LAS VEGAS – While globalization has been around for some time, it’s affecting the commercial truck market more than ever before, according to a session at Heavy Duty Aftermarket Dialogue in Las Vegas Monday.
As Stu MacKay, president emeritus of MacKay & Co., said, “We have talked about it before, but what we are seeing is that globalization has disrupted the way things used to be.”
Tim Kraus, president of the Heavy Duty Manufacturers Association, noted that the majority of its supplier members have a manufacturing or marketing presence outside of the U.S.
MacKay said globalization of the medium-duty market has been around starting as early as 1976, with Volvo partnering with Freightliner on medium-duty trucks and Isuzu coming into the U.S. market in 1984.
Heavy–duty was not immune from early globalization, with France’s Renault making its initial investment in Mack back in 1979 and Germany’s Daimler acquiring Freightliner in 1981, he said. And more recently, Germany-based Volkswagen took a stake in Navistar and China-based Geely acquired a stake in Volvo Trucks. [Editor’s note: Paccar, meanwhile, has gone the other direction, acquiring Netherlands-based DAF Trucks in 1996 and Britain’s Leyland Trucks in 1998.]
One of the most significant places where globalization is having an impact is on powertrain, MacKay pointed out. Back in 1986 fleets had a choice of Cummins, Caterpillar and Detroit engines in their trucks regardless of make (with the exception of Mack, who sold mostly its own engines into its trucks.)
Last year, however, fleets’ engine choices were either Cummins or the proprietary engine of the truck manufacturers.
Globalization doesn’t have to mean overseas, and MacKay pointed out that in 2001, Mexico produced 6,000 medium-duty trucks that were sold in Mexico, while the U.S. manufactured 100,000 trucks, most of which were sold here. In 2017, however, 25,700 medium-duty trucks were made in Mexico and sold in the U.S. On the heavy-duty side, in 2001 99,000 heavy-duty trucks were made in the U.S. and 2,000 came from Mexico. Last year, nearly 124,000 heavy-duty trucks were built and sold in the U.S., and 69,000 trucks came from Mexico, with another 23,200 built in Mexico for the Mexican market.
The North American Free Trade Agreement, MacKay said, “has been good for Mexico exporting into other countries. I am not sure how that shakes out, but there is a great deal at stake.”
Disruption beyond globalization
However, disruption has not been limited to globalization on the manufacturing side. The aftermarket has seen and is continuing to see disruption both in the OES channel and on the independent side. E-commerce has changed expectations on product delivery times and companies are looking for ways to add speed and take cost out of the supply chain.
MacKay used industrial distributor W.W. Grainger as an example. The company looked at how it got product to market and determined that costs were too high. The company now offers 50% more products because it changed the way it gets product to market. In addition, its e-commerce sales as percentage of total revenue rose from 30% in 2012 to 50% last year.
MacKay also talked about Amazon’s influence in the trucking industry. “Amazon’s total business is north of $80 billion, and three-quarters of that is not product that is in their distribution centers. It is products from other suppliers that flow through Amazon.” In fact, MacKay discovered that nine companies supply Volvo products through Amazon; five are dealers and four are independents.
What does all this mean for trucking? MacKay said that although the industry has been changing for decades, the rate of change is increasing. “The last chapter has certainly not been written.”