Heavy commercial vehicles on a hefty rise?

Heavy commercial vehicles on a hefty rise?

The global heavy commercial vehicles (HCV) market generated revenue of US$365 billion (more than R5 252 billion) in 2019 and will reach a value of US$560 billion (more than R8 058 billion) by 2030, at a compound annual growth rate of 4,4%. We examine what’s leading to this rise.

The statistic was provided by InsightSlice, an American market intelligence and strategy consulting company, in its piece “The Global Heavy-Duty Truck Share, Trends, Analysis and Forecasts, 2020 – 2030”.

“Heavy-duty trucks are mainly used for construction, mining, cargo transportation, logistics and towing,” InsightSlice reports. “Heavy-duty trucks also experience great demand from the mining sector.”

And it’s the expansion in these sectors that will lead to these heavy hitters generating more and more revenue. It notes: “Mining companies all over the globe require high-payload capacity dumping trucks with less fuel consumption and higher efficiency in order to achieve day-to-day mining activities with ease.

“Demand from developing nations’ mining sector is propelling the heavy-duty trucks market drastically. Governments are approving new mining sites with increasing capacity, thus resulting in rising demand for heavy-duty trucks as well. For instance, in 2020, the government of China approved two new coal-mine projects having about 3,6 million tonnes of annual capacity.

“China’s coal production during the time period of January to May last year reached 1,47 billion tonnes, which is 0,9% more than the previous year.”

Closer to home, things are also on the rise, albeit on a different level. Sales for the heavy truck segment reflected a positive performance during January and, at 1 133 units, showed an increase of 70 vehicles – or a gain of 6,6% – compared to the corresponding month last year. This info has been provided by naamsa, the Automotive Business Council* (formerly the National Association of Automobile Manufacturers).

February’s sales saw an increase of 3,1%, or 1 445 units, for heavy trucks and buses – compared to the same month last year. And March also delivered some positive news, as 1 807 units were sold – 470 more vehicles than March last year. That’s a whopping 35,2% increase.

According to naamsa CEO Mikel Mabasa: “The industry is expected to start recapturing lost demand on its recovery path in 2021, considering the close correlation between new vehicle sales and the country’s anticipated annual GDP growth rate in excess of 3%. However, structural constraints that exist in the economy, coupled with the growing debt of the country and the ongoing electricity capacity limitations that business may face in the future, do not bode well for a quick recovery.

“New vehicle sales in 2021 may also be hampered by stock shortages of some models in the coming months, caused by Covid-19-induced manufacturing supply-chain disruptions, such as the current global shortage of semiconductors, or computer chips, an important part of modern vehicles.”

The UK-based research and analysis company IHS Markit reports that since the last months of 2020 there have been reports of disruption within the supply chain of semiconductors to the automotive sector.

In his piece, “Supply chain disruption for semiconductors to the automotive sector”, IHS Markit’s Mark Fulthorpe writes: “Pressure built up as the automotive industry recovered from the widespread lockdowns experienced during the first half of 2020 and that recovery cycle clashed with increasing demand from the wider consumer electronics sector, which was itself recovering strongly and late in the year, building stocks for the holiday season.”

Christiane Stein, IHS Markit’s associate director of global heavy truck research, adds that this shortage took a while to reach the medium and heavy commercial vehicle (MHCV) sector, but the impacts are now visible.

In her piece “Impact of Semiconductor Shortages on the Global Medium and Heavy Commercial Vehicle Production” she writes: “The influence on production will be uneven across OEMs and countries, with some seemingly unaffected. Several MHCV OEMs will face constraints in the second quarter.

“Combined with other supply-side challenges, these losses may net out as much as 3% of the first half of 2021 production in some regions, including Europe and North America. While IHS Markit believes the effects of the chip shortage may cast a shadow as late as 2022, we expect that some of these first-half losses may be compensated for in the second half of the year.”

She notes that during the first quarter, in Europe Volvo was the main affected OEM and closed its plant in Ghent, Belgium, for one week leading to a reduction of about 550 units. “In the same period, employees of DAF and Scania in the Netherlands went on strike for three days leading to a reduction of about 1 050 units for both together.

“There are also some OEMs that are faring better: Iveco has increased its line rate in February and run extra Saturday shifts in February and March, and expects to increase its line rate further by June. Although MAN is faced with constraints, production in the Polish plant increased. Kamaz announced its first-quarter production figure at 9 800 units, which is 400 units higher than the company had planned.”

For Asia, by and large, India, China and South Korea are not affected in the MHCV sector by the chip shortage. “Within the region, it’s again the Volvo Group that is affected. Volvo’s UD Trucks brand sees lower output at plants in Japan (a reduction of about 330 units) and Thailand.” At the beginning of April, Volvo completed the transaction of selling UD Trucks to Isuzu.

In Brazil, production stops accrued at the end of March and the beginning of April due to a rise in Covid cases in the country and the semiconductor shortage at Volvo.

“Both factors led to a predicted combined loss of 3 100 to 3 400 units in the first half of 2021, which is expected to be made up for later in the year as agribusiness continues to strive and exports from Brazil are forecasted to recover.

“In North America, there are several plant stoppages, reduced line rates and production of unfinished trucks due to chip shortages. Affected are Daimler (rolling downtime in two medium-duty plants), Volvo Group and PACCAR. International did not comment on the topic and Ford’s constraints seem to be in the light vehicle sector.”

Stein adds that, overall, the constraints are less than in the light vehicles business. “Our semiconductor experts say that the shortage was made worse by special events in March (cold wave in Texas and fire at the Renesas plant in Japan) and will continue throughout the 4th quarter of 2021 in the automotive sector. For MHCVs, we assume that the OEMs have the potential to recover part of the lost volume in the second half of 2021.”

Only time will tell how this scenario will play out for the local HCV market and if our upward trend will hold. But the overall positive prediction that revenue from this sector will make some massive leaps within the next decade bodes well for a big rise in the HCV market.

• The new name of the association reflects its broader scope: it now represents a wider community of stakeholders across the automotive value chain. Its mandate has evolved to include manufacturing OEMs, as well as retailing OEMs and heavy commercial OEMs in South Africa.

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Focus on Transport

FOCUS on Transport and Logistics is one of the oldest and most respected transport and logistics publications in southern Africa.
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