Mitsubishi Fuso and UD Trucks announce mid-term strategies

Mitsubishi Fuso aims for overseas sales of 200K units; UD Trucks enhances the low-to-mid-range segme

2012/12/17

Summary

 This report will outline the business strategies of Mitsubishi Fuso Truck and Bus Corporation (MFTBC) and UD Trucks Corporation. MFTBC is an integral part of Daimler trucks division, playing a key role as Daimler's Asia pillar in developing light-duty trucks and hybrid trucks. MFTBC's growth strategy to 2015, "Fuso 2015", contains a global launch of hybrid trucks including the Canter Eco Hybrid, and a target to increase its international sales volume from 120K in 2011 to 200K annually. MFTBC has been working together with its parent company, Daimler, in areas of development, procurement and production.
 UD Trucks Corporation belongs to the Volvo Group's truck operations for Asia-Pacific region. In the group's mid-term plan to 2015, UD Trucks brand products are set to be launched in the low-to-mid-range segment where the group is not selling its trucks.


Related report:
Isuzu and Hino shift core functions to Thailand and Indonesia
(Oct. 25, 2012)

MFTBC's Canter Eco Hybrid
MFTBC's Canter Eco Hybrid exhibited
at the 2011 Tokyo Motor Show


MFTBC mid-term plan includes global launch of hybrid trucks, with a target of achieving international sales volume of over 200K units

MFTBC mid-term business strategy: FUSO 2015 (as of October 2011)

Leader in Green Innovation * CO2 emissions cuts by 7.5%.
* Improving hybrid truck performance, enhancing global launch of hybrid trucks. (note)
Customer Number One in Japan * Improving customer satisfaction through focus on product satisfaction, trust-based sales and dependable service.
Profitable Global Player Increasing international sales volume to over 200K units. (from approx. 120K units in 2011)
* Entering new markets and segments. (export expansion of heavy-duty trucks, launching sales of mid- and heavy-duty trucks in Indonesia)
* Expanding overseas procurement and production including Tramagal plant in Portugal
* Utilizing local production facilities (Daimler India Commercial Vehicles in Chennai, India).
Efficiency Leader Net cost reduction by 2%
* Implementing Daimler standard programs for administrative tasks and production management.
* Enhancing Daimler Truck Operating System for efficient production and procurement.
Employer Number One Enhancing workforce diversity and providing opportunities for improving skills and careers.

(Note) Hybrid trucks are being launched primarily in the Japanese and European markets, and its launch in the US market has not been planned for now. (Reported in November 2012)

Green technology innovation: global launch of hybrid trucks

All-New Canter Eco Hybrid The second generation of the small hybrid truck. It comes with the world's first hybrid system combining dual clutch transmission and hybrid motor, offering a fuel efficiency of 12.8km/liter (heavy vehicle mode: 2-ton class). It debuted in Japan in May 2012 and in Europe in the third quarter of 2012.
Super Great Eco Hybrid A concept of the hybrid heavy-duty truck was unveiled at the 2011 Tokyo Motor Show. It comes with the newly developed motor and lithium-ion battery with a 12-speed automated manual transmission. It demonstrates a 10% fuel efficiency improvement over conventional diesel-only powered vehicles on highways. As of November 2012, MFTBC has made its prototype vehicles and now working on reducing its drive system costs.
Canter E-cell The Canter E-cell, an electric light-duty truck based on the previous model of the Canter was exhibited for the first time at the IAA Hanover Commercial Vehicle Show in 2010. Its lithium-ion battery (40 kWh) and electric motor (maximum output of 70 kW, maximum torque of 300 Nm) allow a cruising range of 120 km when charged with AC power unit (200V) for 10 hours. Road tests are conducted mainly in Europe.
MFTBC is now developing the next-generation Canter E-cell based on the new Canter, and is scheduled to supply one vehicle to Central Nippon Expressway Company (NEXCO) in Japan as a self-propelled highway vehicle with an electronic message board in the summer of 2013. NEXCO and MFTBC will jointly research EVs for maintaining highways (announced in November 2012). The EV model will feature a non-contact charger system and its details, including a cruising range and specifications, will be announced at the time of delivery.
FUSO-Concept II A concept model for a heavy-duty truck eyed to be on the market in 2032 was unveiled in April 2012. The truck is covered with one panel and loaded with features including a grill shutter for improving aerodynamics. The model employs diesel and solar panel-generated hybrid technology, and incorporates automated vehicle formation driving mode.
Technology for better fuel efficiency The concept model was made featuring a drag foiler (wind deflector) and side spoilers for optimizing aerodynamics, adopting alternator power generation control and solar battery power generation. It achieves a 10% better fuel efficiency compared to conventional models.

KD production of the Canter Eco Hybrid in Portugal

MFTBC began KD production of all-new Canter Eco hybrid at Tramagal plant in Portugal in September 2012. The plant provides an annual production capacity of several hundred units of the hybrid trucks. The facility has been producing the Canter, and on a single shift, it has annual capacity of 15K units. The Portugal factory plans to produce about 5,000 units in 2012 and 6,400 units in 2013.

