SANDEEP KARGlobal Director,

Automotive & Transportation Research

Global Medium-Heavy Duty Truck Market: Vision 2022

Vision 2022: Big Picture

2014-2022 CV Industry Senior Management Top-of-Mind Issues

Last frontiers of globalization- Next 11, Africa

2.Regulation compliance pressures

3.Global manufacturing and sourcing shifts

4.Rapid proliferation of electronics

5.Urban logistics, bricks-and-clicks, and multi-modality

6. Autonomous driven connected trucks

7. Service and maintenance revenue focused business models

8. New truck types (e.g. mega-trucks, city trucks, etc.) and pricing models

012345

Global CV 2020 Vision: Senior Executive Top of Mind Issues, Global, 2014- 2022

Note: Data collected from 2013-2014 interviews and discussions with Sr. Manager to CEO level executives of truck OEMs and tier-1 suppliers in NA, EU, APAC, China, India, Latin America and other regions

Source: Frost & Sullivan analysis.

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

55.0

65.0

75.0

85.0

95.0

105.0

50

100

150

200

250

300

350

US Annual Industrial Production Index US Class 8 Actual Units Sold Used Class 8 Estimated Units Sold

Truck Buying Cycles vis-a-vis Economic CyclesIncreasing Volatility

Heavy-duty Truck Dealership Market: Correlation Between Truck Buying Cycle and Industrial Growth, United States, 1998–2016

Ind

us

tria

l P

rod

uct

ion

Ind

ex

(2

00

7=1

00)

Un

its

So

ld (

‘00

0)

Low Replacement• Increase in replacement cycle to 5 – 6 years• Slowdown of economy• Tremendous demand for used trucks

Artificial Boosters• Pre-buy activity• Regulation compliance• Cheaper trucks

Strong Economy • Robust economic activity• Class 8 growth exceeded overall truck

growth sales during much of the 1990s, peaking in 1999

Pent-up Demand• Growth in US manufacturing and

industrial production• Pent-up replacement demand• Short supply of MY ‘08 and ‘09 used trucks

• Truck cycle peaks occur every 4th / 5th year.• Truck cycle peaks precede industrial production peak by a year.• This correlation suggests that the next truck cycle peak could be in 2014–

2015 followed by an potential economic upturn in 2016.

Global GDP & Commercial Truck Market Growth Outlook

Growth in BRIC and Next 11 economies will offer strength to global truck demand. Developed economies to start offering momentum from 2015 onwards

Global CV Vision 2020: World GDP and CV Growth Outlook – Global: 2012 – 2022

RegionGDP Growth Estimates:

2012 – 2022 (%)MCV Growth

(CAGR%)HCV Growth (CAGR

%)

Overall CV Growth (CAGR

%)

Market Opportunity

North America 2.1 – 2.5 4.3 3.6 3.9 Moderate

South America 4.0 – 5.0 4.4 5.7 5.3 Moderate-High

Europe 1.0 – 1.5 4.2 3.8 3.9 Moderate

China 6.5 – 7.0 2.9 5.4 4.7 Moderate-High

India 6.0 – 7.0 4.4 7.0 5.9 Moderate-High

Russia 3.5 – 4.0 10.3 8.4 8.9 High

Next 11 5.0 – 6.0 7.1 9.2 8.2 High

RoW 4.0 – 5.0 8.4 8.2 8.3 High

Global 4.0 – 4.5 5.1 5.7 5.5 Moderate-High

Global Medium & Heavy Truck Market ForecastDespite short-term global headwinds, stabilizing BRIC markets and rising Next 11 and African markets to elevate global MCV and HCV sales to 4.6 Million by 2022

Global CV 2020 Vision: Unit Shipments – Global: 2013–2022

Note: All figures are rounded; the base year is 2012. Source: Frost & Sullivan analysis.

Next 11 includes the following countries: Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Turkey, South Korea, Vietnam, and Bangladesh.

MCV: 6T to 16THCV: 16T and above

North America

South America

China India Russia Europe Next 11 RoW0

200,000400,000600,000800,000

1,000,0001,200,0001,400,0001,600,0001,800,000

2013 2022

2022 Regional Shares~2.7

million

~4.6 million

34%

36%

64% 66%

Un

its

44%31%

24%

42% 21%45%

53%

55% 69%

76%

58% 72%79% 55% 47%

28%

5.5% CAGR Growth

Vehicle Platform Strategies of Key Global HD OEMsBy 2022, 30 Global HD Truck Platforms are Expected Collectively Accounting One Out of Every Three HD Trucks Made That Year

Global CV Vision 2020: Heavy-duty Truck Market: Key Truck Platforms – Global: 2013 and 2022

Note: All figures are rounded. The base year is 2011. Source: Frost & Sullivan analysis.

