Thailand Trucking Market 2009 www.solidiance.com

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The Thailand truck market has shown some strong resilience during the political and economical crisis that shook Thailand and the world in 2009. Despite the current drop in demand, the market did not collapse and suppliers have been so aggressive in their manufacturing output cut that they could not meet Thai demand in 2009 and had to import trucks from Japan. The market is expected to remain strong over the next 2-3 years with pre-crisis volumes of 25-27,000 units per year foretasted for 2012.

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Thailand Trucking Market 2009 www.solidiance.com

  1. 1. Trucking industry in Thailand: no crisis Solidiance examines the current Thai truck market and growth perspectives November 2009
  2. 2. Thailand commercial vehicle market outlook Trucking Industry in Thailand: resilient to crisis Commercial vehicle market in Thailand has shown unexpected resistance to crisis The Thailand truck market is relatively modest in terms of size; with only 17,620 units sold last year, compared to the Market size of commercial trucks, Thailand passenger vehicle market with more than 1 million units Units GDP Growth produced and nearly 600,000 units sold in 2008. 25,000 6% Nevertheless, Thailand is the first market for commercial 4% vehicles in ASEAN, beyond Malaysia and Indonesia. 20,000 2% Japanese truck manufacturers, who dominate the passenger 15,000 and commercial vehicle market in Thailand, estimated in 0% early 2009 a negative growth of 30% to 40% in the truck 10,000 -2% market. But the situation is not as dramatic as they imagined, and mid this year, they have re-forecasted about negative 5,000 -4% 5% to 15% growth for the same year. 0 -6% Solidiance study shows that in some parts of the country, 2006 2007 2008 2009F 2010F 2011F 2012F truck manufacturers have difficulties to keep up with Fuso Hino Isuzu Others GDP demand of new trucks. For instance, Hino predicted forecast Source: DLT Thailand according to the Consumer Confidence Index and import/export forecast for Thailand. For 2009, Hino forecasted negative growth of 30% as compared to 2008 and ultimately reduced production of trucks by 30% for 2009. As of August 2009, Hino already had run out of stock on “At the beginning of this year, Hino believed that export many models. industry which contributes for about 70% of Hino sales Sales, which in general have dropped far less than expected in Thailand will completely stop expanding. Thus, they should rebound in 2010. Many businesses in Thailand have decided to decrease their production to 30% of what is postponed purchases of new and replacement trucks for the normally produced. next following years. This is a major force that will push sales of trucks to approximately 24,000 by 2012, reaching It turned out that a lot of clients here believe that the the levels of 2006. economy will be better by the end of this year, so they do not stop buying trucks. These cause Hino trucks to OEMs in Thailand have underestimated the rebound of run out of stock and loose sales opportunities.” the Thai commercial vehicle market and are now facing difficulties to supply trucks in some parts of the Kingdom Hino Dealership Manager in North East Thailand 2
  3. 3. Thailand commercial vehicle market outlook Trucking Industry in Thailand: resilient to crisis Duopoly market with 2 Japanese OEM dominating the Thai truck market Japanese OEM largely dominate the Thai truck market with Isuzu, Hino, Mitsubishi Fuso and Nissan UD heading the Market segmentation by tonnage, 2008 market position with more than 97% of market share in 2008. But out of these 4 companies, Isuzu and Hino seem Others 3% Fuso 6% to be definite leaders, with 83.8% market share in 2008. Others 20% Fuso 10% Others 14% Fuso 8% LCVs and HCVs are the 2 best selling segments of trucks in the Thai market: The LCV segment is largely dominated by Isuzu, selling LCV MCV HCV constantly on average 70% of the 2-4 ton trucks segment in the domestic market. Hino comes second selling constantly Isuzu 31% Isuzu 40% on average about 60% of the 4-5 ton trucks. Hino 41% Isuzu 50% Hino 38% Hino 39% In the MCV segment, Hino has slightly better sales than Isuzu. Dealers and end users’ perception of Hino trucks is LCV (2 – 10 tons) MCV (11 – 20 tons) HCV (21 tons and above) very good, making this brand the best in this segment and Source: TAI, Solidiance analysis 2009 offering a wide range of durable and reliable trucks. In the HCV segment, Hino and Isuzu also dominate the Ranking of criteria when purchasing imported trucks market with an almost equal