"11 consecutive drops", how do heavy truck manufacturers break through the cocoon?

Innovation, Excellence, Transcendence

March is almost always the traditional golden season for sales in the heavy-duty truck industry, but the sales situation in March 2022 is a bit disappointing to the industry.

According to the latest publicly available data, heavy-duty truck sales in March 2022 were about 77,000 units, although up nearly 30% from February, but compared with 230,000 vehicles in March 2021, sales fell by 67%, almost "waist cut".

The year-on-year decline in heavy-duty truck sales in March 2022 has been the 11th consecutive month of decline since May last year, and this single-month sales continue to interpret the phenomenon of "11 consecutive declines" in the history of the heavy-duty truck market, which has brought difficulties to the operation of most heavy-duty truck manufacturers.

The year-on-year sales of heavy-duty trucks in each month from 2021 to March 2022 are as follows:

What's worse is that from the perspective of a period of time in the future, the heavy-duty truck market is still unlikely to show signs of improvement, and may still be interpreted as a bleak of "falling and falling", and the days of heavy-duty truck companies may continue to be spent in torment.

Why? The Bus Terminal Network believes that:

First, it is affected by the "endless" epidemic.

At present, the epidemic situation has rebounded in various places, such as Shanghai, Jilin and other regions. This will inevitably affect the transportation flow of the logistics industry, will reduce the efficiency of the logistics market, and will also delay the resumption of work and production of enterprises everywhere.

Card friends feel that in this environment, buying a car and running transportation, especially medium and long-distance transportation, will suffer a greater loss in profits, so their willingness to buy heavy trucks will be greatly reduced. No one knows when the impact of the epidemic will end, which will affect the sales of heavy trucks for some time to come.

Second, at present, there are more cars and less goods, freight rates are low, and it is more difficult to make money with heavy trucks.

Previous policy stimulus, market overdraft, etc., the current heavy-duty truck vehicles are almost saturated. The current economic environment (such as environmental protection production restrictions, raw materials soaring, etc.) has caused many enterprises to limit production or even stop production, the source of goods that can be exported by enterprises has been greatly reduced, and many heavy truck vehicles in use have no goods to pull, or even idle.

In this environment where it is becoming more and more difficult to make money, the probability of card friends changing cars or buying new cars is greatly reduced.

Third, the price of diesel fuel is rising steadily, and the operating costs are constantly increasing.

Recently, the National Development and Reform Commission released the news that from 24:00 on March 31, 2022, the domestic diesel gasoline price will increase by 110 yuan per ton, which is the seventh consecutive increase in gasoline and diesel prices since the end of 2021.

At present, mainly affected by the Russo-Ukrainian war, it is unlikely that international oil prices will fall for a while and a half. The rise in oil prices will inevitably lead to an increase in the transportation costs of heavy trucks, originally card friends can not earn a few dollars, oil prices are still rising, who dares to buy a large number of heavy trucks?

The fourth is the impact of the price of second-hand national five-fold trucks.

Some of the new five-heavy trucks in China will flow to the second-hand car market at a very low price due to the unprocessed inventory. This will inevitably impact the national six-heavy truck market for some time to come. After all, the price of the national six-heavy truck is much higher than the price of the national five second-hand car.

Fifth, although the future of new energy heavy trucks can bring some new incremental markets, but due to the narrow application scenarios, few power stations, battery pack standards are not uniform, limited mileage and many other factors, the number of market demand for new energy heavy trucks will not be too much for a period of time, and the overall dilemma of the heavy truck market cannot play a fundamental role in reversing.

Sixth, the sales base of heavy-duty trucks in the same period of 2021 is too high, making it less promising for the inflection point of the heavy-duty truck market in the future period (at least in the first half of the year).

In summary, the bus terminal network believes that heavy-duty truck manufacturers may continue to endure the "suffering" of falling and falling after they have suffered "11 consecutive drops", and heavy-duty truck manufacturers can only break through the cocoon and get out of the predicament if they take the initiative to seek new breakthroughs.

So, what do heavy truck companies do?

First, in-depth analysis of customer needs, consolidate the cornerstone of products.

Products are the cornerstone of stable market and the carrier of improving customer satisfaction.

Therefore, first of all, we must deeply analyze the needs of target customers and produce products with corresponding needs.

At present, the heavy-duty truck market is mainly changed from the previous "incremental competition" to "stock competition".

After "stock competition" becomes the new normal, the product strength of heavy trucks may be more important than before.

According to the survey of the bus terminal network, combined with the national development strategy and customer needs, the heavy truck industry is undergoing a comprehensive upgrade.

For example, the upgrade of emission regulations has an impact on the user's "right of way", the user's "collectivization" brings difficulties to vehicle management and driver management, and the intensification of industry competition "forces" users to improve transportation efficiency, etc., and the factors that promote the comprehensive landing of this upgrade are inseparable from the heavy truck enterprises with logistics equipment.

That is to say, the National VI models that meet the latest emission standards and new energy products that represent new technology routes, smart models with advanced driver assistance functions and even automatic driving technology, and intelligent terminal systems that integrate functions such as vehicle management platforms, operation support services, and vehicle-road collaboration will become the "just need" of the heavy-duty truck market.

Specifically, in the future, the core demands of customers for heavy-duty truck products are mainly concentrated in "high-end, comfortable, efficient, low-carbon, green, and intelligent". Therefore, car companies must focus on product innovation around these 6 aspects.