Note: Within the split Auman GTL, and MAN SITRAK platforms are accounted to both individual OEMs involved, but are counted only once for computing the total.

Observed no. of distinct plat-forms, 2013

Estimated no. of global platforms available, 2013

Observed no. of distinct plat-forms, 2022

Estimated no. of global platforms available, 2022

0

10

20

30

40

50

60

70

7 4 6 4

8

36

3

6

3

5

4

3

3

3

3

2

1

2

2

7

2

7

3

6

3

6

3

6

2

5

2

4

1

5

1

5

2

5

2

3

1

4

2

3

1

3

2

Beiqi Foton

Dongfeng Motor Corp.

CNHTC

Ashok Leyland

TATA Motors

Navistar Inc.

PACCAR Inc.

IVECO

Scania AB

MAN SE

Volvo Group

Daimler Group

58

24

55

30

Pri

ce

Attractive Segment by Region – 202222 to 27 Ton GVWR Segment to Emerge as Most Attractive Among Trucks Globally at Price Band of $45,000 to $75,000

5000 10000 15000 20000 25000 30000 35000$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

North Amer-ica

South Amer-ica

China

India

Russia

Europe

Next 11RoW

Global CV Vision 2020: Highest-selling Weight Segment in Each Region – Global: 2022

GVWR (kilogram)Size of the bubble: Sales units of top segments in each country in 2022. Note: All figures are rounded; the base year is 2013. Source: Frost & Sullivan analysis.

Fleet Operations Overview – North America

In 2022 Fleets Operating in NA Should Expect an Average Annual Cost of $183,000 or $1.9 Mer Mile, a 10 Percent Increase Over 2013’s Operating Cost

Global CV 2020 Vision: Fleet Cost Overview – North America: 2013 and 2022

2013 20220%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

33.0 29.0

28.0 31.0

9.0 11.0

10.0 12.04.0 3.0

11.0 9.03.0 3.02.0 2.0

Fuel

Driver Wages

Driver Benefits

Tractor / TrailerInsurance

MaintenancePermits / Toll

Tires

Global Powertrain Market Outlook: 2022

Global Medium & Heavy Truck Market Forecast 2013-2022

China and NA to show greater preference towards advanced powertrain systems; NG to emerge as fastest growing powertrain technology across regions

Segment: GVWR 6T and above

Global CV Vision 2020: Powertrain Mix, 2022

Global Medium-heavy truck sales to reach 4.6 million by 2022

World NA SA China India Russia Europe RoW

Diesel 86.7 73.2 91.3 84.4 92.85 91.25 87.05 92.9

NG 8.9 16.8 6.4 10.2 6.25 7.45 8.25 4.4

HEV 3 4 1.3 4.9 0.8 1 4.6 0.6

Gasoline 1.4 6 1 0.5 0.1 0.3 0.1 2.1

10%

30%

50%

70%

90%

2013 2022

~2.7 million

Un

its

~4.6 million

Advanced Diesel Engine Technologies – Weighted Average Preference Ranking

Heavy-duty Engine Market: Weighted Average Preference Ranking of Advanced Powertrain Technologies by Key OEMs, North America, 2014

• Downspeeding emerges as top preference across all OEMs.

• WHR is critical due to significant benefits the technology offers.

• All OEMs are expected to focus on after-treatment technologies, owing to regulatory mandates.

Note:1. Ranking is on a scale of 1 to 10, with 10 being most

preferred, and 1 being least preferred.2. Weighted average ranking used as representative of

industry. Individual OEM level rankings are detailed in respective OEM profiles.

7.97.8

8.4

7.6

8.2

7.9

8.1

7.5

In-cylinder Improvements

Downsizing

Downspeeding

Waste Heat Recovery

Turbochargers & RelatedBoosting Technologies

AdvancedAfter-treatment

Engine Prognostics

Hybridization

NA SA China India Russia West Europe Next 11 RoW

Global Natural Gas Truck Sales ForecastsGlobal Sales Expected to Reach 390,000 units by 2022; North America and China to Emerge as Leading Markets for NG Trucks

Global CV Vision 2020: Natural Gas Sales Forecast, Split by Region by Type, 2013 and 2022

Note: All figures are rounded; the base year is 2012. Source: Frost & Sullivan analysis.

