MEDICAL DEVICES PHARMACEUTICALS CHEMICALS FOOD & BEVERAGE ELECTRONICS

Strategic Analysis of North American Commercial VehicleMaintenance and Repair Market

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Strategic Analysis of North American

Medium/Heavy-Duty Commercial Vehicle

Maintenance and Repair Market

Maximizing Revenue Growth Amidst Rising Competition

March 2012

2

Contents

Section Slide Numbers

Market Metrics 7

Executive Summary 20

Introduction and Overview of the North American Medium/Heavy Duty CV Maintenance and Repair Market

32

Distribution and Service Channel Analysis 42

Maintenance Demand Analysis for Class 4-8 Trucks 50

Maintenance Demand Analysis for Buses 57

CV Product Opportunity Analysis 61

CV Replacement Tires Opportunity Analysis 70

Impact of Regulations of Medium/Heavy Duty CV Maintenance and Repair Market 75

Research Conclusions and Recommendations 82

Appendix 87

The Frost & Sullivan Story 89

3

List of Figures

Medium/Heavy Duty CV Maintenance and Repair Market: Aftertreatment Aftermarket Revenue Potential Analysis, North America, 2010-2017 29

Medium/Heavy Duty CV Maintenance and Repair Market: Safety Aftermarket Revenue Potential Analysis, North America, 2010-2017 30

Medium/Heavy Duty CV Maintenance and Repair Market: Aftermarket Component Manufacturers by Parts Category, North America, 2010 37

Medium/Heavy Duty CV Maintenance and Repair Market: Top 10 OEM Nameplates for Class 4-8 Trucks, North America, 2010 38

Medium/Heavy Duty CV Maintenance and Repair Market: Key Independent Distribution Channel Participants, North America, 2010 39

Medium/Heavy Duty CV Maintenance and Repair Market: Channel Revenue Indicators for Minor Maintenance, North America, 2010 44

Medium/Heavy Duty CV Maintenance and Repair Market: Channel Revenue Indicators for Major Repairs, North America, 2010 45

Medium/Heavy Duty CV Maintenance and Repair Market: Impact of Legislation on CV Tire Aftermarket, North America, 2010-2017 72

Medium/Heavy Duty CV Maintenance and Repair Market: Aftertreatment Aftermarket Revenue Potential Analysis, North America, 2010-2017 77

Medium/Heavy Duty CV Maintenance and Repair Market: Safety Aftermarket Revenue Potential Analysis, North America, 2010-2017 81

4

List of Charts

Medium/Heavy Duty CV Maintenance and Repair Market: VIO, North America, 2007-2017 13

Medium/Heavy Duty CV Maintenance and Repair Market: Vehicles in Production, North America, 2010, 2011 and 2017 14

Medium/Heavy Duty CV Maintenance and Repair Market: Class 4-8 Trucks in Operation by Geography, North America, 2007-2017 15

Medium/Heavy Duty CV Maintenance and Repair Market: Trucks and Companies by Fleet Size for Class 3-8 Vehicles, North America, 2010 16

Medium/Heavy Duty CV Maintenance and Repair Market: Average Annual Miles Driven for Class 4-8 Trucks, North America, 2007-2017 17

Medium/Heavy Duty CV Maintenance and Repair Market: Average Annual Miles Driven for Buses, North America, 2007-2017 17

Medium/Heavy Duty CV Maintenance and Repair Market: Buses in Operation by Vocation, North America, 2007-2017 18

Medium/Heavy Duty CV Maintenance and Repair Market: HD Truck and Bus Technicians by Geography, North America, 2000-2010 19

Medium/Heavy Duty CV Maintenance and Repair Market: Truck and Bus Service Locations, North America, 2000-2010 19

Medium/Heavy Duty CV Maintenance and Repair Market: Roadmap, North America, 2007-2017 23

Medium/Heavy Duty CV Maintenance and Repair Market: Drivers and Restraints, North America, 2011-2017 24

Medium/Heavy Duty CV Maintenance and Repair Market: Revenue by Parts Category, North America, 2010 and 2017 25

Medium/Heavy Duty CV Maintenance and Repair Market: Total Parts Revenue, North America, 2010 and 2017 25

Medium/Heavy Duty CV Maintenance and Repair Market: Channel Performance Indicators, North America, 2010 26

Medium/Heavy Duty CV Maintenance and Repair Market: Maintenance and Repair Service Trends, North America, 2008, 2010 and 2017 27

Medium/Heavy Duty CV Maintenance and Repair Market: Parts Revenue by Distribution Channel, North America, 2010 28

Medium/Heavy Duty CV Maintenance and Repair Market: Overview and Impact of EPA 2010, North America, 2010-2017 29

Medium/Heavy Duty CV Maintenance and Repair Market: Overview and Impact of CSA 2010, North America, 2010-2017 30

Medium/Heavy Duty CV Maintenance and Repair Market: Overview, North America, 2010-2017 33

5

List of Charts (continued)