market share of 40% for Isuzu and 38% for Hino. 1 2 3 4 5 Imported trucks have been slowly gaining presence in Technology 3.8 Thailand within the MCV and HCV segments. European brands like Volvo and Scania are increasing their market presence, but it remains small (less than 2% of the market). European trucks have a high end image, and are deemed as Reliability 3.7 more reliable than Japanese trucks. Their price range is very high (tariffs on imported trucks are 40%, taxes are 200%) which will continue to limit their sales volumes. European Product quality 3.3 trucks are used in specific industries in Thailand, for transportation of oil and gas products, for instance. Chinese brands like Golden Dragon and DFM, are trying to Country of origin 4.3 gain presence in Thailand, but their market share is still very low. Thai trucks dealers do not believe, for a large majority, Price in the potential of these trucks which are deemed to be very 3.8 far from Japanese trucks in terms of reliability and quality. Source: Solidiance analysis 2009 Sample: 50 3
  4. 4. Thailand commercial vehicle market outlook Trucking Industry in Thailand: resilient to crisis In 2008 & 2009, the largest buyers of trucks are logistics, government and construction companies 40% Solidiance study shows that the transportation industry is the 35% largest purchaser of trucks in Thailand in 2008 and 2009. 30% Usage of trucks per industry, 2008 This sector reached a market value of USD 5.8 billion in 25% 2008. The largest players are DHL, FedEx and UPS with a 20% total share of more than 80% of the whole market. 35% 15% The government represents the second largest purchaser of 10% trucks although purchases are made randomly. The Thai 5% 14% 13% 12% 12% 11% government purchases trucks types such as garbage trucks 3% 0% or street sweeper trucks. Construction companies are also an important segment of trucks users, but the difficulty with this sector is that in 2009, investments are forecasted to halve. Source: Hino, Fuso, Solidiance analysis 2009 Fuel efficiency as the first criteria when purchasing trucks Study shows that end-users have generally very good Key factors when purchasing a truck knowledge regarding trucks. Additionally, most buyers have st 1 Choice already solid preferences for specific brands and know about performance levels of the trucks they are willing to buy. Fuel efficiency Price Volume Cap. Unexpectedly, price was not the first factor quoted when 48% 17% 11% purchasing trucks. Fuel efficiency comes as the first criteria of purchase nd because it constitutes a large percentage of end-user’s 2 Choice operating cost: fuel can represent up to 60% of operating Price Fuel Efficiency Customization costs. 33% 21% 12% Availability of spare parts comes as a third criteria of purchase because it is an important element to ensure nd 3 Choice business continuity. The two market leaders have 44 and 60 3S dealerships respectively. It is a key criteria for a large Spare parts Price Aftersales part of end-users who are particularly concerned with spare 28% 20% 21% parts availability. Sample: 50 Source: Solidiance analysis 2009 4
  5. 5. Thailand commercial vehicle market outlook Trucking Industry in Thailand: resilient to crisis The challenges at stake in the Thai trucking industry in the forthcoming years Regulation challenges: Environment policies and new technologies for trucks: Asean member states plan to move another step forward in If we exclude Japan, Thailand is at the forefront of the liberalization of their trade policies by completely environmental policies in Asia in the truck industry, eliminating tariffs by 2015. Experts believe that one of the having changed gas emission standard this summer main consequences of this liberalization would be a from Euro 2 to Euro 3, a more stringent regulation for modification of the power struggle between truck makers emissions. and dealerships, which means that the leverage which is now However, there is no clear sign that this will impact the on the side of manufacturers will switch to truck dealers. type of motorization in the next years. Experts, truck As the elimination of tariffs will lead to many more foreign dealers and end-users interviewed in this study are brands imported to Thailand, it will increase competition doubtful about the NGV trucks imposing their standard between manufacturers. Dealers will beneficiate from this on the Thai market because genuine NG trucks are competition and could impose the end of exclusive considered too expensive. The consequence is that end- dealerships. It would allow them to share brands, services users are customizing their own trucks to make