DAVID HAMESGeneral Manager Marketing & Strategy,

Daimler Trucks North America

How Regulations, Costs & Reliability are Changing the Equipment Life / Trade Cycle

• Emissions & Regulatory Hurdles: Then & Now– Pre EPA10– Post EPA10

• The OEM Perspective: Alignment of Goals– Current Regulatory Direction Aligns Fuel Economy with Emissions Goals– Creation of “Race” To Fuel Economy Leadership

• Fleet Perspective: Total Cost of Ownership– Operating Costs of Equipment are Taking Step Improvements– Current Fuel Costs are Driving Adoption toward Newer Equipment– Reliability of Emissions Technologies Also Maturing

• Used Market Dynamics: Changing Mindset– All Used Trucks are Not Created Equal

Emissions & Regulatory Hurdles

• Pre EPA10 Environment– Significant Increases in Equipment Costs– Significant Decreases in Fuel Economy– Increased Vehicle Complexity– Decreased Reliability

• Post EPA10 Environment– Significant Increases in Equipment Costs– Significant Improvements in Fuel Economy– Increased Vehicle Complexity– Improving Reliability

Then & Now

The OEM Perspective

• The Challenge:– Create a Fuel Economy

Payback Scenario for Customers that Offsets the Incremental Cost of CO2 Reduction Technology

– Evolving GHG Legislation

• The Threats:– Mandated Technologies

The Alignment of GoalsFuel

Economy

CO2

Fleet Perspective

• Many Competing Factors:– Spec’ing for Fuel Economy is

Now Top Priority in Most Applications– Uptime has become a Cost of Entry

Factor in Purchase Decisions– Changing Residual Value Dynamics

• Driver Retention:– Increasing Factor in Truck

Specifications and Recognition of Cost

Total Cost of Ownership Top Priority

Decreasing Priority

Increasing Priority

Cost of Entry

Fuel Economy

DriverRetention

ResidualValue

Uptime

Used Market Dynamics

• Early Emissions Cycles Extended Equipment Cycles:– Drove Values of EPA98 Equipment– Higher Maintenance Costs for Emissions Equipment– Decreased Fuel Economy in Addition to Higher Maintenance Costs– CARB Requirements Drove Some Improvement in EPA07 Equipment

• Post EPA10 Has Changed This Dynamic:– Resale Value is not as High of a Priority in New Truck Specifications – Fuel Economy Improvements Drive Shorter Trade Cycles

Changing Mindset

GHG17OBD16GHG14OBD13EPA10EPA07EPA04EPA98