concise summary 2014 united states fleet managers voice of customer research

2014 United States Fleet Managers Desirability

and Willingness to Pay for Advanced Truck

Technologies

Market Pull for Fuel-Efficient, Safe, and Smart Trucks Rising Steadily

May, 2013

Concise Summary

2

Source: Frost & Sullivan

Contents

Section Slide No.

Objectives and Methodology and Respondent Profile 5

Executive Summary 18

US HD Fleet Managers 2014- Top of Mind Issues

Voice of Customer Research Insights

Key Implications

Analysis of Powertrain Technologies 25

Powertrain Technologies Summary 26

Engine Technologies 31

Transmission Technologies 42

Hybrid Truck/Alternative Fuel Technologies 46

Natural Gas Fuel Options Summary 51

Lubricants Overview 59

Key Insights-Powertrain Technologies 64

Analysis of Advanced Safety Technologies 65

Brake Systems Summary 66

3


Contents

Section Slide No.

Advanced Safety Technology Summary 72

Active Chassis Control Options Summary 81

Other Advanced Safety Technology Components 87

Key Insights-Advanced Safety Technologies 95

Analysis of Telematics Technologies 96

Telematics Technology Summary 97

Prognostics Technology Summary 103

Other Telematics Technology Components 110

Key Insights- Telematics Technologies 121

Regulatory Compliance Technologies 122

CSA Rating Compliance 123

Stopping Distance Regulations 124

Anti-idling Regulations 126

Key Insights- Regulation Compliance Technologies 127

4


Contents

Section Slide No.

Brand Perceptions 128

Overall Best Engine Supplier 129

Overall Best Advanced Safety System Suppliers 130

Overall Best Advanced Telematics Supplier 131

Appendices 132

Powertrain Technologies (Influential Factors, Relative Importance of Options, Price

Sensitivity Analysis, etc.) 133

Advanced Safety Technologies (Influential Factors, Relative Importance of Options, Price


Telematics Technologies (Influential Factors, Relative Importance of Options, Price


The Frost & Sullivan Story 184

5

Objectives and Methodology

6


Objectives

The following are the objectives of this research:

• Understand the importance of advanced truck technologies (i.e., powertrain,

safety, and telematics) features in the overall purchase decision process

• Assess which powertrain, safety, and telematics advance technologies are

currently being utilized and are planning to be utilized in 2015

• Ascertain which advanced truck technologiesare most preferred by fleet

managers

• Measure the desirability and willingness to pay for advanced truck

technologies

• Determine the impact that regulatory compliance has on fleet managers’

decisions

• Evaluate fleet managers’ perceptions of advanced truck technology brands

7


Methodology

Methodology

A telephone interview survey methodology was utilized. Data collection was

during in March and April 2014.

Sample

In total, 101 United States (U.S.) heavy duty fleet managers were

surveyed.Specifically, we targeted heavy duty fleet managerswho:

• Are part of the vehicle (for heavy duty trucks) purchase making process

• Are expecting to purchase additional vehicles for their fleet within the next two

years

• Have at least class 6, 7, and 8 vehicles in their fleet

Reporting Note

Due to rounding, percentages in charts and tables may not sum to 100.

8


Current Title of Respondent

53%

13%

33%

1%

Current Title of Respondent

Fleet manager

Safety manager with influence onthe purchase decision process of

vehicles for use in your fleet

Maintenance or service manager

General Manager

Q1. Which of the following best describes your current title?

The largest proportion of surveyed respondents are fleet managers (53%).

Base: All respondents (n=101).

9


Prevalence of Private Versus For Hire Fleets

41%

59% 55%

45%

24%

76%

33%

67%

Private For hire

Prevalence of Private Versus For Hire Fleets

Total sample Small Medium Large

Approximately six out of ten surveyed fleets are for hire (59%).

Q6. Is your fleet primarily…?


10


Prevalence of Vehicle Classes within Fleets

9% 4%

12%

75%

14%

6% 11%

69%

7% 4% 6%

83%

5% 3%

15%

77%

Class 1 to 3 vehicles Class 4 to 5 vehicles Class 6 to 7 vehicles Class 8 vehicles

Prevalence of Vehicle Classes within Fleets (Mean Percent)


Q4. What percentage of the following classes of vehicles do you currently have in use in your fleet? - Mean scores

Given the criteria to focus on fleet managers within heavy duty truck fleets, a greater proportion of fleets

are composed of class 8 vehicles.


