Executive Outlook of Global Medium-Heavy Duty Low-cost

Truck Market By 2022 Medium-Heavy Low Cost Truck Sales to Reach 1.3 Million Units

NE05-18

June 2015

CONCISE SUMMARY OF

FULL STUDY

2 NE05-18

Contents

Section Slide

Number

Executive Summary 4

Low Cost Truck Manufacturing: Strategies and Challenges 14

Global Market Analysis 20

Global OEMs Product Strategy 29

Africa 34

China 41

India 48

North America 55

South America 62

Western Europe 69

Key Conclusions, Future Outlook and Predictions 76

Appendix 81

3 NE05-18 3 NE05-18

Executive Summary

4 NE05-18

Key Research Takeaways

Source: Frost and Sullivan

Medium-Heavy Duty Low-cost Truck Market, 2014–2022

Global* Low-cost truck market will grow at CAGR 2.1% to over 1.26 million units by 2022

Driven by increasing demand in South America, Africa, North America, Western Europe, and Next 11 countries

counteracting stable and declining demand in India and China respectively.

Increasing demand for low-cost trucks in North America and Western Europe largely due to economic conditions

Prolonged economic slowdown and structural changes to freight movement patterns changing truck purchase patters. Low-

cost truck sales to experience 2014-2022 CAGR of 5.4% and 15.8% in North America and Western Europe.

Strength of western OEMs in South America and Africa will diminish gradually in the next 6-8 years

The two regions have experienced some initial penetration of low-cost trucks from Chinese and Indian OEMs in the past 2-3

years. This is expected to further grow through increasing proliferation of low-cost brands which will almost double and triple

in South America and Africa respectively by 2022.

*Only includes India, China, Africa, South America, North America and Western Europe

Rise in value truck demand in China and India to take market share away from low-cost trucks

Rising economic influence in China and India is changing product preferences among fleets in China and India. This coupled

with increasing presence of western OEMs is accelerating demand and sales of value trucks. This is taking a section of

demand for low-cost trucks towards value trucks.

A common focal price range across global OEMs by 2022,due to converging interests

Price gaps between American, European, Japanese, Chinese and Indian OEMs will continue shrinking over 2014-2022

period. Chinese and Indian OEMs will focus on higher end trucks, whereas, American, European and Japanese OEMs will

focus more on value and upper-end low cost trucks.

5 NE05-18

Global Low-cost Truck Market and Price Boundaries

Low-cost Truck Market: Global Average Price of Low-Cost MDTs and HDTs, 2014

• Definition of low-cost truck varies by region.

• In markets such as North America, Western Europe and South America a low-cost truck can be defined as: “A truck that is priced 15-25% lower than an average priced truck within the same commercial vehicle category in the given region”.

• In markets such as China, India and Africa a low-cost truck can be defined as: “A truck that is perceived as an entry level truck in corresponding markets and is priced at the lowest price bandwidth in each segment (i.e. medium and heavy-duty trucks)”.

Definition

Source: Frost and Sullivan

120,000

100,000

80,000

60,000

40,000

20,000

120,000

100,000

80,000

60,000

40,000

20,000

Low-cost MDT Low-cost HDT

Pri

ce (

$)

Pri

ce (

$)

MDT HDT

India

China

Africa

South America

North America

Western Europe

India

China

Africa

South America

There are currently no low-cost trucks in the HDT segment in North America and Western Europe, by the same definition

as exists for developing markets

6 NE05-18

Market Overview – Classification

MDT (Medium Duty Trucks):- 6 ton - 16 ton

HDT (Heavy Duty Trucks):- >= 16 ton

Weight Segments

Regions Covered Africa North America

China South America

India Western Europe

Source: Frost and Sullivan

Price Segments • Price segments are classified according to various regions based on the local

market conditions.

• Markets such as India, China and Africa clearly have a segment between low

and premium segments, where the price, specifications and features fall right

between the two. This segment here is defined as the ‘value segment’.

• In markets such as South America, North America, and Western Europe the

trucks are classified into only low and premium, as there is no intermediate

space to be classified as value.

