New York, New York – North American commercial vehicle companies will be shut out of the global market within four years, unable to compete against low-cost manufacturers based in emerging markets, according to business advisory firm Alix Partners. Companies in countries such as Russia, India and China will shut the door on North American competitors to about half the global vehicle market by 2014 if current growth and cost trends persist, the company said.

The Alix Partners study shows that after weathering an unprecedented global volume decline of 29 per cent in 2009, North American companies are recovering and production is expected to return to strong 2008 levels within the next two to three years. However, despite the recovery and expected growth, the North American OEMs are being outflanked both by emerging-market-based OEMs, which now account for two-thirds of global commercial truck production, and by European competitors, who have gained an advantage through partnerships with low-cost indigenous companies.

The study also said that producers in China, India and Russia together are expected to boost their output by some 50 per cent over the next four years, due to the strength of domestic economies and demand from other emerging markets in Southeast Asia, Africa, the Middle East and Central America. North American OEMs are not well positioned to exploit this increasing demand, Alix Partners said, because of a mismatch of product types, lack of local partners, and costs that are too high. Even with a growing demand for a so-called “middle segment” of more sophisticated trucks in emerging markets, the cost of these vehicles is still 40 to 50 per cent less than the average North American-made truck.

“The key for North American OEMs is to focus on how to quickly gain a foothold in the middle segment,” said Francesco Barosi, managing director at Alix Partners. “However, that’s all the more difficult today because there are now only a few ‘unmarried’ joint-venture partners left in China, India and Russia to aid in lowering costs. That means OEMs and their suppliers must focus like never before on whatever is necessary to customize low-cost products for emerging markets. The alternative is to cede half of the global market and, thereby, perhaps a company’s long-term future.”

The study found that China’s commercial vehicle production volume increased by 22 per cent, while volume globally decreased by 29 per cent. Today, China accounts for 49 per cent of total BRIC (Brazil, Russia, India and China) commercial vehicle production, which in turn accounts for 66 per cent of global production. By 2014, the global commercial vehicle industry is expected to grow by 1.8 million units, with China expected to account for 36 per cent of total global growth.

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