11


Prevalence of Straight Versus Tractor Trucks within

Fleets

20%

77%

3%

27%

71%

2% 8%

92%

0%

19%

77%

4%

Straight trucks Tractor trucks Other

Prevalence of Straight Versus Tractor Trucks within Fleets (Mean Percent)


Q47. What percentage of trucks in your fleet are…? - Mean scores


Overall, tractor trucks are most prevalent in fleets.

12


Prevalence of Trailer Types within Fleets

46%

13% 10%

6%

14% 8%

3%

40%

21% 14%

7% 9% 9%

0%

53%

7% 13%

8% 10% 8%

0%

48%

8% 5% 4%

20%

7% 8%

Dry

va

ntr

aile

rs

Tanker

traile

rs

Fla

tbe

dtr

aile

rs

Utilit

ytr

aile

rs

Re

frig

era

ted

tra

ilers

Sp

ecia

lty

tra

ilers

Oth

er

Prevalence of Trailer Types within Fleets (Mean Percent)


Q48. What percentage of trailers in your fleet are…? - Mean scores


Overall, dry van trailiers are most prevalent in fleets.

13


Prevalence of Vocational Versus On-highway within

Fleets

30%

70%

33%

67%

21%

79%

29%

71%

Vocational On-highway

Prevalence of Vocational Versus On-highway within Fleets (Mean Percent)


Q7a. What percentage of your fleet is…? - Mean scores

Q7b. For those trucks in your fleet that are on-highway, what percent are: - Mean scores


24%

35%

27%

Short/local haul

Long haul

Regional haul

Routes of On-highway Use (Mean Percent)

14


Years of Experience in Role

14 14

11

15

Total sample Fleet manager Safety manager Maintenance manager

Years of Experience in Role (Mean)

Q53. How long have you been a (RESPONSE Q1)?


15

Executive Summary

16


US HD Fleet Managers: Top of Mind Issues in 2013-2014

0

1

2

3

4

5

1.RegulationCompliance

2.Total Cost ofOwnership

3.Driver andTecnician Shortage/

Retention

4.DecliningEquipmentUtilization

5. Fuel PriceVolatility

6. Freight Rate(Spot Rate)Fluctuations

7. EconomicOutlook and Margin

Concerns

• Regulation compliance (CSA, braking

distance, anti-idling, EPS 2010,

upcoming GHG regulations, etc.) is top

of mind for fleet managers in North

America. This is driving fleet managers’

purchase decisions toward advanced

truck technologies, especially in case

of safety, telematics, and powertrain

technologies.

• Equipment utilization is impacted by

shorter hauls, CSA, availability of

drivers, hours of service, and traffic

congestion which all effect operating

cost. Average utilization is down over

15% for the last 5 years.

• Equipment purchase cost and lifecycle

cost, which is related to other factors

such as fuel price volatility, driver

shortage, technician shortage, among

others, are highly rated high top of

mind issues by fleet managers,

indicating the rising importance of

TCO in choosing trucks and advanced

truck technologies.

Note: Factors 1-7 are most highly rated top-of-mind issues reported by managers of 10 largest

for-hire and private fleets derived from a separate survey.

Score legend: 5- Highest importance t; 3- Moderate Importance; 1- Low Importance to fleet

managers

North American HD Fleet Manager: Top-of-mind

Issues Impacting Business Decisions, 2013-2014

17


Voice of Customer Research Insights: 2014 US HD Fleet

Managers • This survey, now in its fifth year, reveals a dominant narrative dictating advanced technology

preferences and associated willingness to pay: Fleet managers are willing to invest in technologies that can enable operating cost saving, even if this implies paying a premium for acquiring such technologies.

• Another key trend gaining momentum is need for access to data and data analysis which will enable fleet managers to make smart, mission critical decisions aimed at reducing operating cost and increasing fleet productivity, safety, and regulation compliance.