them and parts and to offer to their clients a much wider portfolio run with gas. This results in poor efficiency and of vehicles than now. increased number of breakdowns which does not give NGV systems a good image. Biodiesel could be an Fostering the added value creation in the truck alternative, but industry experts doubt that this can be manufacturing widely used as a substitute at the present moment nor Thai authorities are currently trying to convince Japanese in the near future. manufacturers to produce more vehicles locally, and to transfer more technology and production know-how to Thailand. One of the best illustration of this phenomenon is the production and design of high value parts which has “The price for genuine NGV trucks with already switched from Japan to Thailand for the pick ups appropriate engine is THB 700,000 more than a cars. This trend is growing with other high value models, classical truck running with gasoline. This is why such as the Toyota Camry Hybrid, which is now produced in there is a lot of customization made by truck end- Thailand. users when buying NGV systems. They adapt it Thai authorities are pushing towards the same trend for the themselves to their trucks which are running with truck industry. It has already started with Hino trucks now the same engine as classical trucks working with producing more of their high value parts in Thailand, in gasoline”. partnership with Toyota. Experts predict this trend will continue for the years to come, consolidating the lead of Owner of a Thai logistics company, running Thailand in the region. 600 trucks based in Greater Bangkok 5
  6. 6. Thailand commercial vehicle market outlook Trucking 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 to outpace the competition, close gaps in growth and capitalize on market opportunities. With offices in Singapore, India, Thailand and China, Solidiance’s Asia focus provides 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 Mark Lee- Principal Mickael Feige- Senior Consultant Mickael Feige is a Senior Strategy Consultant based in Mark is a Principal based in the Singapore office with more Bangkok office with more than five years of consulting than eight years of consulting experience. Mark has a strong experience. He has led over 50 national and multi-regional focus on quantitative based projects. Previous roles include engagements for Fortune 500 clients across Europe, Japan being regional manager for Synovate Business Consulting in and south-east Asia. Prior to joining Solidiance, Mickael was Singapore, handling projects for MNCs across Asia, focused managing investments and partnerships projects in Europe predominantly on the automotive industry. Mark managed for large Japanese MNCs, especially in the automotive most survey-based projects for MNCs where he advised industry. With strong experience in combining numerical and international companies on market entry, customer qualitative analytics, Mickael specializes in customizing segmentation prioritization and growth strategies. He also advanced market segmentation and size forecasting models has ample experience in qualitative research, having to help clients identify and prioritize market opportunities to managed various multi-country projects that required a develop growth strategies. Mickael has rich experience combination multiple approaches in order to customize across automotive industry throughout Europe and Asia results to meet the clients’ needs. Having worked for five Pacific, including in Japan where we worked for one of the years in the M&A team of a Korean Conglomerate in Spain, top 3 carmaker. He combines sector and cross-industry best Mark also has vast experience with mergers and acquisitions practice, leveraging this knowledge to help clients develop in Europe, Asia and Africa. Mark is fluent in Korean, English successful market strategies. He holds a Bachelor in and Spanish. He holds a BS in mechanical engineering, from marketing (with Honors) from the London Metropolitan the Worcester Polytechnic Institute (United States) and a University and a MBA from the Institute of Political Science of MBA from the University of Rochester. Lyon (France). India Thailand Singapore China Suite 10-08 Suite 32-05, Interchange Suite 17-01 Suite 801 A-9, Third Avenue 399 Sukhumvit Road, High Street Center Hong Kong Plaza Bandh Road, Klongtoey, Wattana, 1 North Bridge Road 283 Huaihai Road Central New Delhi Bangkok 10110 Singapore 179094 Shanghai 200021 Tel: +91 99999 88859 T. +66 2 660 3638 Tel: +65 6408 8208 Tel: +86 21 5168 8905 www.solidiance.com industrial@solidiance.com

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