Abstract
Research Overview
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Market Overview
Increased Global Trade and Strict Environmental Regulations Augur Well for
Chassis Systems and Components Aftermarket
Due to significant technological improvements, chassis systems and components
manufactured for class 6-8 trucks have become more robust and long lasting
than ever before. Conversely, this has had the effect of extending their
replacement cycles, which in turn has affected their unit shipment in the
aftermarket. Further, rising truck prices are causing fleets to postpone their
replacement purchases until the truck's performance starts deteriorating
beyond repair. Together, these two factors are expected to significantly
restrain the growth of the aftermarket for class 6-8 truck chassis systems and
components.
However, the increase in international trade volumes and trucks' share of
freight transportation could create strong growth opportunities in the
aftermarket. In addition, Environmental Protection Agency (EPA) regulations on
the reduction of nitrogen oxides (NOx), hydrocarbons (HCs), and particulate
matter (PM) emissions by installing advanced engines that use exhaust gas
recirculation (EGR) are set to enter their final implementation phase in 2007.
"This is expected to encourage pre-buying of trucks ahead of the impending and
more stringent legislations on emissions, thereby providing a boost to the
unit shipment of chassis systems and components in the short and medium term,"
says the analyst of this research service.
Strong Bargaining Power Enables Suppliers to Command Favorable Pricing
High entry barriers to the mature chassis systems and components aftermarket
allow existing suppliers to have considerable bargaining power, thus enabling
them to reduce the growing price pressures from truck manufacturers and
command better prices in the medium to long term. With truck manufacturers
preferring to maintain relationships with a few suppliers to streamline
operations, the aftermarket is seeing growing consolidation among larger
participants and the exit of smaller ones, which again increases their
negotiating power. On the other hand, the rise in prices of key raw materials
such as steel is likely to contribute to higher prices of chassis systems and
components.
However, competitive pressures in the chassis systems and components
aftermarket are increasing, due to growing demand from imported class 6 and 7
trucks for innovative and competitively priced products. This is leading
suppliers to pay greater attention to improving their design, manufacturing,
marketing, and distribution capabilities. "Thus, technological innovations
such as advanced chassis systems featuring enhanced vehicle stability and
safety features are expected to be a key trend that are likely to support
revenue growth in the aftermarket," says the analyst.
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