(Note) Tramagal plant has been promoting the productivity improvement initiative since the fall of 2011, targeting a 5% increase in productivity every year by 2015, in order to improve efficiency in production and logistics lines and curb investment. The plant will not cut down on employees for now but will freeze new hires.

Improving efficiency: 10% reduction in procurement cost and supply chain review

Parts procurement cost a 10% cost reduction by 2015.
Supply chain Reviewing suppliers based on performance and competiveness for an optimized supply chain.
* Review criteria: performance in costs, technology, quality and delivery (deadline), financial stability, future products and market bases and preparation status of future product lineup for MFTBC.
* Support measures: MFTBC will support its suppliers in designing and engineering in production processes to reduce its procurement cost. Also, it will assist Japanese suppliers in dealing with other Daimler brands, and expanding their global operations.

 

 



MFTBC sharing development resources with Daimler Group

Hybrid trucks Global Hybrid Center (GHC) at MFTBC facilities in Kawasaki and Kitsuregawa in Japan serve as worldwide hubs for hybrid development for Daimler Commercial Vehicles Division. They develop hybrid system modules common to all Daimler truck and buses.
MFTBC is planning to standardize the GHC-developed hybrid system to be applied to heavy-duty trucks of over 18 tons (GVW) and large buses for Mercedes-Benz Trucks and Freightliner brands. MFTBC also intends to introduce the hybrid technology to the 40-ton trucks.
Parts supply MFTBC will supply chassis parts for the Mercedes-Benz brand trucks starting in 2014. The components will be made at Kawasaki plants and supplied to factories in Germany. The products will be also supplied to the Freightliner brand in North America to improve production efficiency through consolidating production.
Engine development MFTBC will develop its next generation engines for a medium-duty truck that will debut in 2015 or later with Daimler's European and North American business division. (Reported in April 2012). Its development costs are increasing to deal with tighter environmental regulations in each nation. The expenses will be shared across the Daimler Group to enhance cost competitiveness. The 6R10 engine for heavy-duty trucks developed by the Daimler Group has been used in the MFTBC Super Great since 2010.
Procurement MFTBC will procure its components globally with Daimler's purchasing divisions in China and South Korea. About half of the Canter components come from overseas suppliers in terms of value (as of 2012).
India Daimler India Commercial Vehicles Pvt. Ltd (DICV) began production of a medium-duty truck under the BharatBenz brand at its Oragadam plant in October 2012. The plant's initial production capacity is 36K units per year and will be ramped up to 70K. DICV intends to increase its local content ratio to 85%.
Three models produced at DICV include 9-ton and 12-ton (GVW) trucks, and a 12-ton damp truck. These trucks are based on MFTBC's Canter light-duty truck cabin and MFTBC's Fighter medium-duty truck chassis. MFTBC supported DICV in designing and localization of their engine/transmission in addition to production engineering, and has plans to introduce the models under the MFTBC brand.

Reciprocal supply of light-duty trucks with Nissan

MFTBC and Nissan Motor concluded a contract for a light-duty truck reciprocal supply, starting January 2013 (announced in November 2012). MFTBC will provide the Canter (payloads: 2.0 to 4.0 tons) including hybrid models under the model name NT450 Atlas to Nissan, while Nissan will supply the Atlas F24 (payloads: 1.15 to 1.5 tons) as the Canter Guts to MFTBC. This is a part of the strategic partnership between MFTBC's parent company Daimler AG and Renault-Nissan Alliance.

 

 



MFTBC expects the 2012 global sales to reach 180K units

During the period from January to September 2012, global sales (including those in international markets and Japan) increased by 41.3% y/y to 136K units, while sales in Japan were 27K, up 52.7% y/y supported by the Japanese government subsidies and the demand generated from recovery efforts after the Great Earthquake in Japan. Sales in international markets outside Japan were 109K units, an increase of 38.8% y/y. Sales were particularly good in Indonesia, the Middle East and Africa. Global sales for the full year 2012 are expected to exceed 180K units. MFTBC's unit sales

New vehicles sales at MFTBC

(1,000 units)
2005 2006 2007 2008 2009 2010 2011 2012
Outlook
 Jan. to Sep.
2012
(y/y)
Japanese market 59 71 54 42 23 25 27 36 27 52.7%
International market 120 117 135 157 77 117 121 148 109 38.3%
Global sales 179 189 189 199 100 141 148 184 136 41.3%
Source: MFTBC Press Release (October 29, 2012), Daimler Annual Report, Daimler Trucks Division Day (June 28, 2012)
(Note) 1. The 2012 outlook is estimated by Marklines Co., Ltd. based on Daimler's documents (June 2012).
2. MFTBC expects its production volume in 2013 to be the same or higher compared to the 2012 figure (as of September 2012).