2013 2022

38%

32%

6%

2%

10%

5%7%

22%

5%

41%

7%

5%

9%5%6%

2013 Regional Shares

2022 Regional Shares

Un

it S

hip

men

ts

~390,000

~35,100

CAGR: 36 %

Global Hybrid & Electric Truck Sales ForecastsGlobal Sales Expected to be Driven by Impetus from the NA, Europe and Chinese Markets. Japan Emerging as a Major Hub for Hybrid Components

Global CV Vision 2020: Hybrid and Electric Sales Forecast, Split by Region by Type, 2013 and 2022

Next 11 includes the following countries: Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Turkey, South Korea, Vietnam, and Bangladesh.Trucks with GVWR 6T and above included

North America

South America

China India Russia Europe RoW0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000Electric Hybrid

2013 2022

47% CAGR Growth

2022 Regional Shares

~4,100

6%

39%

17% 9% 10%14%86%

29%

94%

61%

83% 91%69%

90%

Un

its

66%

34%

~137,100

31%

71%

2014 U.S. HD Fleet Managers’ Voice:Powertrain Technology Summary

Warranty and residual value

Most influential factors in powertrain technology

purchase process

Semi / Fully automatic

transmissions Currently one of the most

prevalently used and important advanced

powertrain technology in fleets

23%Estimated

future growth rate

Convenience of servicing

Primary reason for selecting OEM

nameplate engines 4% vs. 2%Mean percent of

fleets that currently versus plan to have

diesel-electric hybrid trucks

< 4%Mean percent of

fleets that currently or plan to use CNG,

LNG, or DME

Global Engine Displacement and Power RecalibrationDominant Narrative in Diesel Technologies in Engine Downsizing in Developed Markets Contrasted Against Engine Upsizing in Developing Markets

Truck Engine Power Bandwidths, China, 2010 and 2020

HD Truck Diesel Engine Displacement Overview, North

America, 2011 & 2018

HD Truck Diesel Engine Displacement Overview, Western

Europe, 2012 & 2018

12

12.2

12.4

12.6

12.8

13

13.2

13.4

13.6

13.8

14

14.2

14.4

14.6

14.8

15

2011 201811

11.211.411.611.812

12.212.412.612.813

13.213.413.613.814

2012 2018

2010 2020

100

300

400

500

Power (kW)700

MDTLDT

200 kW

100 kW60k W

HDT

220 kW

400 kW 350 kW

HDT

600 kW

MDT300 kW

140 kW

(Medium-High Duty)

LDT 80 kW

200

600

Note: All figures are rounded. Source: Frost & Sullivan analysis.

~ 3% reduction

~ 3 % reduction

13.7 – 14.113.4 – 13.7 12.3 – 12.7

11.9 – 12.3

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Global Telematics Market Outlook 2022

New Fleet Management Systems Vendors Evolving – Expanding Value ChainGoing forward most value chain partners will consider offering proprietary FMS solutions; Consolidations (acquisition / partnership) will be likely outcome

Most of the value chain partners of the

trucking industry are eyeing this market

Tires

Internet Companies ex: Google

Truck OEMs ex: Freightliner, Volvo, PACCAR, International

Telematics Companies ex: TomTomWireless Companies ex:

Verizon, AT&T

Energy Companies ex: Shell, Exxon

Tier-I Companies ex: Cummins, WABCO, Pirelli,

Michelin, Continental After OEMs, it is Tier-1 Suppliers That Are Now

Focusing on This Segment. Cummins, Eaton, WABCO,

Michelin

Proliferation of Telematics is a Global Phenomenon:FMS Services by Region / Country

CV Telematics Market: Key FMS services by region, Global, 2014

Turkey• Digital Tachograph• Driver Management• Fuel Management

India• Vehicle Tracking, • Fuel Management • Safety of vehicles and

DriversLatin America

• Stolen Vehicle Recovery.• Fuel Management• Insurance Service

Russia• Emergency Services• Track and Trace• Two way messaging

Australia• Vehicle Tracking, • Driver Management• Order Management

China• Fuel Management• Driver Management

European Union• Track and Trace• Driver Behavior• Vehicle Management• Fuel Management• Regulatory Mandated Services

