Transport services, not trucks, attracting new technology players

Technological advances are reshaping the truck manufacturing industry and shifting the traditional value pools. Connectivity and telematics are becoming increasingly lucrative aspects of the transport business, but to what degree? In the transport business, the focus is squarely on reducing downtime, improving resource effectiveness and optimising asset utilisation. Already there are warnings that automakers need to address their customers not so much with sheet metal but with services. Wilfried Aulbur, Managing Partner at Roland Berger, has argued that connectivity in particular will prove an essential revenue stream for truck manufacturers. "The positioning of connectivity-based products and services is key to success," he asserted. But will it replace hardware in terms of a profitable business avenue? Many industry watchers have observed that the hardware side of the truck is becoming less important compared to the software and service aspects. This could result in a major reshuffle of the segment's key players, with truck manufacturers, fleet management companies and technology providers all scrambling to define their role in a rapidly evolving ecosystem. "We need to ask ourselves, 'Who will be producing the trucks in the future - the same companies as we have now or completely different ones?" suggests Christoph Domke, Director - Mobility 2030 (Automotive & Transportation), Global Strategy Group at KPMG. The everlasting chassis The answer to that depends in part on how the industry develops. While nobody has a crystal ball, clear trends are emerging. One of these centres around the choice of powertrain. The bulk of today's heavy trucks are powered by diesel engines, but that is set to change, and with it, the wider supply chain. "We will see a big shift towards alternative powertrains, moving away from diesel trucks towards natural gas, particularly liquefied natural gas (LNG)," predicts Domke. That's good news for LNG gas tank manufacturers, which will grow in value and importance. All the transportation activity taking place on the roads between component factories and truck factories will either be significantly reduced with 3D printing or completely cease to exist Similarly, trucks are expected to adopt more hydrogen and battery power units. Nikola Motors, for example, is promising that its upcoming hydrogen-electric Class 8 models will best diesel across all metrics. This one company alone believes its offering could pretty much wipe diesel off the road entirely in a matter of years. That could rewrite the business plans for numerous suppliers. "This is going to become much more pronounced and relevant during the next decade," Domke tells Automotive World. The move from an internal combustion engine to a battery-powered truck also opens up the possibility for an 'everlasting chassis'. Electric vehicles entail fewer components than their internal combustion engine (ICE) counterparts and generally require less service. The idea is that everything surrounding the chassis - the services and software, an interchangeable battery, etc - is replaced as often as required with minimal fuss. The truck chassis itself could last for 50 years. "This leaves you with more or less an infinite truck chassis that lasts forever," emphasises Domke. Autonomous design Similarly, the move to autonomous driving heralds significant change for manufacturers. If a truck can completely drive itself, there may be no need for a cab. Volvo's latest autonomous concept truck, the Vera, skips the driver cab entirely. If we take this a step further, is there even need for a truck? "If you are going to take out the driver, you could just put the motor on the trailer," suggests Steve Tam, Vice President of ACT Research. That could simultaneously help with length limitations. Europe currently limits truck and trailer combinations to 18.75 metres, though this has been extended to 25.25 metres in certain countries. Cutting out the truck in front of the trailer means that much more space for cargo, and that much more earnings potential per run. "This is why many companies are suggesting the move to a trailer on wheels. If you have more transportation space, you make more money as a fleet operator," says Domke. If you are going to take out the driver, you could just put the motor on the trailer At the same time, autonomous trucks could change the location of factories and warehouses. At the moment, these are generally centrally located so trucks can reach multiple other facilities within a certain period of time. Fully autonomous vehicles, though, can theoretically run all the time unless they are serviced. Where a manufacturer positions its production facility becomes less and less important. "This is another big thing that real estate companies and the big logistics providers have to think about," he warns. 3D printing Growing use of 3D printing could also reshape the traditional truck manufacturing setup. It offers a cost-saving approach to component production as well as a faster time to market. With minimal space demands, companies can set up 3D printing operations almost anywhere. Already a handful of truck manufacturers are experimenting with potential applications, though most remain small scale. Daimler Trucks North America (DTNA), for instance, is using 3D printing to provide replacement parts for older models. Momentum, however, should gain pace rapidly in the coming years. "Some truck manufacturers have made recent acquisitions in this space and it is becoming increasingly relevant for them," Domke points out. The concern is that it also carries negative connotations. What happens if companies start locating their 3D printing press or facility inside or next to their established truck manufacturing factory? That would reduce the demand for transportation of parts among different plants. "All the transportation activity taking place on the roads between component factories and truck factories will either be significantly reduced with 3D printing or completely cease to exist," he predicts. "It produces a negative effect on truck demand and thereby also truck production." Competitive landscape The competitive landscape is changing, along with the market participants in this field. In addition to the automakers and transportation companies, the technology companies are taking on a more active role. "Some of the big technology juggernauts like Amazon and Uber are hugely excited about this topic, and are increasingly driving the agenda," adds Domke. "Everyone has their own opinion of where this should go moving forward." There is no need for companies like Uber or Amazon to buy any automakers because they know that the vehicle in itself and the manufacturing of it do not represent the value-adding revenue stream for which everyone is looking Amazon is certainly one to watch. "The number of patents for which Amazon is applying on both the car and on the truck side is staggering," he observes. It's also understandable, as transportation represents one of the biggest single expense areas for the company. Taking full control of the transportation processes by reducing those costs, whether it’s in terms of long haul trucking or last mile delivery, could prove essential. However, there is a notable gap in this flurry of activity. "People are asking why Apple or Amazon or Uber have not invested in any truck or car manufacturers. There's a good reason for that," he noted. "The vehicle component is becoming less important. It’s all about services and software going forward." The sort of collaboration seen with Waymo and FCA could serve as a template for others. FCA simply provides Waymo with the vehicles it needs for its fleet testing operations. It could be the same for truck manufacturers going forward. "There is no need for companies like Uber or Amazon to buy any automakers because they know that the vehicle in itself and the manufacturing of it do not represent the value-adding revenue stream for which everyone is looking," says Domke. Who will be producing the trucks in the future - the same companies as we have now or completely different ones? Domke expects that in the next 15-20 years, half of the existing brands will find it a struggle to remain in business in their current form. "Many companies are very nervous; these are changes that we have never seen before in the market. There are some players that have been around for 100 years that could be out of business in the next 20. It’s very worrying," he concedes. Some will restructure, while others will be taken over by other companies or sold off. That said, it remains to be seen exactly which players will reign in this new environment. It could be a conglomerate of different firms, technology providers or fleet leasing companies. In light of the increasing importance of fleets moving forward, hand in hand with a decline in private ownership for trucks, Domke suggests the latter group bears watching. Meanwhile, partnerships and various forms of collaboration are likely to colour industry developments in the years ahead. "Already today we see many connections forming across the industry with numerous players. There has emerged such a complex construct of different links, investments, accelerator activities, co-operations, partnerships – you name it – that it becomes very difficult to look through," he cautioned. "This will only become more complex going forward." This article was featured in our November 2018 special report, ‘The truck factory of the future’, which is now available for download

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