Many businesses have already begun to lay out. For example, FAW Jiefang, the leader of the heavy-duty truck industry, on January 20, 2022, Jiefang J6 was renewed and upgraded, and the J6V tractor was a product produced around the above 6 core appeals. Careful research found that jiefang's newly listed J6V heavy-duty truck products are developed after in-depth analysis of customer needs, adding 7 major fields and 80 upgrade technologies, giving the transportation industry the highest TCO operational value and gathering diversified advantages.

It is reported that this product has just been listed to promote the scheduling of liberation in February this year, and at the same time laid the foundation for subsequent release in the country.

In addition, in the high-end heavy-duty truck market, jiefang J7 and independent high-end heavy-duty truck Yingtu are also around the above six major demands, which have been favored by many customers.

For example, Dongfeng Commercial Vehicle under Dongfeng Motor's command, its vehicle brand "Dongfeng Tianlong, Dongfeng Tianjin", brings customers more reliable and efficient operational value and more economical and convenient operation experience with heavy-duty truck products in all scenarios.

On the golden track of intelligent driving, Dongfeng is committed to creating the "Infinity Star" of L4-L5 level new concept unmanned trucks, which is the first unmanned container car in China to adopt unmanned port vehicles without cockpits, which can realize the five functions of environmental active perception, self-positioning, autonomous intelligent control, remote control and remote communication, and greatly improve the competitiveness of heavy-duty truck products in the high-end logistics and transportation market.

Second, increase the intensity of aftermarket services and seek new profit growth points.

As mentioned above, the future heavy-duty truck market will enter the era of "stock competition" and become the new normal, and car companies may not be able to achieve by selling cars alone to improve their profits. As HU Hanjie, chairman of FAW Jiefang, said at the 2022 business conference, it will become more difficult for heavy-duty truck manufacturers to make profits from new car sales in the future.

At present, there has always been a generally recognized view in the heavy truck industry, that is, "today's European truck market is the tomorrow of the Chinese market.". Because the profit model of many European heavy truck industries is to profit from the service of the vehicle aftermarket, rather than simply by selling cars.

According to the survey of the bus terminal network, although the supply of parts and components continues to be short, the price of raw materials rises, the impact of the epidemic, the intensification of competition and many other constraints, European and American heavy-duty truck companies still achieve high income and good profitability.

In the annual reports released by a number of European and American heavy-duty truck companies, the vehicle aftermarket contributes more and more to the profits of the group as a whole, and many companies will include vehicle services and financial leasing businesses that include spare parts and maintenance services as separate business units for performance statistics.

For example, Sweden's Scania Annual Report 2021 shows that sales in 2021 were 13.927 billion euros, an increase of 21% from 11.521 billion euros in 2020. Among them, the aftermarket service business of vehicles (including spare parts and maintenance services) will reach 2.964 billion euros in 2021, an increase of 15% from 2.588 billion euros in 2020, accounting for 21.28% of overall sales.

For example, the German Mannka bus sales in 2021 are 10.934 billion euros, of which the aftermarket service business of vehicles is 2.303 billion euros, accounting for 21.06%.

For example, Navistar Trucks in the United States will have sales of 3.557 billion euros in 2021, of which the service business in the aftermarket of vehicles is 1.053 billion euros, accounting for 29.60%. Volvo Group's net sales in 2021 were SEK 372.216 billion, of which the service unit was SEK 76.304 billion, accounting for 20.50%.

The above data illustrates the importance of the aftermarket business to European and American heavy-duty truck companies.

First, because the main engine factory wants to provide customers with full-life cycle services; second, for the main engine factory, the after-sales business is a good balance of the host business, especially when the host sales business has fallen sharply; the third is that the profit of the after-sales business is much higher than that of the host business, such as the gross profit margin of the host business selling cars in the range of 10%-15%, but the gross profit margin of after-sales spare parts is about 20%.

According to data from the China Association of Automobile Manufacturers, china's commercial vehicle ownership accounts for about 10.9% of the total car ownership, and the size of the commercial vehicle aftermarket accounts for half of the automotive industry aftermarket. According to the data, the size of the mainland commercial vehicle aftermarket has reached 440 billion yuan in 2020, and it will likely reach 500 billion yuan in 2021 and may be higher in 2022.

The business philosophy of "increasing aftermarket services and seeking new profit growth points" in Europe and the United States is a good reference for heavy-duty truck manufacturers whose current sales business in the mainland has fallen sharply.

In fact, at present, domestic mainstream heavy-duty truck companies have also begun to increase their attention and layout to aftermarket business. For example, FAW Jiefang proposed at the 2022 business annual meeting that it will expand its marketing business to the whole value chain, require dealers to change their business thinking, put the aftermarket and vehicle sales in the same or even more important position, adjust the profit structure, and expand the profitability of finance, insurance, second-hand cars, contract maintenance and repair.

For example, Dongfeng Commercial Vehicle also emphasized the post-marketing strategy at the 2022 Business Annual Meeting, requiring the aftermarket business department to focus on customer value, promote digital marketing transformation, and establish an ecosystem for customers to serve all scenarios.

In short, in the current environment of a sharp decline in vehicle sales, the road for heavy-duty truck manufacturers to simply rely on the sale of vehicles to make money may become narrower and narrower. And "increasing the intensity of aftermarket services and seeking new profit growth points" may be the way forward for heavy truck manufacturers to break through the cocoon.