brief summary: voice of customer (fleet managers of heavy-trucks)

U.S. Fleet Manager’s Desirability and Willingness to Pay for Advanced Heavy-Duty Truck Technologies

September 2010N828-18

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Executive Summary

• There is a common theme to the voice of all the fleet managers surveyed in this study: Give us technologies that can help reduce operating expenses and we are willing to purchase it, even if it means paying a higher up-front price.

• The fact that technologies such as SCR, hybrid trucks, advanced lubricants, automatic/automated transmissions, remote diagnostics and prognostics, navigation based fuel efficiency optimization, TPMS, and ESC are receiving high degree of familiarity, desirability, and interest from fleet managers proves that the advanced truck technologies market is expected to drive most revenue growth opportunities for OEMs and system suppliers alike.

• In each category and in each segment, the level of familiarity with advanced truck technologies experienced an increase across the board compared to 2009 levels. This is a good indication as it signals that fleet managers are shedding the typical psychological inertia that was restraining faster penetration of advanced technologies in the U.S. trucking industry.

• The recent fuel price volatility, strengthening regulatory environment, and applicability of advanced truck technologies in enhancing fleet’s fuel efficiency, reducing emissions, increasing safety, and improving mobile resource efficiency have all contributed to the higher levels of traction these technologies are achieving among fleet managers.

• Many of the responses related to advanced technologies and benefits desired by the fleet managers are offering embedded clues related to service related revenue potential that still remains largely untapped. Fleet managers are seeking less data and more actionable information, less downtime and more time and mission critical support, less reliance on factors that feature high degrees of variables and more reliance on active systems.

• Fleet managers use their own set of metrics in choosing one technology over another, and in many cases these metrics are not only related to ROI and payback, but also factors such as reliability, lifecycle costs, innovative technologies, regulation compliance support, brand and reputation of the technology provider, etc.

• Among powertrain technologies, SCR, automated/automatic transmissions, and advanced lubes are ranked as the highest in terms of purchase intentions (with 50 percent, 41 percent, and 34 percent of surveyed fleet managers showing active purchase intentions), while reliability, fuel-efficiency, and reduced maintenance requirements are ranked as the most desired benefits.

• Among telematics technologies remote diagnostics/prognostics and critical event/safety event alerts emerged as the two technologies that featured 100 percent of fleet managers’ interest (active and passive combined). For all other technologies fleet managers report “No Interest” except for these two technologies. Operating cost savings, regulation compliance support, and safety and security of mobile resources are the most desired benefits from telematics technologies.

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Executive Summary

• Braking distance regulation compliance technologies, tire-pressure monitoring, and blind spot detection systems receive the highest purchase intention rankings (44 percent, 38 percent, and 22 percent of fleet managers show active interest, respectively). Inducing safe driving practices, delivery of tangible ROI and payback, driver retention, and help with CSA 2010 regulation compliance emerges as the most desired benefits. In choosing safety technologies, reduced maintenance requirement is a key consideration, while in choosing a supplier of safety systems the support/responsiveness of the supplier, and its image as a leading innovator are key considerations.

• Not considering TPMS, among safety systems the ESC/driver drowsiness/distraction warning/GPS based safety alert combination, receives the highest level of demand (63 percent). Among telematics technologies, the most preferred service bundle (61 percent) includes back office automation, voice communication, and critical safety alert applications. Among safety technologies, integrated safety technologies such as automated collision mitigation systems and among telematics technologies prognostics are the ones to watch, as these are on track for rapid growth in demand and market penetration.

• While fleet managers are most likely to use diesel powered APUs (39 percent), 30 percent of surveyed fleet managers report intention to use battery powered APUs to meet anti-idling regulations. The demand for battery-powered APUs is expected to rise over the next 12 months.

• It is interesting to note that 48 percent of surveyed fleet managers are willing to consider hybrid heavy-duty trucks at a price premium of $40,000 over the price of a conventional truck. However, it is also noteworthy that two-thirds seek a payback within four years.

• Nearly all (99 percent) surveyed are managers of Class 6-8 truck fleets. Nearly half (47 percent) of fleet managers belong to private fleets, while 46 percent belong to for-hire fleets. 25 percent of the fleet managers are CEO/COO/President/Owner of the fleets, and 55 percent report that they will be making purchase decisions within the next 6 months.

