The midmarket dynamic will drive the world’s leading OEMs into the BRIC market battleground. Today, there are two broad categories of manufacturers. For the most part, global OEMs such as MAN, Volvo, Scania, and Isuzu sell premium trucks in the Triad markets. Local OEMs such as Tata Motors, Kamaz, and Dongfeng Motor produce low-cost vehicles for BRIC markets.
Local OEMs have vastly outpaced global OEMs over the past decade, and that trend is expected to continue. Most local OEMs from India and China have achieved growth rates of 5 percent and higher, while many global OEMs and local OEMs from Russia have seen sales decline. Stimulated by domestic growth, BRIC OEMs already account for six of the ten largest producers worldwide. The next ten years will see global and local OEMs converge and compete. Global Triad companies will become more localized, local BRIC manufacturers more global.
Global OEMs. With Triad markets remaining stagnant, global players need new markets. Even though BRIC buyers are seeking more sophisticated trucks, vehicles designed and priced for Triad markets still cost too much. They meet emissions standards and come with special features that BRIC buyers do not demand. To compete with local BRIC players, global OEMs must downgrade specifications and reduce costs. We calculate that to do this, they will need to localize more than 90 percent of their activities. A European OEM told us, “We could achieve a competitive level in Brazil only after localizing all of our activities.”
Local OEMs. BRIC OEMs also seek fresh markets. So far, they have profited from rapid growth in home economies. In terms of sales units, annual growth rates exceeding 10 percent—achieved from 2000 through 2008 by companies such as Tata in India and Dongfeng in China—were in line with overall growth in domestic commercial-vehicle markets. But new entrants and upgraded vehicles have intensified competition, so these companies can no longer rely on domestic growth to power expansion. To maintain momentum, local OEMs must operate two key levers: tapping into upgrades in their domestic market and capturing growth in other rapidly developing economies.
To tap the potential of upgraded vehicles, BRIC OEMs need access to advanced technology. Many local OEMs have, therefore, entered into partnerships with global suppliers or OEMs. Tata, for example, built an upgraded truck using advanced components from global suppliers such as Cummins, ArvinMeritor, and ZF Friedrichshafen. Prakash Telang, the managing director of Tata Motors, reported, “We are not confining ourselves to the domestic market but are now building a world truck to be sold in overseas markets.”
To encourage further growth, local OEMs need to improve their positions in other developing economies. Most local OEMs we spoke with are aiming for an export rate of 15 to 20 percent over the next five years compared with less than 5 percent today. The most frequently named markets are Southeast Asia, Latin America, Africa, the Middle East, and other BRIC countries.
The authors wish to thank all participating senior executives of major truck OEMs and suppliers for their great support and openness. The authors also extend their appreciation to their BCG colleagues Pascal Bruckner, Kevin Chen, Rafael Cicco, Roman Hilgers, Robert Koschig, Stefan Mauerer, Alexa Schlamp, Tobias Weidner, and the Knowledge Team. Thanks also go to Katherine Andrews, Gary Callahan, Elyse Friedman, Kim Friedman, Huw Richards, and Sara Strassenreiter for their contributions to the writing, editing, and production of this report.
To Contact the Authors
You may also contact our regional industry experts: