Evolution, not revolution—but what does the future hold for Daimler Trucks?

A new Automotive World report examines the outlook for Daimler Trucks over the five years to 2023. By Martin Kahl

Like its passenger car sibling, Daimler Trucks is preparing for a new role within the soon to be restructured Daimler group. At the company’s annual shareholder meeting in May, approval is expected to be granted for a much anticipated new corporate structure; the Mercedes-Benz car and van operations will be housed under Mercedes-Benz AG, financial and mobility services will be managed by Daimler Mobility AG, and Daimler Truck AG will be responsible for all truck and bus activities.

When Daimler’s Supervisory Board and Board of Management met in February 2019, they confirmed the appointment of Ola Källenius as the future Chairman of the Board of Management of Mercedes-Benz AG and Chairman of the Board of Management of Daimler AG, replacing Dieter Zetsche when he steps down this year.

At the same meeting, Martin Daum was appointed as future Chairman of the Board of Management of Daimler Truck AG, with a seat on Daimler’s Board of Management. Formerly President and Chief Executive of Daimler Trucks North America, Daum has been running Daimler’s global truck and bus operations since 2017, when he transferred to Stuttgart in the wake of Wolfgang Bernhard’s resignation.

Martin Daum has been confirmed as future Chairman of the Board of Management of Daimler Truck AG, and a member of the Board of Management of Daimler AG

The division has continued to thrive under Daum’s leadership. Daimler Trucks is the world’s largest truck manufacturer, with consolidated sales of over 517,000 vehicles in 2018. Daimler Trucks also operates a 50/50 joint venture in China with Beiqi Foton Motor, which sold 103,000 units in 2018.

The division’s three core brands—Freightliner, Fuso and Mercedes-Benz—accounted for over 90% of output in 2018, with the remainder being sold under the BharatBenz, Thomas Built and Western Star brands.

In addition to the change in corporate structure which will begin officially once approved, Daimler Trucks is making some major investments in its portfolio, product development and manufacturing footprint.

In March, Daimler Trucks Asia officially opened a new €74m (US$83m) Product Center building and Design Center at the Kawasaki Plant (K1) in Japan, which will house Fuso’s corporate headquarters, R&D and design activities.

In India, Daimler India Commercial Vehicles (DICV) is going from strength to strength, with Satyakam Arya, Managing Director and Chief Executive since November 2018, reportedly saying that DICV will launch 52 new BharatBenz and Fuso products in 2019 for local and export markets. DICV has been a considerable success story for Daimler, having recently achieved break-even after six years of operation, thanks to cost reduction and a significant increase in sales.

BharatBenz dealership inauguration
BharatBenz, Daimler’s Indian truck brand, achieved break-even after six years of operation

Daimler’s truck activities in India are wholly-owned, but in Russia, it holds a stake in local manufacturer KamAZ, which suffered considerably in 2018; according to local reports, KamAZ reported a 111-fold decline in net profit.

In terms of technology, CASE is the name of the game, with product development focused on connected, automated, shared and electric trucking. At CES in January 2019, the truck manufacturer announced the surprise decision to end its research into platooning, having been unable to replicate the theoretical financial and fuel efficiency benefits in real world testing. Instead, the company said it will focus its efforts on automation, and confirmed a €500m (US$570m) investment programme “to bring highly automated trucks (SAE level 4) to the road within a decade”.

Overall, the prospects for the company are good, as outlined in a new Automotive World report—Strategy update: Daimler Trucks—which examines the outlook for Daimler Trucks over the five years to 2023.

“Many things are going well for Daimler Trucks,” said report author Jonathan Storey. “It enjoyed record sales in 2018, which it expects to repeat this year, with pretty much all North American build slots for 2019 already full at the start of the year.”

The report anticipates a downturn in the early part of the five-year forecast, attributed to a slowdown in the NAFTA region, followed by a new period of growth.

“While the report expects Daimler Trucks’ volumes to turn down for a couple of years after 2019, a return to growth is forecast for the last two years of the period,” noted Storey.

Despite Daimler’s surprise decision to discontinue platooning technology research, the truck maker is investing heavily in the development of Level 4 automation

On the assumption that Project Future—the name given to Daimler’s reorganisation—goes through as planned, Daimler Trucks will begin to enjoy a greater degree of operational independence within the group. It would reasonably follow that with this greater level of freedom comes the opportunity and incentive to increase profitability. As outlined in Automotive World’s report, the Daimler Trucks division has averaged a 6.5% operating margin over the last five years, despite a target of 8%. The report notes: “In 2018, DT’s margin rose by 0.5pts to 7.2% and speaking in early 2019, Martin Daum, DT’s head, reaffirmed the 8% target as a cycle average across all markets.”

Commenting on the 8% target, Storey said: “It is to be hoped that by the end of the period, the higher sales volumes, coupled with DT’s greater operational independence, will enable the company to hit the 8% operating margin that it has been targeting but failing to achieve since 2012.”

Everyone with a vested interest in the global truck industry will be watching events in Stuttgart in May, when Daimler shareholders meet and discuss Daimler’s future. What follows is likely to be a “reorganisation rather than a transformation” notes Storey in the report, adding that this “is not necessarily a bad thing.”

Daimler Trucks is the latest commercial vehicle manufacturer to be covered in Automotive World’s automaker strategy update series.

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