A price war outside the UK
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BRITISH vehicle manufacturers are clawing their way back to better times and the preoccupation with recession seems to have moved to the Continent. At the Paris Motor Show a plea for an end to the truck price war was made by the Chambre Syndicale des Constructeurs des Automobiles.
All European industrial vehicle manufacturers are affected by current economic difficulties, said the Chambre. The potential supply exceeds what the domestic market can absorb.
On January 1, 1984, there were in France about 538,000 goods vehicles over five tons gvw in use (carriers, tractors, buses). For a total market estimated at 45,000 vehicles over five tonnes in 1984, the annual rate of renewal would be around 6.7 per cent, since the replacement market accounts for 80 per cent of new vehicle sales. Assuming a 6.7 per cent rate of annual renewal and no change in the vehicle population level, it will take 15 years to achieve a complete renewal.
It is surprising to find 12.3 per cent of trucks are over 10 years old in the overall park; 10.3 per cent over 10 years old in the overall tractor park; and 28.5 per cent of buses over 10 years old in the public transport vehicle park.
In order to be efficient, a road haulage company must use vehicles under five years old on average. Obsolete vehicles have become a major handicap to an efficient management. As a consequence, the French road vehicle park had to be renewed if it is to remain competitive in Europe. But where are the buyers?
There's no rush to buy in many parts of Europe. Italy has been particularly depressed. An exception seems to be West Germany where the Verband der Automobilindustrie (VDA) reports that its industry is recovering after the metalworkers strike; nevertheless, exports this year are running at eight per cent below the equivalent figure for 1983 in the period up to July.
Daimler-Benz said that domestic sales by the German commercial vehicle industry in 1984 will probably increase a little. However, it added, foreign manufacturers, "who have a price advantage especially in the area of unsophisticated lightweight vehicles, can be expected to make further inroads; this applies most of all to the Japanese competitors."
A certain increase in demand is evident only for light commercial vehicles, but shipments of trucks in the gvw class of 6 tons and up will remain low in 1984, it forecast.
The West European markets have become the focal point of competition since overseas truck demand, especially from the OPEC region, has receded. Outside Europe it does not expect to make up completely the decline of exports to OPEC countries.
Some manufacturers say they are surviving (and more) without price-cutting. VAG (UK) says it is one of them. Richard Ide, commercial vehicle director of VAG (UK), said the company is on target to increase its share of the UK heavy vehicle market to five per cent by 1986.
Sales of MAN vehicles from January to July are up 52 per cent this year. Haulage tractor sales have virtually doubled to 2.9 per cent. And he said there had been no massive price slashing. Ironically, he then announced a more competitive pricing policy, with parts prices 30 per cent less than at the beginning of 1983.
MAN and VW are pumping money into their activities; an investment of £5.6m in VAG's commercial vehicle activities was announced in July 1983 to increase market share to five per cent over five years.
Some manufacturers cut prices when they have to — at least this appeared to be the message of Alan Fox, the Iveco UK chief executive, launching new Iveco models. Discounting, he said, has waxed and waned as some manufacturers tried to distance themselves from it but had been compelled to return to it, albeit at lower levels. His company traded profitably last year and he has prophesied that 1984 will produce a better figure than the £2.7m recorded in 1983.
If it's still tough for the chassis makers it's as tough for the main suppliers — who is going to buy all these engines being announced at the Motor Show?
The market for proprietary engines seems to be continuously decreasing and it's not just engines but major and minor components as well.
In September I quoted some of the latest market forecasts. This month there's another that's worth reporting in the component context — Eaton Corporation. Being involved in both large and small component production Eaton needs to monitor the market very carefully. Bob Scullor, Eaton's regional manager for the UK and Scandinavia, forecasts that European truck production in all categories will move from 330,000 in 1984 to 423,000 by 1989. The market itself, as it relates to the proprietary driveline suppliers, is also changing, he said.
Eaton's competitors, Rockwell, ZF and Dana, are to be as equally aggressive. Vertically integrated OEMs are seeking to improve their penetration. Eaton recognises it needs product development across all component sectors if it is to continue and improve its presence, A review of the light/medium duty market (eight to 16 tonnes) shows an average annual production of 75,000 to 80,000 units. Allowing for vertically integrated manufacturers, the available market to outside suppliers is 35,000 units a year.
Bob Scullor did not refer to Japanese competition for the component producers. Yet the Amsterdam Bus Show saw Nippondenso, the giant Japanese electrical automotive components maker, launching into European bus airconditioning in a big way. It is also reported to be interested in selling its diesel fuel injection equipment to European engine manufacturers.
As this Japanese company already supplies a high proportion of starter motors, alternators, filters and spark plugs on Japanese vehicles — and so is already effectively in both the OEM and aftermarket in Europe — it follows that additional competition is a very real threat to European component suppliers.
Such moves represent an added measure of competition for the European component producers which will make tough.times tougher.