Medium/Heavy Duty CV Maintenance and Repair Market: Drivers and Restraints, North America, 2011-2017 34

Medium/Heavy Duty CV Maintenance and Repair Market: Aftermarket Parts and Service Distribution Structure, North America, 2010 35

Medium/Heavy Duty CV Maintenance and Repair Market: Overview of Truck Stop Service Centers, North America, 2010 40

Medium/Heavy Duty CV Maintenance and Repair Market: Truck Stop and Travel Center Locations, United States, 2009 41

Medium/Heavy Duty CV Maintenance and Repair Market: Channel Performance Indicators, North America, 2010 43

Medium/Heavy Duty CV Maintenance and Repair Market: Maintenance and Repair Service Trends, North America, 2008, 2010 and 2017 47

Medium/Heavy Duty CV Maintenance and Repair Market: Parts Revenue by Distribution Channel, North America, 2010 48

Medium/Heavy Duty CV Maintenance and Repair Market: Replacement Parts and Service Competitive Analysis, North America, 2010 49

Medium/Heavy Duty CV Maintenance and Repair Market: Class 4-8 Trucks in Operation, North America, 2007-2017 51

Medium/Heavy Duty CV Maintenance and Repair Market: Class 4-8 Trucks in Production, North America, 2010, 2011 and 2017 52

Medium/Heavy Duty CV Maintenance and Repair Market: Class 4-8 Trucks In Operation by Powertrain, North America, 2010 and 2017 53

Medium/Heavy Duty CV Maintenance and Repair Market: Class 4-8 Trucks In Operation by Transmission, North America, 2010 and 2017 54

Medium/Heavy Duty CV Maintenance and Repair Market: Class 4-Trucks Trends and Needs, North America, 2010-2017 55

Medium/Heavy Duty CV Maintenance and Repair Market: Class 4-8 Truck Revenue by Parts Category, North America, 2010 and 2017 56

Medium/Heavy Duty CV Maintenance and Repair Market: Buses in Operation by Vocation, North America, 2007-2017 58

Medium/Heavy Duty CV Maintenance and Repair Market: Buses in Production, North America, 2010 and 2017 59

Medium/Heavy Duty CV Maintenance and Repair Market: Class 4-8 Bus Revenue by Parts Category, North America, 2010 and 2017 60

Medium/Heavy Duty CV Maintenance and Repair Market: Reman Engine Revenue and Distribution, North America, 2010 and 2017 62

6

List of Charts (continued)

Medium/Heavy Duty CV Maintenance and Repair Market: Reman Transmission Revenue and Distribution, North America, 2010 and 2017 63

Medium/Heavy Duty CV Maintenance and Repair Market: Filtration Systems Revenue and Distribution, North America, 2010 and 2017 64

Medium/Heavy Duty CV Maintenance and Repair Market: Bake Systems Revenue and Distribution, North America, 2010 and 2017 65

Medium/Heavy Duty CV Maintenance and Repair Market: Exhaust Systems Revenue and Distribution, North America, 2010 and 2017 66

Medium/Heavy Duty CV Maintenance and Repair Market: Starter/Alternator Revenue and Distribution, North America, 2010 and 2017 67

Medium/Heavy Duty CV Maintenance and Repair Market: Chassis Component Revenue and Distribution, North America, 2010 and 2017 68

Medium/Heavy Duty CV Maintenance and Repair Market: HVAC/Cooling Parts Revenue and Distribution, North America, 2010 and 2017 69

Medium/Heavy Duty CV Maintenance and Repair Market: Overview of CV Tire Aftermarket, North America, 2010 71

Medium/Heavy Duty CV Maintenance and Repair Market: Replacement Tire Revenue by Distribution Channel, North America, 2010 73

Medium/Heavy Duty CV Maintenance and Repair Market: Replacement Tire Revenue and Distribution, North America, 2010 and 2017 74

Medium/Heavy Duty CV Maintenance and Repair Market: Roadmap of Regulatory Environment, North America, 2007-2017 76

Medium/Heavy Duty CV Maintenance and Repair Market: Overview and Impact of EPA 2010, North America, 2010-2017 77

Medium/Heavy Duty CV Maintenance and Repair Market: SCR-Equipped Trucks in Use, North America, 2007-2017 79

Medium/Heavy Duty CV Maintenance and Repair Market: Retrofitted Trucks in Use, North America, 2007-2017 79

Medium/Heavy Duty CV Maintenance and Repair Market: Class 4-8 Trucks Aftertreatment Revenue, North America, 2010 and 2017 80

Medium/Heavy Duty CV Maintenance and Repair Market: Overview and Impact of CSA 2010, North America, 2010-2017 81

7

Market Metrics

8

Research

S

co

pe • Market dynamics – Market drivers, restraints, and challenges for the maintenance and repair market

• Maintenance and repair demand forecasts for class 4-8 trucks and buses

• Assess the impact of the regulatory environment on the maintenance/repair aftermarket

• Demand analysis of replacement parts for CVs

Research

M

eth

od

- o

log

y

Market

D

efi

nit

ion

• The goals of the study are to analyze the North American CV (class 4-8) repair and maintenance industry and to project the future outlook and opportunities it offers to the different participants of the value chain. G

oal

• This study covers the North American class 4-8 (14,001 GVWR and up) on-road CV market. CVs include medium and heavy-duty trucks and school, transit, and motor-coach buses.