South Africa• Track and Trace• Stolen Vehicle Recovery• Driver Management

Middle East• Track and Trace• Trailer Temperature

Monitoring

North America• EOBR• Prognostics / Preventive

maintenance• Driver Management• Fuel Management

Commercial Vehicle Prognostics – StakeholdersPredictive maintenance and predictive analytics will increasingly encompass various vehicle systems and industry participant groups

Prognostics Market: Prognostics Stakeholders, North America and Europe, 2012–2020

Note: Warehouse distributors (WDS); Independent Retail Channels(IRCs). Source: Frost & Sullivan

OEMs

Tier I Suppliers

Aftermarket Vendors Independent Service Stations

Fleet Manager

Fleet Maintenance Software

Analytics Companies

Dealerships

True Value of Prognostics Will Only Be Realized When Most Vehicular Systems are Encompassed by Using Electronic Interfaces

FuelFuel leakageFuel qualityFuel injectorsFuel level

Catalytic ConverterEmissions

Tires Out of balance tiresLow tire pressureTire wear

Transmission Transmission Issues

Coolant Cooling system failure Coolant pump failureCoolant hose failureCoolant level

Air filterDirty air filterEmissions

Alternator Alternator problemsAlternator deteriorationStarter failure

EngineEngine IssuesEmissions

Ignition Ignition Issues

BrakesBrake problemsBrake pressureHard braking

OilOil change neededOil levelOil temperature

Prognostics Installed Base Estimates – NA & EUBy 2017 Over 1 Million Commercial Vehicles in North America and Western Europe to Subscribe to Prognostics Applications

2012 2013 2014 2015 2016 2017 2018 2019 2020

NORTH AMERICA

102730.5 156093.75 230158.5 323176.5 449550 597013.5 783549 991008 1205293.5

EU-ROPE

79999.84 113791.772416

165485.74902784

252944.967389053

361205.413431568

491239.362266933

680419.187562647

859384.34272194

1064832.86908797

100,000

500,000

900,000

1,300,000

Prognostics Market: Prognostics installed base estimates, North America and Europe, 2012-2020

Evolution of prognostics technology, moderately mature business models and demand from end users to increase vehicles uptime will

push prognostics demand faster beyond 2017

Purchase Intentions of Telematics Technologies – North AmericaAll surveyed fleet managers have some level of interest in critical event / safety system intervention alert and remote diagnostics and prognostics technologies.

Prognostics Market: End-user Survey, North America, 2012–2020

Q16: Which of the following best describes the consideration your fleet would give toward the following telematics technologies?# Sample size does not support actionable analysis.

Telematics Technology

Level of Purchase Intention

Active (Considering)

Passive (Might Consider)

No Interest

Critical event / safety system intervention alert (N=30#) 37% 63% -

Navigation-aided regulation compliance (N=36#) 36% 56% 8%

Real-time traffic / dynamic navigation (N=46#) 33% 58% 9%

Accident reconstruction analysis data (N=45#) 29% 62% 9%

Remote diagnostics and prognostics (N=44#) 23% 77% -

Back-office automation-dispatching (N=28#) 21% 75% 4%

Geofencing (N=38#) 21% 66% 13%

Stolen vehicle tracking (N=56) 20% 64% 16%

Voice communication (N=33#) 18% 64% 18%

2014 U.S. HD Fleet Managers’ Voice:Telematics Technology Summary

Improved regulatory

compliance Most influential factor

in telematics technology purchase

process

Driver performance monitoring Currently the most

prevalently used and most important

telematics technology in fleets

4%Estimated

future growth rate

55%Percent interested in integrating remote/ prognostic data with

maintenance management system and parts inventories

52%Percent of fleet

managers consider engine

related prognostic data most valuable

29%Estimated

future growth rate for

prognostics

Future of Connectivity in Urban LogisticsMobile Resource Management Focused Decision Making Poised to Become More Proactive than Reactive; Efficiency Gains in the Scale of 1990’s Coming Soon

Reactive Proactive

2010

2015

2020

2025

Telematics

Intelligent Transport Systems

Social Media Integration

Sensors & Terrain / Weather Mapping

Traffic Predicting Software

Connectivity and Urban Logistics: Evolution of Technology Platforms, Global, 2010 – 2025

