with 83.8% market share in 2008.
LCVs and HCVs are the 2 best selling segments of trucks inthe Thai market:
The LCV segment is largely dominated by Isuzu, sellingconstantly on average 70% of the 2-4 ton trucks segment inthe domestic market. Hino comes second selling constantlyon average about 60% of the 4-5 ton trucks.
In the MCV segment, Hino has slightly better sales thanIsuzu. Dealers and end users’ perception of Hino trucks isvery good, making this brand the best in this segment andoffering a wide range of durable and reliable trucks.
In the HCV segment, Hino and Isuzu also dominate themarket with an almost equal market share of 40% for Isuzuand 38% for Hino.
Duopoly market with 2 Japanese OEM dominating the Thai truck market
Market segmentation by tonnage, 2008
LCV (2 – 10 tons) MCV (11 – 20 tons) HCV (21 tons and above)
Imported trucks have been slowly gaining presence inThailand within the MCV and HCV segments. Europeanbrands like Volvo and Scania are increasing their marketpresence, but it remains small (less than 2% of the market).European trucks have a high end image, and are deemed asmore reliable than Japanese trucks. Their price range is veryhigh (tariffs on imported trucks are 40%, taxes are 200%)which will continue to limit their sales volumes. Europeantrucks are used in specific industries in Thailand, fortransportation of oil and gas products, for instance.
Chinese brands like Golden Dragon and DFM, are trying togain presence in Thailand, but their market share is still verylow. Thai trucks dealers do not believe, for a large majority,in the potential of these trucks which are deemed to be veryfar from Japanese trucks in terms of reliability and quality.
54
Country of origin 4.3
Price3.8
Technology
Reliability
Product quality
3.8
3.7
3.3
Ranking of criteria when purchasing imported trucks
321
Source: TAI, Solidiance analysis 2009
Source: Solidiance analysis 2009 Sample: 50
LCV
Isuzu 50%Hino 41%
Fuso 6%Others 3%
Fuso 10%
Isuzu 31%
MCV
Hino 39%
Others 20% Fuso 8%
Isuzu 40%
HCV
Hino 38%
Others 14%
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Thailand commercial vehicle market outlookTrucking Industry in Thailand: resilient to crisis
35%
14% 13% 12% 12% 11%
3%0%
5%
10%
15%
20%
25%
30%
35%
40%
Solidiance study shows that the transportation industry is thelargest purchaser of trucks in Thailand in 2008 and 2009.This sector reached a market value of USD 5.8 billion in2008. The largest players are DHL, FedEx and UPS with atotal share of more than 80% of the whole market.
The government represents the second largest purchaser oftrucks although purchases are made randomly. The Thaigovernment purchases trucks types such as garbage trucksor street sweeper trucks.
Construction companies are also an important segment oftrucks users, but the difficulty with this sector is that in 2009,investments are forecasted to halve.
Usage of trucks per industry, 2008
Fuel efficiency as the first criteria when purchasing trucks
Study shows that end-users have generally very goodknowledge regarding trucks. Additionally, most buyers havealready solid preferences for specific brands and know aboutperformance levels of the trucks they are willing to buy.Unexpectedly, price was not the first factor quoted whenpurchasing trucks.
Fuel efficiency comes as the first criteria of purchasebecause it constitutes a large percentage of end-user’soperating cost: fuel can represent up to 60% of operatingcosts.
Availability of spare parts comes as a third criteria ofpurchase because it is an important element to ensurebusiness continuity. The two market leaders have 44 and 603S dealerships respectively. It is a key criteria for a largepart of end-users who are particularly concerned with spareparts availability.
1stChoice
2nd
Choice
3nd
Choice
Sample: 50
Key factors when purchasing a truck
Source: Solidiance analysis 2009
In 2008 & 2009, the largest buyers of trucks are logistics, government and construction companies
Source: Hino, Fuso, Solidiance analysis 2009
Fuel efficiency 48%
Price 17%
Volume Cap.11%
Price33%
Fuel Efficiency21%
Customization12%
Price20%
Spare parts 28%
Aftersales21%
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Thailand commercial vehicle market outlookTrucking Industry in Thailand: resilient to crisis
Regulation challenges:
Asean member states plan to move another step forward inthe liberalization of their trade policies by completelyeliminating tariffs by 2015. Experts believe that one of themain consequences of this liberalization would be amodification of the power struggle between truck makersand dealerships, which means that the leverage which is nowon the side of manufacturers will switch to truck dealers.
As the elimination of tariffs will lead to many more foreignbrands imported to Thailand, it will increase competitionbetween manufacturers. Dealers will beneficiate from thiscompetition and could impose the end of exclusivedealerships. It would allow them to share brands, servicesand parts and to offer to their clients a much wider portfolioof vehicles than now.
Fostering the added value creation in the truckmanufacturing
Thai authorities are currently trying to convince Japanesemanufacturers to produce more vehicles locally, and totransfer more technology and production know-how toThailand. One of the best illustration of this phenomenon isthe production and design of high value parts which hasalready switched from Japan to Thailand for the pick upscars. This trend is growing with other high value models,such as the Toyota Camry Hybrid, which is now produced inThailand.
Thai authorities are pushing towards the same trend for thetruck industry. It has already started with Hino trucks nowproducing more of their high value parts in Thailand, inpartnership with Toyota. Experts predict this trend willcontinue for the years to come, consolidating the lead ofThailand in the region.
The challenges at stake in the Thai trucking industry in the forthcoming years
Environment policies and new technologies for trucks:
If we exclude Japan, Thailand is at the forefront ofenvironmental policies in Asia in the truck industry,having changed gas emission standard this summerfrom Euro 2 to Euro 3, a more stringent regulation foremissions.
However, there is no clear sign that this will impact thetype of motorization in the next years. Experts, truckdealers and end-users interviewed in this study aredoubtful about the NGV trucks imposing their standardon the Thai market because genuine NG trucks areconsidered too expensive. The consequence is that end-users are customizing their own trucks to make themrun with gas. This results in poor efficiency andincreased number of breakdowns which does not giveNGV systems a good image. Biodiesel could be analternative, but industry experts doubt that this can bewidely used as a substitute at the present moment norin the near future.
“The price for genuine NGV trucks withappropriate engine is THB 700,000 more than aclassical truck running with gasoline. This is whythere is a lot of customization made by truck end-users when buying NGV systems. They adapt itthemselves to their trucks which are running withthe same engine as classical trucks working withgasoline”.
Owner of a Thai logistics company, running600 trucks based in Greater Bangkok
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Thailand commercial vehicle market outlookTrucking Industry in Thailand: very resilient to crisis
Solidiance is a marketing and innovation strategy consulting firm with focus on growth in Asia Pacific. The company works closely with Automotive clients tooutpace the competition, close gaps in growth and capitalize on market opportunities. With offices in Singapore, India, Thailand and China, Solidiance’s Asia focusprovides clients with a better understanding of intrinsic Asia issues.
To subscribe to further white papers and to learn more about Solidiance please visit: www.solidiance.com
Mickael Feige is a Senior Strategy Consultant based in
Bangkok office with more than five years of consulting
experience. He has led over 50 national and multi-regional
engagements for Fortune 500 clients across Europe, Japan
and south-east Asia. Prior to joining Solidiance, Mickael was
managing investments and partnerships projects in Europe
for large Japanese MNCs, especially in the automotive
industry. With strong experience in combining numerical and
qualitative analytics, Mickael specializes in customizing
advanced market segmentation and size forecasting models
to help clients identify and prioritize market opportunities to
develop growth strategies. Mickael has rich experience
across automotive industry throughout Europe and Asia
Pacific, including in Japan where we worked for one of the
top 3 carmaker. He combines sector and cross-industry best
practice, leveraging this knowledge to help clients develop
successful market strategies. He holds a Bachelor in
marketing (with Honors) from the London Metropolitan
University and a MBA from the Institute of Political Science of
Lyon (France).
Mickael Feige- Senior Consultant
Mark is a Principal based in the Singapore office with more
than eight years of consulting experience. Mark has a strong
focus on quantitative based projects. Previous roles include
being regional manager for Synovate Business Consulting in
Singapore, handling projects for MNCs across Asia, focused
predominantly on the automotive industry. Mark managed
most survey-based projects for MNCs where he advised
international companies on market entry, customer
segmentation prioritization and growth strategies. He also
has ample experience in qualitative research, having
managed various multi-country projects that required a
combination multiple approaches in order to customize
results to meet the clients’ needs. Having worked for five
years in the M&A team of a Korean Conglomerate in Spain,
Mark also has vast experience with mergers and acquisitions
in Europe, Asia and Africa. Mark is fluent in Korean, English
and Spanish. He holds a BS in mechanical engineering, from
the Worcester Polytechnic Institute (United States) and a
MBA from the University of Rochester.
Mark Lee- Principal
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