 

 



UD Trucks' mid-term strategy: 10% cost reduction and the low-to-mid-range segment development

 

UD Trucks' parent company, Volvo, announced in September 2012 its mid-term strategy through 2015 for its trucks division. The strategy includes productivity enhancement, procurement review, and cost cuts to improve its operating margins by 3% points. For UD Trucks in particular, the group's initiative targets reducing total costs by 10%.   
 The Volvo Group looks to become number one or two in combined Group Trucks heavy-duty-market share. Further, the company places Asia-Pacific and Africa as key markets, and aims at increasing sales by 50% and 25% respectively. UD Trucks will develop the high-end segment in Japan and the low-to-mid-range segment in global market.
UD Trucks' Condor medium-duty truck
UD Trucks' Condor medium-duty truck

 

Strategies for improving profitability at UD Trucks (source: the Volvo Group's 2013-2015 strategy)

Restructuring plan * 10% cost reduction
* About 950 employees are scheduled to retire by the end of 2012 with a voluntary retirement program announced in August 2012
* Ending production of UD Trucks for the U.S. market announced in September 2012
Improving performance * Using the Volvo Group's knowledge for production and human resources systems for UD Trucks
* Improving customer satisfaction and market shares

(Note) The Volvo Group will earmark SEK 560 million (about 84 million USD) for a restructuring plan in UD Trucks to be charged in the third quarter in 2012

The Volvo Group branding strategy: UD Trucks will develop the low-to-mid-end segment

Segment Price range Up to now In the future
Premium 95%- Volvo brand, Mack brand,
Renault Trucks brand
Volvo brand,
Mack brand (vocational trucks)
High-end 85-95% UD Trucks brand,
Volvo brand, the Mack brand,
Renault Trucks brand
UD Trucks brand (Japan),
Volvo brand, Mack brand,
Renault Trucks brand
Value 65-85% - UD Trucks brand,
Renault Trucks brand
Value/Basic 40-65% - UD Trucks brand, EICHER brand
Basic -40% EICHER brand EICHER brand

Thailand: Nissan Diesel Thailand (NDT) will resume KD production in Thailand

UD Trucks resumed its production and sales of the CMW trucks by assembling knocked-down kits in March 2012 at Nissan Diesel Thailand (NDT). Its operations will continue through mid 2013, with an average monthly production of about 30 units. NDT became a wholly owned subsidiary of Singapore-based Tan Chong Company in 2002, but in 2011, the Volvo Group agreed to take over business of production and sales of UD Trucks from Tan Chong Company.
In March 2012, the Volvo Group announced that it would spend two billion baht to expand the production capacity of its plant (Thai Swedish Assembly) to respond to growing demand in Thailand, and its products will be exported to markets, including Laos, Myanmar, and Cambodia. Its output capacity will increase to 20K units a year, of which a maximum of 16K units are reportedly to be produced under the UD Trucks brand (this has not been confirmed by UD Trucks as of October 2012).

 

 



Shipment volume of medium and heavy-duty trucks growing in UD Trucks deliveries

 

 UD Trucks deliveries for the period of January through October in 2012 were about 18K. The number of trucks delivered during the first half of the term exceeded the previous year's figure due to the eco-car subsidies in Japan, but the total volume up to October went down by 2.8% y/y with the ending of the subsidies in July.
 Shipments for the full year 2012 are expected to come short of 23K of the previous year, and to be the same level (about 22K units) as 2009 when the volume dropped. The shipment rates for light-duty trucks, medium-duty trucks and heavy-duty trucks were about the same in 2009, but for the period between January and October in 2012, the rates in the heavy and the medium-duty truck segments were 40% and 51%, respectively.

(Note) For the UD Condor light-duty trucks available on the Japanese market, the model with a 1-2 ton payload is supplied from Nissan, while the model with a 1.65-4 ton payload is supplied from Isuzu under OEM arrangements.
UD Trucks deliveries

 

UD Trucks deliveries by region/GVM

2006 2007 2008 2009 2010 2011 Jan.-Oct.
2011 2012
North America 3,094 3,349 1,608 853 1,010 1,089 966 429
South America 607 1,039 933 445 300 259 241 133
Asia, Middle East 59,526 36,526 39,089 16,753 23,908 16,563 13,247 13,772
(Middle East) 2,567 3,101 4,736 855 1,183 n.a. n.a. n.a.
(Other Asia) 56,962 33,425 34,353 15,899 22,725 n.a. n.a. n.a.
Other markets 7,375 10,574 7,724 3,457 4,130 4,842 4,212 3,811
Total 70,630 51,508 49,363 21,509 29,348 22,753 18,666 18,145
Light-duty trucks (< 7t) n.a. 16,400 18,661 8,248 9,657 2,632 2,374 1,720
Medium-duty trucks (7-16t) n.a. 16,452 15,095 6,651 9,572 10,822 8,689 9,186
Heavy-duty trucks (>16t) n.a. 18,656 15,607 6,610 10,119 9,299 7,603 7,239

Source: Volvo Truck delivery report


(Source) Press releases and financial reports from MFTBC, Daimler, UD Trucks and Volvo, and various media reports.

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