"Despite battling a range of arduous challenges ranging from engine related fines to market share loss caused by reliance on cooled-exhaust gas recirculation, this is a company whose growth strategies are poised to take it to higher growth gradient in coming months," Kar says. "Navistar's reliance on cooled-EGR as opposed to selective catalytic reduction, I believe, could yield rich dividends and volume, as well as, market share growth in key markets such as China and India. While it is true Brazil is slowing down, and China could potentially deliver lackluster growth, the strategies, plans and products Navistar is putting into place hold the potential of multiplying its growth as the global economy starts to bounce back from recession."
Kar says the growth of the compressed-natural-gas and liquefied-natural-gas truck market, rising demand for hybrid trucks in an era of diesel price volatility, rising demand for commercial trucks in Brazil, Russia, India and China (BRIC) and Next-11 markets could offer Navistar growth opportunities, enabling it to withstand the headwinds.
"The decline in margins could be offset by volume growth in emerging markets and having a cost effective engine that features a lower upfront cost and attractive fluid efficiency could actually work to the company's benefit in emerging markets," Kar says.
"With that said, as diesel price volatility continues in North America and diesel exhaust fluid prices remain lower than diesel on a per gallon equivalent basis, selective catalytic reduction will continue attracting managers of long-haul fleets. However, the rise of hub-and-spoke logistics and regional freight movement could imply growth in the Class 6-7 segment which will help Navistar."
Overall, Kar says that although Navistar seems to be going through short-term pain, the outlook based on its growth strategies looks to be one of long-term gain. "Navistar urgently needs to solve the 13L certification issue and place a greater focus on the important issue of global market share growth," he says. "At the end of the day, that will deliver share holder value more than anything else."