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Familiarity with Powertrain Technologies: Most Fleet Managers Reported

Highest Degree of Familiarity With AMTs/ATs

46%

37%

36%

34%

34%

17%

14%

12%

5%

50%

49%

52%

51%

49%

42%

43%

43%

36%

10%

5%

9%

17%

27%

16%

29%

6%

7%

7%

13%

8%

17%

18%

12%

9%

13%

13%

0% 20% 40% 60% 80% 100%

Automated manual/Fully-automatic

Auxiliary Power Unit

Cooled Exhaust Gas Recirculation

Selective-Catalytic Reduction (SCR)

Biodiesel

Compressed Natural Gas

Navigation-based Fuel Consumption

Diesel-Electric Hybrid Trucks

Diesel-Hydraulic Hybrid Trucks

Familiarity with Powertrain Technologies (N=101)

Very Familiar Somewhat Familiar Neither Familiar Nor Unfamiliar Somewhat Unfamiliar Very Unfamiliar

Q1: How familiar are you with the following advanced powertrain technologies?

Key Take Away: Nearly all respondents are very/somewhat familiar with automated manual or fully automatic technologies, whereas sixty percent are unfamiliar with diesel-hydraulic hybrid trucks. The slightly higher percent of familiarity with cooled EGR technology compared to the SCR technology, is likely due to respondents associating cooled-EGR as the baseline EGR technology which came into the market in 2007.

Source: Frost & Sullivan

Note: Proportions less than five not shown numerically in chart.

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Importance of Powertrain Technologies


26%

19%

26%

16%

14%

12%

12%

9%

52%

44%

47%

48%

42%

29%

42%

36%

18%

24%

17%

23%

26%

29%

35%

28%

5%

9%

7%

10%

7%

14%

10%

6%

5%

12%

21%

5%

14%

0% 20% 40% 60% 80% 100%

Advanced Engine Oil Lubes

Auxiliary Power Unit

Selective-Catalytic Reduction

Cooled Exhaust Gas Recirculation

Biodiesel

Compressed Natural Gas

Navigation-based Fuel Consumption Optimization

Hybrid Trucks

Importance of Powertrain Technologies(N=101)

Very Important Somewhat Important Neither Important Nor Unimportant Somewhat Unimportant Not-at-All Important

Q7: Please rate the level of importance of the following powertrain technologies in terms of applying them to enhance operations and reduce the operating costs of your fleet.

Key Take Away: Advanced engine oil lubes, selective-catalytic reduction and cooled exhaust gas recirculation are rated the most important technologies to enhance operations and reduce operating costs.


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Familiarity with Telematics Enabled Services: Fleet Managers Most Familiar

With Stolen Vehicle Tracking and Geofencing

Note: Proportions less than five not shown numerically in chart.Q6: How familiar are you with the following telematics technologies (telecommunication

technologies that link the vehicle to the fleet management hub)??

Note: Voice Communication Technologies applies to both the Location and Tracking Categories and Mobile Resource Productivity Enhancement Technologies categories. Thus, to prevent duplicate reporting, Voice Communication Technologies is shown individually (not grouped).

26%

14%

24%

23%

16%

13%

12%

18%

13%

40%

37%

44%

59%

43%

47%

54%

47%

49%

21%

36%

23%

11%

28%

28%

24%

25%

28%

9%

8%

6%

6%

9%

8%

5%

8%

5%

5%

5%

5%

3%

0% 20% 40% 60% 80% 100%

Back-Office Automation-Dispatching

Critical Event/Safety System Intervention Alert

Geofencing

Stolen Vehicle Tracking

Navigation Aided Fuel-efficiency Optimization

Real-time Traffic and Dynamic Navigation

Voice Communication

Remote Diagnostics and Prognostics

Accident Reconstruction Analysis Data

Familiarity with Telematics Technologies (N=101)Very Familiar Somewhat Familiar Neither Familiar Nor Unfamiliar Somewhat Unfamiliar Very Unfamiliar

Key Take Away: Back-office automation, geofencing, and stolen vehicle tracking are telematics enabled services boast the highest degree of familiarity. Interestingly, almost one in every five fleet managers report a high degree of familiarity with remote diagnostics and prognostics.



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Importance of Telematics Technologies to Enhance Operations and Reduce Operating Costs: Overall 6 out of 10 Fleet Managers Consider Telematics Enabled Services and Applications Important For Operations Enhancement and Operating Cost Reduction

Q9: Please rate the level of importance of the following telematics technologies (telecommunication technologies that link the vehicle to the fleet management hub) in terms of applying them to enhance operations and reduce operating costs of your fleet.

27%

11%

23%

21%

20%

17%

16%

7%

19%

18%

48%

64%

50%

55%

44%

48%

50%

53%

52%

41%

22%

17%

19%

19%

31%

26%

27%

29%

21%

31%

5%

6%

5%

5%

5%

6%

6%

0% 20% 40% 60% 80% 100%

On-board Telematics Hardware, as opposed to …

Critical Event/Safety System Intervention Alert

Back-Office Automation

Remote Diagnostics and Prognostics

Voice Communication

Stolen Vehicle Tracking

Navigation Aided Fuel-efficiency Optimization

Real-time Traffic and Dynamic Navigation

Accident Reconstruction Analysis Data

Geofencing

Importance of Telematics Technologies (N=101)Very Important Somewhat Important Neither Important Nor Unimportant Somewhat Unimportant Not-at-All Important

Note: Voice Communication Technologies applies to both the Location and Tracking Categories and Mobile Resource Productivity Enhancement Technologies categories. Thus, to prevent duplicate reporting, Voice Communication Technologies is shown individually (not grouped).

Key Take Away: On-board telematics hardware is considered as a more important technology than hand-held device for enhancing mobile resource productivity. Of all services, back-office automation, remote diagnostics and prognostics, voice communications, and accident reconstruction data analysis are considered very important for operating cost reduction and operations enhancement.



8N828-18

Advanced Safety Technologies Currently Used: TPMS Is the Most Widely Used Advanced Safety Technology Among Tractor-Trailer Fleets, While Straight Truck Fleets Reported Highest Degree of Usage of Disc-Drum Combination

Note: Multiple mention question.

Q5L: Please select the following advanced safety technologies that are currently used in your fleet.

Key Take Away: Tire Pressure Monitoring System is mostly often used by respondents for advanced safety technologies. Disc brake-drum brake combination and tire inflation systems are also emerging as widely used technologies. Among all active chassis control technologies, ESC is the most widely used safety technology among largest Class 6-8 truck fleets in U.S.


44%

41%

37%

34%

31%

28%

21%

18%

15%

13%

11%

15%

42%

49%

17%

29%

19%

32%

25%

15%

15%

14%

17%

19%

43%

39%

39%

34%

33%

28%

21%

19%

16%

13%

11%

16%

0% 20% 40% 60%

Tire Pressure Monitoring System

Disc Brakes and Larger Drum Brakes

Trailer Tire Inflation System

Tractor/Truck Based Electronic Stability Control

Tractor-Based Roll Stability Control

GPS Based Safety Warning System

Blind Spot Detection System

Trailer-Based Roll Stability Control

Lane Keeping Assist

Automatic Collision Mitigation System Featuring …

Driver Drowsiness/ Distraction Warning

None of the above

Advanced Safety Technologies Currently Used

Total Sample (N=100) Straight (N=59) Tractor (N=94)

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44%

39%

26%

23%

23%

20%

19%

18%

15%

14%

11%

54%

52%

52%

65%

57%

59%

50%

53%

51%

51%

56%

8%

16%

10%

14%

15%

27%

24%

22%

29%

25%

7% 5%

0% 20% 40% 60% 80% 100%









Automatic Collision Mitigation System

Driver Drowsiness/ Distraction

Lane Keeping Assist

Familiarity with Advanced Safety Technologies (N=101)

Very Familiar Somewhat Familiar Neither Familiar Nor Unfamiliar Somewhat Unfamiliar Very Unfamiliar

Familiarity with Advanced Safety Technologies: Tire-Based Safety Technologies Show a Higher Degree of Familiarity Owing to Fuel-Efficiency Enhancement Value Proposition in Addition to Safety/Stability Enhancement Potential

Q5: How familiar are you with the following advanced safety technologies?

Key Take Away: Almost half of respondents are very familiar with Tire Pressure Monitoring System with advanced safety technologies, higher than any other competing safety technology.



10N828-18

Comparative Analysis by Truck Types: TPMS and Advanced Braking Technologies

Score Highest In Terms of Familiarity Among Fleet Managers

Q5L: Please select the following advanced safety technologies that are currently used in your fleet?

Key Take Away: Almost half of respondents are very/somewhat familiar with Tire Pressure Monitoring System. The fuel-efficiency benefit associated with this technology is perceived to be a leading reason for this.


44%

41%

37%

34%

31%

28%

21%

18%

15%

13%

11%

15%

42%

49%

17%

29%

19%

32%

25%

15%

15%

14%

17%

19%

43%

39%

39%

34%

33%

28%

21%

19%

16%

13%

11%

16%

0% 20% 40% 60%






GPS Based Safety Warning System (Speed, ramp …



Lane Keeping Assist

Automatic Collision Mitigation System Featuring …


None of the above

Comparative Analysis by Truck Types: Familiarity of Advanced Safety Technologies % Very/Somewhat Familiar

Total Sample (N=100) Straight (N=59) Tractor (N=94)

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30%

30%

26%

25%

24%

22%

20%

16%

14%

14%

10%

42%

46%

59%

55%

51%

51%

58%

50%

58%

53%

52%

24%

19%

12%

17%

20%

17%

15%

29%

24%

29%

33%

7%

6%

0% 20% 40% 60% 80% 100%










Automatic Collision Mitigation System

Lane Keeping Assist

Importance of Advanced Safety Technologies to Enhance Operations and Reduce Operating Costs (N=101)

Very Important Somewhat Important Neither Important Nor Unimportant Somewhat Unimportant Not-at-All Important

Importance of Advanced Safety Technologies to Enhance Operations and Reduce Operating Costs: ESC and RSC Are Considered Important Safety Technologies as These Offer Active Control and Protection Against Dangerous Instabilities


Q8: Please rate the level of importance of the following safety technologies in terms of applying them to enhance operations, reduce operating costs, and improve overall safety of your fleet.

Key Take Away: Thirty-percent of respondents rated that it is very important to enhance and reduce Tractor/Truck Based Electronic Stability Control and Tractor-Based Electronic Stability Control operating cost. However, while considering the safety technologies chosen as either very important or somewhat important, 85 percent of all fleet managers ranked TPMS as an important safety technology for reducing operating costs which is higher than any other technology listed.


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Efforts to Meet EPA 2010 Regulatory Requirements: For EPA 2010 compliance, the preference for SCR mirrors market reality; for CSA 2010 compliance, most fleet managers are planning to use data from safety systems to improve fleet and drivers’ safety performance

Q10: Does your fleet plan to meet the EPA 2010 regulations through the use of SCR (Selective-Catalytic

Reduction) technology??

Key Take Away: Nearly seventy percent of respondents are likely to use SCR to meet EPA regulations, and over half of respondents are likely to use data from advanced safety systems.


Q11: Does your fleet plan to use data from advanced safety systems to help improve your fleet’s performance and driver performance under

CSA 2010 regime?

Yes56%

No27%

Don't Know17%

Usage of Data Advanced Safety Systems(N=101)

Yes68%

No23%

Don't Know

9%

Use of SCR to meet EPA 2010 Regulations

(N=101)

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47%

47%

6%

0% 20% 40% 60%

Bendix

MeritorWABCO

Other

Primary Supplier of Advanced Safety Systems(N=101)

Primary Supplier of Advanced Safety Systems: Bendix and MeritorWABCO

enjoy similar penetration among surveyed fleets

Q27: Which supplier of advanced active safety systems do you primarily use?

Key Take Away: Bendix and MeritorWABCO are the most-used brands of advanced safety systems among respondents. This indicates that these companies are offering disparate and competing technologies that are finding traction among fleet managers. It also validates findings from Frost & Sullivan’s industry research that these two companies are the leading suppliers of advanced safety technologies in the Class 6-8 truck market.


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25%

17%

10%

10%

5%

5%

4%

4%

21%

0% 10% 20% 30%

Qualcomm

PeopleNet

Geologic

Tripmaster

PHH Arval

XATA

Cadec

Trimble-@Road

Other

Primary Supplier of Advanced Telematics Services(N=101)

Primary Supplier of Advanced Telematics Services: Qualcomm is the primary supplier of advanced telematics services to the largest Class 6-8 truck fleets in the U.S.; PeopleNet is quickly narrowing the gap

Q29: Which supplier of advanced telematics services do you primarily use?

Key Take Away: One-fourth of respondents use the advanced telematics services of Qualcomm.


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29%

21%

14%

13%

11%

11%

2%

0% 10% 20% 30%

Freightliner

Navistar/International

Kenworth

Peterbilt

Mack

Volvo

Other

Primary Manufacturer of Trucks Used in Fleet(N=101)

Primary Manufacturer of Trucks Used in Fleets: Nearly one out of three surveyed fleet managers rank Freightliner as the primary truck nameplate in their fleets

Q31: Which truck manufacturer do you primarily use in your fleet?

Key Take Away: Freightliner is the most-used truck brand, followed by Navistar/International. This shows that managers of the largest fleets in the U.S. have been choosing Freightliner trucks more than any other brand of Class 6-8 trucks.


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Demographics: Truck Detail

94%

59%

4%

0% 20% 40% 60% 80% 100%

Tractor

Straight

Other

Types of Fleet Trucks(N=101)

99%

41%

36%

0% 20% 40% 60% 80% 100%

Class 6 to 8

Class 1 to 3

Class 4 to 5

Class of Trucks(N=101)

S6: What types of trucks does your fleet currently utilize? S5: Which of the following classes of vehicles do you currently have in use in your entire fleet?


Note: Multiple mention question. Note: Multiple mention question.

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47%

46%

7%

Type of Fleet (Private/Hired) (N=101)

Private For Hire Other

39%

61%

Type of Fleet (N=101)

Vocational On-highway

S9: Is your fleet primarily… S10: Is your fleet primarily…

Demographics: Types of Fleets Represented


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Demographics: Title of Respondents

69%

2%25%

4%

Title of Respondents(N=101)

Fleet Manager Safety Manager Maintenance/Service Manger CEO/ COO/ President/ Owner

Note: “Other” includes General Manager/VPs/President, Logistics Manager, etc.

S1: Which of the following best describes your current title?


19

About Frost & Sullivan

20N828-18

Frost & Sullivan Research: Providing a Complete Information Picture

This research was conducted utilizing the expertise of two teams within Frost & Sullivan: Customer Research and Automotive & Transportation (A&T).

The two teams worked together to develop the survey instrument. Customer Research then managed the fieldwork and performed much of the data analysis seen throughout this document. The teams then collaborated once again to properly analyze the results.

Since the teams have differing areas of expertise, Customer Research knowing the demand side of research and the A&T Practice knowing the supply side of research, we were able to combine both perspectives throughout, thus providing a complete information picture.

21N828-18

Who is Frost & Sullivan

The Growth Consulting Company• Founded in 1961, Frost & Sullivan has over 45 years of assisting clients with their decision-making and

growth issues.

• Over 1,700 Growth Consultants and Industry Analysts across 32 global locations.

• Over 10,000 clients worldwide – emerging companies, the global 1000 and the investment community.

• Developers of the Growth Excellence Matrix – industry leading growth positioning tool for corporate executives.

• Developers of T.E.A.M. Methodology, proprietary process to ensure that clients receive a 360o

perspective of technology, markets and growth opportunities.

• Three core services: Growth Partnership Services, Growth Consulting and Career Best Practices.

22N828-18

What Makes Us Unique

Exclusively Focused on Growth

Global thought leader exclusively focused on

addressing client growth strategies and plans –

Team actively engaged in researching and

developing of growth models that enable clients

to achieve aggressive growth objectives.

Industry Breadth

Cover the broad spectrum of industries and

technologies to provide clients with the ability to

look outside the box and discover new and

innovative ideas.

Global Perspective

32 global offices ensure that clients receive a

global coverage/perspective based on regional

expertise.

360o Perspective

Proprietary T.E.A.M.TM Methodology integrates all

6 critical research methodologies to significantly

enhance the accuracy of decision making and lower the risk of implementing growth strategies.

Growth Monitoring

Continuously monitor changing technology,

markets and economics and proactively address clients growth initiatives and position.

Trusted Partner

Working closely with client Growth Teams –

helping them generate new growth initiatives and leverage all of Frost & Sullivan assets to accelerate their growth.

23N828-18

T.E.A.M. Methodology

Frost & Sullivan’s proprietary T.E.A.M. methodology ensures that clients have complete “360 Degree Perspective” from which to drive decision-making. Technical, Econometric, Application, and Market information ensures that clients have a comprehensive view of industries, markets and technology.

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Global Perspective

Founded in 1961

Over 1,700 Consultants / Analysts across 31 global locations

10,000+ clients worldwide including emerging companies, the global 1000, and the investment community

brief summary: voice of customer (fleet managers of heavy-trucks)

Documents

technologies fleet managers

percent of fleet managers

fleet managers desirability

innovative technologies

powertrain technologies

integrated safety technologies

managers of class

supplier of safety systems