Industry Analysis & Industry Trends
The past five years have been an eventful ride for heavy duty truck manufacturers. IBISWorld estimates that industry revenue will decline by 1.2% annually during the five years through 2011. Governments across the globe have been launching new regulations aimed at reducing emissions from trucks. When new standards are introduced, the price of trucks typically goes up due to research and development costs spent on making the truck emissions compliant. Truck buyers are aware of this trend and when a change in legislation is announced, they tend to purchase trucks in anticipation of a rise in prices once the new law is implemented. This led to inflated growth rates in the three years prior to 2007, as new legislation (and price hikes) came into effect during that year... read more
Industry Investment
The industry has a high level of capital intensity, as indicated by the ratio of capital-to-labor of 1:1.5 (that is, for every unit of capital, 1.5 units of labor are required). This has been caused by the automation of the manufacturing process, which has improved productivity and reduced the need for labor input. Low-labor cost countries such as China have a lower capital to labor ratio than higher-wage countries such as the United States. In other words, capital expenditure tends to be the similar across all countries, while wage costs differ quite significantly from country to country.
Large scale production requires significant capital for automated processes to be installed. Large scale automated production processes are common in the automotive sector... read more