Truck and Bus Manufacturing
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Industry Overview
US heavy truck and bus manufacturers include about 80 companies with combined annual revenue of about $25 billion. Major companies include PACCAR (Peterbilt and Kenworth); Navistar International; Daimler Trucks North America (Freightliner); Volvo Trucks North America; and Blue Bird. The industry is highly concentrated: the top five manufacturers have about 70 percent market share; the top 20 have 97 percent. Many companies are parts suppliers to assembly plants.
Competitive Landscape
Heavy truck demand is driven by growth in the agriculture, manufacturing, construction, and retail sectors. Bus demand is driven by growth in the number of school-aged children and investment in public transportation systems. The profitability of individual companies depends on volume and sales of high-margin options. Small manufacturers compete by supplying parts to other assemblers or by offering highly customized products. The industry is capital-intensive: annual sales per employee averages about $750,000.
The industry competes with other forms of transportation, namely trains and planes, which also move freight and people over long distances. Reconditioned and used vehicles also compete with newly manufactured products, since equipment may have a useful life in excess of 1 million miles.
Products, Operations & Technology
Heavy trucks and buses are classified by Gross Vehicle Weight Rating (GVWR), a measure of the total allowable weight of the truck when fully loaded. Class 6 (GVWR of 19,001 to 26,000 pounds); Class 7 (GVWR of 26,001 to 33,000 pounds); and Class 8 (GVWR of 33,000 pounds and over) vehicles make up the majority of heavy trucks on US highways. Class 6 represents about 15 percent of total US unit sales, Class 7 about 20 percent, and Class 8 about 65 percent. In addition to new units, aftermarket sale of parts represents about 10 percent of industry revenues.
Buses and local delivery trucks generally are rated Class 6 and Class 7. Most heavy trucks, called tractors, which pull detachable trailers, are Class 8. Tractors are equipped with a fifth wheel, the coupling that connects the trailer to the back of the tractor for towing. These rigs are frequently known as 18-wheelers due to the combined number of wheels on the tractor and trailer.
Heavy trucks and buses are typically produced on assembly lines, much like auto manufacturing. Parts are received from outside sources (either third parties or other corporate-owned plants), usually on a just-in-time basis. Beginning with the assembly of the basic frame of two steel beams with cross-members for support, the product proceeds from station to station where components are added to complete the finished chassis. Axles, a suspension system, an engine, a drive train, and a transmission are part of the completed chassis. Fuel tanks, fans, coupling, and hoses are connected to the chassis. The truck cab, hood, and sleeper compartment are assembled separately and lowered onto the chassis assembly after painting. Final components are attached and the truck is tested using a dynanometer, an instrument that measures engine power while the truck wheels spin on rollers. Additional quality control checks are performed before the truck is driven off the assembly line for a test drive.
Plant capacities vary by size and capital investment, but a typical facility may be several hundred thousand square feet. A recently opened 200,000 square foot assembly plant has an annual production capacity of 2,500 heavy-duty trucks. Some manufacturers provide chassis to other assemblers that outfit the completed rig.
Almost all heavy duty trucks have diesel engines, which are bought from suppliers like Cummins and Detroit Diesel. Raw materials include steel, aluminum, plastics, glass, and rubber. Metal parts are a combination of forgings, extrusions, and sheet products. Aluminum and plastics lessen vehicle weights and improve fuel consumption. Material costs represent about 85 percent of revenues.
The heavy truck and bus industry uses computer modeling extensively to optimize raw materials, engine performance, and aerodynamics, all which affect cost and fuel efficiency. Technology-enabled safety equipment is available to help reduce heavy-duty vehicle accidents on the nation's highways. Suppliers offer systems that include collision warning, lane departure warning, vehicle stability, and brake monitoring. Vehicles can be equipped with wireless computers and GPS to help navigate and communicate with drivers.