• Fleet managers, safety managers, and maintenance managers are found to show varying degrees of preference for advanced technologies. Fleet managers’ decisions were found to be guided by a more diverse set of needs such as need to reduce operating cost, and also solve current operating challenges such as regulation compliance, downtime reduction and driver turnover; while safety and maintenance managers’ decisions are attributed to fewer priorities such as service and maintenance effort and cost reduction, regulation compliance, and mobile resource safety.

• While it may be observed that private fleets are more likely to adopt new and advanced truck technologies, analysis of fleet manager responses indicate that for-hire fleets attach more importance to advanced powertrain, safety, and telematics technologies. Rising equipment cost and operating expenses, a factor that impacts for-hire fleets more severely than private fleets could be a reason behind lower probability of adopting advanced truck technologies despite considering these more important for their operations.

• With average Class 8 truck age touching 9 years, fleet managers are choosing technologies that can prevent escalation in lifecycle cost such as advanced lubricants, natural gas engines, tire pressure related systems, prognostics, smaller sized engines. Driver shortage issues are catalyzing adoption of AMTs, telematics, collision mitigation systems, and anti-idling technologies among others.

• Freightliner was found to be the most prevalent nameplate among surveyed fleets. Cummins, Bendix, and Qualcomm/Omnitracs were rated highly as suppliers of advanced truck technologies.

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Managers (Continued) • This year’s survey showed rising preference for 12-13L engines among fleet managers, especially

representing small-medium sized for-hire fleets. While the majority of fleet managers report spec’ing trucks with both OEM nameplate and independent supplier engines, 34% report spec’ing trucks with only OEM nameplate engines.

• Among advanced powertrain technologies, natural gas powertrain technologies and semi/fully automated transmissions, and advanced low-viscosity lubricants are experiencing rising fleet manager interest and preference. 12-14L engines are rated as most desirable, if made available and if fuel savings of at least a dollar per diesel gallon equivalent can be attained for applicable vocation(s). OEMs’ AMT nameplate strategy seems to be paying off with majority of fleet managers reporting likelihood of considering OEM nameplate and independent supplier transmissions equally.

• The strong brand resonance of independent suppliers such as Cummins, Eaton, and Allison backed by advanced powertrain products, solutions, and services have ensured fleet managers’ continued interest and preference for their products, despite OEM nameplate engines and transmissions gaining increasing traction.

• Among advanced safety technologies chassis control systems such as ESC, RSC, collision mitigation systems, and tire related technologies such as trailer tire inflation systems and TPMS are showing highest growth potential. Among driver information and warning systems, lane departure warning systems receive the highest ratings. Automatic collision mitigation systems and tire related safety technologies are expected to be experience rapid proliferation in new and existing trucks in the next 2 to 5 years. Among fundamental safety systems, both larger drum brakes and air disc brakes are expected to dominate the market, with air disc brake proliferation growing at a faster rate while still remaining a much smaller segment of the brakes systems market.

• CSA 2010 is currently the most important regulation for fleet managers influencing both safety and telematics technology adoption. Medium-large for-hire fleets are most interested in leveraging data from safety systems in improving CSA fleet scores, while medium-sized fleets show highest interest in safety system hardware for CSA compliance.

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Managers (Continued) • Telematics/connectivity is now perceived as one of the most important advanced technology areas for

improving overall fleet productivity and efficiency by fleet managers. TCO reduction, regulation compliance, prediction of impending truck system failure, and mobile resource safety and security are the primary drivers of telematics adoption. Prognostics is one of the fastest growing telematics service/application among fleets. This year’s survey indicates a 29 percent growth in prognostics adoption among surveyed fleets.

• Engine related prognostics is the most vital prognostics data. Roughly half (55%) of surveyed fleet managers report interest in integrating prognostics data to their fleet’s maintenance systems and parts inventory management systems.

• Analysis of telematics pricing models and offerings reveals an urgent need for recalibration of telematics packages. New packages featuring most important applications/services desired by fleets and priced at optimal price points will likely increase fleet manager adoption but also stoke large scale adoption by small-medium sized fleets. $19.40 was found to be the mean fee truck fleet managers are willing to pay per truck, per month for telematics services. This is lower than current industry mean of $26.90/month. The challenge for telematics service providers will be to package and offer important applications such as track and trace, prognostics, dynamic navigation, stolen vehicle tracking, and critical event/safety system intervention alert among others more strategically and within the affordability boundaries of largest section of fleet managers.