Big Data Catalysis

• Bigger and better data will enable logistics industry participants gain both panoramic and granular views of their business processes

• One Simple Application- Shipping companies can improve on-time performance by leveraging shipping port availability, weather, traffic, and prognostics data

• Proactive decision making derived from power of big data can catalyse better decisions, precise interventions, and accurate predictions enabling bottom-line growth

Global Safety Market Outlook 2020

Truck SafetyToo Many Technologies Chasing Too Few Consumer Dollars- Integrated Systems on the Rise

Global MCV-HCV Market: Overview of Trucks Safety Technologies, 2012 – 2020

Driver Information & Warning Systems Active Chassis Control Systems Integrated Safety SystemsLegend

Lane Departure Warning System

Blind Spot Detection System

Anti-lock Braking System

Electronic Braking System

Forward Collision Warning System

Adaptive Cruise Control System

Tire Pressure Monitoring System

Driver Drowsiness Warning System

Electronic Stability Control System

Roll Stability Control System

Integrated Safety Systems

Telematics Based Safety Applications

Growth Opportunities in Safety Systems Market (2010-2022)

TPMS, Stability Control Systems, and ABS to Experience Highest Traction in Global Markets; Integrated Safety Systems and Telematics Based Systems to Experience Rising penetration in North America and Europe

TRIAD = North America, EU, Japan BRIC = Brazil, Russia, India, China Next 11 countries

Moderate Noticeable HighRegional / Global Penetration:

Global CV Vision 2020: Safety Systems Adoption Potential Snapshot (Global), 2010-2022

Anti-lock braking systemsElectronic stability control systems

Roll-over stability control systemsAdaptive cruise control systems

Electronic braking systems

Integrated safety systems

Telematics based safety applications

DIWS

ACCS

ISS

TBSA

Tire pressure monitoring systems TRIAD, BRIC, Next 11

Lane departure warning systems TRIAD, Next 11

Forward collision warning systems TRIADBlind spot detection systems TRIAD, BRIC, Next 11

Driver drowsiness warning systems TRIADGlobal

GlobalTRIAD

TRIADTRIAD, BRIC (select)

TRIAD

TRIAD, BRIC, Next 11

2014 U.S. HD Fleet Managers’ Voice:Advanced Safety Technology Summary Improved Safe

Driving Practices

Most influential factors in advanced safety

technology purchase process

Tire Related Safety Systems

Gaining significant increase in fleet

manager interest

Stability Control

Systems Most important

advanced safety technology in fleets

19%Estimated

future growth rate for RSC

12%Estimated

future growth rate for ESC

32%Fleet managers expect to use

trailer tire inflation systems in 2015

Common Multiplexed Architecture Across OEMs:Foundations for Developing Smart Trucks

Global CV Vision 2020: Common Multiplexed Architecture, NA-EU, 2014-2022Need for Robust, Effective and Efficient Electronics, Communication and Networking Architecture

Enables seamless communication between vehicle and devices

Single standardized platform will streamline product development for OEMs and Teir1 suppliers

Since, necessary infrastructure is available, new devices addition will not require discrete system integration and customizationOBD – On-Board Diagnostics; HVAC – Heating Ventilating and Air-Conditioning

Development of architecture in compliance with SAE standards.

J1939, J1708, CAN, LIN etc - vehicle bus protocol used for communication and diagnostics among vehicle components

Infotainment

Regulation Compliance

OBD

HMI – Driver Comfort & Convenience Controls

Handheld / Personal Device Connectivity

Telematics Connectivity

Safety System Integration

HVAC

Powertrain Control

Chassis Control

MULTIPLEXEDARCHITECTURE

IEC 60068,ISO 16750

Vision 2022Profit from Volume and Margins

andTruck of the Future

Volume Growth from Developing Markets, Margin Growth from Advanced Technologies:Product Focus on HD Trucks and City Trucks

Volume Growth

BRIC

Next 11

Africa

North America

APAC

Eurasia

LatAm

Margin Growth

Advanced Powertrain

Telematics

Safety

Health, Wellness, Wellbeing

Platforms

Autonomous Driving

Vision 2022:What Will be the Traits of Truck of The Future?

Green

Safe

Connected

Smart

Key Contacts

Sandeep KarGlobal Director- Automotive & Transportation ResearchDirect: 416.490.7796Fax: 416.490.1533Email: sandeep.kar@frost.com