The demand for medium & heavy Trucks registered strong growth across EU & the U.S. markets in 2015 with robust freight activity, increasing fleet utilization and growing profitability for fleet operators with continued plummeting of crude oil prices. The U.S. Economy continues to prove itself as the stable cornerstone of the global economy with steady economic growth momentum followed by Europe which, too, continues to make slow economic recovery amid deflationary risks.
The economic growth in China has slowed down to the lowest rate in over 25 years accompanied by continued financial markets volatility as the country strives to transition to a more consumption driven economy with limited reliance on manufacturing & heavy industries which has impacted the industry significantly.
Brazil & Russian economies, on the contrary, have been impacted severely by the energy sector downturn and are in recession, in addition, to the ongoing political crisis in Brazil with pressures likely to prevail across these economies over near term.
Additionally, the ongoing mining slump with continued weakness in global commodity prices has impacted a number of other emerging markets as well. The OECD & IMF have already issued stress signals and have cut their global economic growth forecasts for 2016 to 3.4% and the IMF has termed the global economy as being highly vulnerable to adverse shocks in its latest outlook with market turbulence, oil price crash, weak commodity prices & continued geo-political conflict as key threats & risk factors to global economic growth.
The industry fundamentals, however, remain strong & robust driven by long term, sustainable growth drivers given the key role played by the transportation industry towards economic growth & development globally and significant investments likely to be made by emerging nations towards infrastructure development over medium term to support economic growth and with rapid urbanization trend.
Amongst traditional markets, the U.S. market is likely to spearhead market direction going forward & will hold the key to shaping the near to medium term global market outlook. Additionally, massive investments are going to be required in the U.S. towards infrastructure rebuilding & repair over medium term.
The demand for medium & heavy Trucks registered strong growth across EU & the U.S. markets in 2015 with robust freight activity, increasing fleet utilization and growing profitability for fleet operators with continued plummeting of crude oil prices.
The advent of a long term transportation bill, after over a decade, with the passing of the FAST Act in December 2015 provides over $300 billion in federal funding towards transportation projects in the U.S. through 2020 which is likely to give a significant boost to the industry in the U.S. Additionally, Fed’s monetary policy stance in 2016 & the outcome of the U.S. presidential elections will be significant for the industry over near term.
In Europe, the economy entered deflation in February with lower crude oil prices and witnessed slowing down of manufacturing activity amid fears of sluggish growth in 2016 which is likely to lead to quantitative easing by the ECB over near term.
China’s growth forecast for 2016 has been set at the lower 6.5%-7% range along with Moody’s downgrading the outlook for China from stable to negative. The country has already been focusing on rolling out measures to boost economic growth. The effectiveness of stimulus measures & overall policy focus in China over near term, thus, are likely to be decisive over near term.
The significant, expected growth in sales volumes for medium & heavy trucks across emerging markets over medium term and the rapidly expanding pace of technology evolution & integration across product platforms, manufacturing processes & industrial footprint are amongst key trends which are likely to drive growth & spearhead development of next generation products & technologies, in addition, to disruptive business & service models and concepts over the next decade.
The current low crude oil price environment is likely to be sustained over near term and is likely to boost fleet utilization and profitability for fleet operators across traditional markets besides driving maintenance activity and aftermarket sales for industry OEMs. Additionally, OEMs have been focusing significantly on expanding their technology driven services portfolio aimed at boosting fleet operating efficiency & productivity for operators which is likely to witness further growth over medium term.
The OEMs also continue to invest significantly towards new products & technologies development and modernization of their manufacturing footprint through integration of cutting edge ICT technologies while significantly enhancing focus on customer support by taking a long-term view of the market.