• Another distinction to be made is that these segmentations are region specific

and may overlap. For example: Trucks in the value segment in China and India

may be similar to those in the low-cost segment in Western Europe and North

America.

7 NE05-18

Price Range of Medium-Heavy Duty Trucks by Region Developed markets such as

North America and Western Europe offer wider entry points to Indian and Chinese OEMs(in the $20,000 to

$35,000 price range in the MDT segment) forcing local OEMs to develop competing products

Regional Truck Price Analysis, MDT and HDT, 2014

MDT HDT

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

Pri

ce (

$)

Pri

ce (

$)

India China Africa South

America

North

America

Western

Europe

India China Africa South

America

Source: Frost and Sullivan

Premium segment

Value segment

Low-cost segment

• North America and Europe currently feature very few players, both local and Japanese, in the low-cost segment

price range.

• In Africa and South America the low-cost segment price range consists of only limited products mainly from Chinese

and Indian OEMs.

• The low-cost segment price range in India and China is filled with local competitors and offers growth opportunity

only in the Premium and value segment price range.

8 NE05-18

Regional Low-Cost Truck Market Sales and Market Share Forecast Shrinking share of low-cost trucks in China and India till 2022 will result in downward pressure on global low-

cost truck growth

Low-cost Trucks Unit Sales and % share in the overall market, Global, MDT and HDT, 2014-2022

Source: Frost and Sullivan

India

China

Africa

South America

North America*

(MDT)

Western

Europe* (MDT)

171,000

Units (2014)

315,000

Units (2022)

89%

% Share (2014)

63%

% Share (2022)

CAGR

7.9%

756,100

Units (2014)

674,000

Units (2022)

71%

% Share (2014)

46%

% Share (2022)

CAGR

-1.4%

21,600

Units (2014)

60,000

Units (2022)

23%

% Share (2014)

39%

% Share (2022)

CAGR

13.6%

81,800

Units (2014)

150,000

Units (2022)

37%

% Share (2014)

48%

% Share (2022)

CAGR

8.0%

33,450

Units (2014)

50,800

Units (2022)

15%

% Share (2014)

19%

% Share (2022)

CAGR

5.4%

3,300

Units (2014)

10,600

Units (2022)

5%

% Share (2014)

14%

% Share (2022) CAGR

15.8%

*Numbers only for MDT, as proliferation of low-cost trucks in the HDT segment not expected till 2022

9 NE05-18

Global Low-cost Truck Market 84% of the low-cost truck market is currently represented by Chinese market (with 60% of the market share)

and India (with 24% of the market share)

Source: Frost and Sullivan

22%

20%

16%

14%

7%

6%

4%

3% 3%

3% 2%

OEMs Market Share, Low-cost Truck Market, Global* MDT-HDT, 2014

Dongfeng

FAW

Sinotruck

Tata

Ashok Leyland

Daimler**

Ford

Isuzu

Eicher

MAN/VW

Shaanxi

2014

Premium

Value

Low

2022

Premium

Value

Low

13%

45%

41%

37%

22%

41%

Low-cost segment size and OEM Market Share, Global*, MDT and HDT, 2014-2022

*Only includes India, China, Africa, South America, North America and Western Europe

**includes Mercedes-Benz, Freightliner (FCC) and Mitsubishi Fuso

~2,357,000 ~3,390,000

• The global low-cost truck segment will decline in terms of percentage share in the overall market by 2022. However, in

terms of unit sales this segment will grow by 18%.

• Value segment will more than double in the next 8 years, largely driven by demand from China and India.

10 NE05-18

Expected Low-cost Truck Platforms More new low-cost platforms are expected from Chinese, Indian and Japanese OEMs through to 2022

HDT

MDT

2010 2022

27 16 11

16

11

Il series

AsiaMotorWorks

Daimler BharathBenz

IVECO LCT HDT MAN/VW trucks

Hyundai HDT DongFeng DFL

DongFeng Duo

IVECO’s Chinese

Platform Based MD

Daimler BharathBenz

2014

Fuso FG LCT ISUZU FTR

Volvo-DongFeng

LCT HDT

Ashok Leyland

Source: Frost and Sullivan

Low-cost Truck Market: Vehicle Model Timeline (World), 2010-2022

2018

FAW LCT HDT

MAN/VW LCT HDT

Isuzu LCT MDT

Tata LCT MDT

Tata LCT HDT

Ford LCT MDT

Volvo-Eicher LCT HDT

Sinotruck LCT HDT

Hyundai LCT MDT

Iveco LCT HDT Ashok Leyland LCT HDT

• Chinese and Indian OEMs will dominate the low-cost segment in the next 6-8 years through various platforms and brands

• Hyundai is likely to enter North America and Europe within the next 2 years trucks that will be positioned at lower-cost

product options in these markets.

• Western OEMs such as MAN and Iveco will consider low-cost product baselines for South American and African markets

by 2018-2020.

Fuso LCT MDT

UD LCT HDT

Hino LCT MDT

11 NE05-18

Global Low-cost MD-HD Truck Outlook Low-cost truck market will experience reversal in performance in the emerging and developed economies

between 2014 and 2022

2014 2022

Market • Low-cost truck markets achieved maturity and

stability in China and India respectively.

• It is still in its early stages in South America and

Africa.

• Almost non-existent in Western Europe and North

America.

• Market growth to be driven largely by Africa,

Next 11, and South America in terms of both

growth rate and volume.

• China and India, despite substantial low-cost

truck demand, will effectively gravitate towards

value and premium segments.

Product • Low-cost trucks in emerging markets feature small

displacement engines, sub-optimal reliability,

durability, and quality and basic safety features and

construction principles

• Low-cost trucks will evolve in terms of quality

and safety features, due to strengthening

regulations across the globe blurring distinction

lines that exist between the low-cost and value

segments

OEMs • There is a clear distinction among OEMs present in

the low and the premium segments, with very few

premium segment OEMs featuring low-cost

offerings and vice-versa.

• More premium segment OEMs form Europe and

America will feature in low-cost truck space

either through joint-ventures or through

distinctive brands

Suppliers • Suppliers for these trucks are almost always local

• Western suppliers are slowly breaking into this

market

• Western tier-1 suppliers will provide pivotal

support to both TRIAD and emerging market

OEMs in this space

Customers • Perception of low-cost trucks as cheap and

unreliable still exists among most customers in the

developed world.

• Affordability barriers associated with value and

premium trucks have driven low-cost market

• Customers expectations from these trucks will

change as customers will be more open to

shorter useful life of such trucks in exchange of

lower upfront cost, especially in TRIAD and

BRIC markets

Low-cost Truck Outlook, Global, MDT-HDT, 2014-2022

Source: Frost and Sullivan

12 NE05-18

The Last Word—5 Big Predictions

2 China and India’s current domination in the global low-cost truck market will diminish

from current combined market share of 87% to 79% by 2022.

3 16 new low-cost truck platforms in MD and HD truck segments to be introduced in key

global markets over 2015-2022 period.

1 Global low-cost truck market will grow at a CAGR of 2.1% reaching 1.26 million units

by 2022.

4 Western OEMs will be pushed to introduce low-cost MD trucks in $50-60 thousand

retail price range, while MD and HD low-cost truck prices in Asian markets will

increase to $30-45 thousand range.

5 Japanese OEMs will be seriously challenged from the bottom of their price bandwidth

by Chinese, Korean and Indian OEMs and from top by European and American

OEMs compelling them to develop lower cost versions of their value trucks.

Source: Frost and Sullivan

13 NE05-18

Market Engineering Methodology

One of Frost and Sullivan’s core

deliverables is its Market Engineering

studies. They are based on our

proprietary Market Engineering

Methodology. This approach, developed

across 50 years of experience assessing

global markets, applies engineering rigor

to the often nebulous art of market

forecasting and interpretation.

A detailed description of the methodology

can be found here.