• Voice of customer research insights from this survey indicates the need for technologies and services that can help reduce fleets’ operating costs, while increasing mobile resource productivity and efficiencies. This coupled with fleet ownership (private vs for-hire), fleet size (small, medium, and large), and manager title ( fleet manager, safety manager, and maintenance manager), and pricing analysis provided in this study reveal rising cognizance and familiarity towards new and emerging advanced powertrain, chassis, safety, and regulation compliance technologies. This underlines the fact that fleet managers are making informed decisions and choosing technologies that not only can benefit their fleets’ operations but also induce improvements in trucking’s productivity, safety, and efficiency.

20


Key Implications

Fleet

Manager

Research

Implications

• In most cases technologies are priced within fleets’ affordability limits, however in some cases such as prognostics and telematics fleet managers are demanding further price reduction for mass adoption.

Price

Sensitivity

Diesel

Powertrain

Regulation

Compliance

Safety

• There is a clear indication of rising interest in smaller displacement engines especially among small-medium sized for-hire fleets. However, 15L engines will continue to dominate the market in the short-medium term and beyond.

• CSA is the most important regulation for fleet managers, influencing their safety and telematics technology purchase decisions

Telematics

Alternative

Powertrain

Implications from Voice of Customer (HD Fleet Managers) Research Findings, US, 2014

• OEMs and tier-1 suppliers must focus on systems and technologies that can help in reducing operating costs, and offer multi-dimensional benefits.

• Automatic collision mitigation systems, larger drum brakes and disc brakes, critical event alerts, stability control systems, and driver and vehicle performance monitoring systems are expected to experience rising proliferation over 2014-2015 period.

• Sales and marketing efforts on the part of tier-1s should center around delivering better warranty and service support, system durability

and reliability, data access for downstream analysis and training, highlighting safety systems’ multi-dimensional benefits, and CSA compliance support, all packaged with better warranty and maintenance support.

• OEM nameplate engines and transmissions are gaining rising traction among fleet managers. Both OEMs and independent suppliers must take note of this trend and strategize accordingly.

• 10 to 12L and higher displacement natural gas engines are expected to gain adoption among private and for-hire fleets. Fleet managers seek fuel cost savings of $1/DGE or more for switching to natural gas.

• While hybrid powertrain adoption is declining, we are advising market participants in staying vested based on long term application potential of this technology.

Value proposition and preference for telematics is rising among fleet managers. However, the applications that are receiving highest interest are centered more around vehicle and driver performance monitoring and downtime reduction. This is necessitating urgent focus on repackaging and re-pricing of telematics application bundles as prices are reported higher than optimal by fleet managers

21


2

AMTs, natural gas powertrain, collision mitigation systems, air

disc brakes, prognostics, real-time dynamic navigation, and tire

pressure related technologies are on the fast track for fleet

adoption growth.

3

4

5 Multiplexed-electronic architectures have become fundamental for OEMs, and electronic interfaces for trucks systems for tier-1s to benefit from brewing technology trends.

1 OEM nameplate systems are gaining traction among fleet managers. TCO reduction, warranty, and data analytics support need to be used by OEMs in further catalyzing this trend.

Medium-sized for-hire fleets are most interested in advanced

truck technologies and also require the most support and

guidance. This customer group requires special attention, but can

yield rich dividends.

Technologies that can offer multi-dimension benefits ( e.g. TPMS

reducing fuel costs in addition to safety, advanced lubricants

reducing fuel costs, extending maintenance interval, prognostics

for downtime reduction, peak performance of trucks, etc.) are

gaining the fastest traction among fleet managers.

2014 U.S. Fleet Manager Study- Executive Summary:

CEO Perspective

22

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23


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concise summary 2014 united states fleet managers voice of customer research

Business

larger drum

collision

air disc brakes

price sensitivity

customer research

oem nameplate

advanced truck

mobile resource