• The geographic scope is North America, which includes the United States and Canada.

• The aftermarket includes independent distributor/retailers and the Original Equipment Service (OES) channel.

• Price and revenue, unless otherwise stated, are provided in U.S. dollars. Aftermarket-parts revenue is at the manufacturer level unless stated otherwise. All service revenue is at the retail level unless stated otherwise.

• The analysis contained in this research service is based on:

o Information collected through discussions with market participants and from secondary sources

o Frost & Sullivan’s published research and market and technology expertise

Objectives, Scope, and Market Definitions

9

Bottom-up and Demand Analysis are Combined to

Evaluate Market Size and Prevailing Competitive Situation

Market Engineering Using

Bottom-up Methodology

• Market Engineering provides insight into all of the factors that influence a market by examining the market across the value chain, from component manufacturers to vehicle owners.

• Frost & Sullivan conducts primary research interviews with component manufacturers, distributors, and installers to benchmark unit shipment, industry pricing, revenue, products, and competitor shifts. Participant input is validated by verifying information with customers and suppliers. Frost & Sullivan builds the market size by accounting for the role of each major participant in the market.

Demand Analysis Marketing Engineering analysis is augmented by vehicle in operation analysis including, demand by fleet and personal vehicle owners and demand by vehicle type.

Bo

tto

m-u

p M

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gy

Primary research with all major participants (15-20 interviews)

Validation of participant size through distributor, retailer, and distribution participant

interviews

Secondary research and demand analysis valuations

Competitive positioning of market participants

Dem

an

d/V

IO A

naly

sis

Total Market Size and Competitive

Position

10

Partial List of Companies Interviewed

YRC Worldwide Inc. Hendrickson USA LLC

ADM Logistics Inc. American Truck Dealers Association

Staples Inc. Michelin North America Inc.

Con-way Inc. Goodyear Tire and Rubber Company

Baldwin Filters Inc. National Automotive Parts Association (NAPA)

Cummins Filtration Dana Holding Corporation

Bendix Commercial Vehicle Systems LLC VIPAR Heavy Duty Inc.

Haldex AB Fleet Maintenance, City of Chicago

Fleetpride Inc. Fleet Maintenance, City of Toronto

Inland Truck Parts Lonestar Truck Group Inc. (Freightliner)

Roady’s Truck Stops

11

Aftermarket Analysis Metrics

The CV aftermarket is directly related to the number of vehicles in operation (VIO) and the key base factor in replacement part and services forecasts.

Average annual miles travelled directly impact a product’s lifecycle and is a strong indicator of replacement and service trends.

Because the majority of CVs operate within fleets and are repaired in-house, fleet size, distribution, and growth trends heavily influence maintenance and repair channels.

Number and type of service locations and technician trends show how and which channels will attract service and repair revenue.

Analysis

Metrics

Annual production units indicate the installed base of CV components. The installed base also reveals any changes in component technology that will have downstream affects on the aftermarket.

Because CVs are business drivers, economic conditions are major impacts on purchase and operation trends, thereby impacting maintenance and repair revenue.

Source: Frost & Sullivan analysis.

12

CV Classifications and Definitions

Category Class 4 Class 5 Class 6 Class 7 Class 8 Buses

Vocation

Intracity pickup

and delivery; construction

Construction and service industries

Pickup and delivery;

government fleet trucks

Construction and retail; pickup and

delivery

Line haul; vocational

Intracity transit and

school buses and

intercity motor

coaches

Growth

Outlook

Small portion of the

commercial vehicle

market; likely to

experience medium growth

Slow economic recovery makes

customers likely to stick

to older vehicles in the short

term

Both private and public

sectors delaying

purchase of replacement

vehicles; negative impact on

VIO

Likely to see stable or medium growth;

vocational sectors highly

influenced by economy

and inflation rates

New regulations

led to Increase in price; slight decline in

new registrations; likely to see

medium growth

Fuel economy

concerns will drive growth for electric and hybrid

transit buses; sales directly proportional to economic

activity

Source: Frost & Sullivan analysis.

13

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Buses 0.55 0.56Class 8 3.11 3.18Class 7 0.99 1.09Class 6 0.73 0.80Class 5 0.78 0.86Class 4 0.94

Year

Class 4-8 Trucks and Buses VIO:

CV Population to Reach Nearly x.x Million by 2017 with a Low Compound Annual Growth Rate (CAGR) of x.x Percent

Medium/Heavy Duty CV Maintenance and Repair Market: VIO, North America, 2007-2017

CAGR = x.x%

VIO

(M

illio

n)