Power Systems Research Global Truck Production Index (PSR-TPI) (Class 3-8 Trucks & Bus Chassis) BASE Region China Emerging Markets Europe Japan & Korea North America South America Global Total Volume 2012 Q1 100 100 100 100 100 100 100 1,229,135 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 141 109 105 113 118 137 123 117 136 112 122 110 155 120 115 100 114 116 76 84 92 93 93 84 93 95 111 98 109 112 106 110 108 99 105 109 107 102 109 119 116 126 147 110 107 96 112 108 104 100 117 113 106 102 120 115 109 104 122 118 86 76 80 85 86 81 85 85 99 96 88 88 103 100 92 115 118 122 128 146 152 158 139 147 156 162 143 151 160 167 113 105 103 100 104 115 110 105 114 110 112 110 130 115 112 1,390,845 1,285,627 1,266,638 1,232,985 1,282,319 1,407,860 1,346,148 1,291,164 1,405,145 1,355,287 1,376,449 1,348,165 1,597,704 1,417,741 1,373,087 Source: CV Link™ 4th Quarter 2013 Power Systems Research Truck Production Index (PSR-TPI) climbs 1.8% St. Paul, MN (Jan. 13, 2014)— The Power Systems Research Truck Production Index (PSR-TPI) increased from 110 to 112, or 1.8%, for the threemonth period ended Dec. 31, 2013 from the Base period of 1st Quarter 2012. The YoY (Q4 2012 - Q4 2013) gain for the PSR-TPI was the same, 110 to 112, or 1.8%. The PSR-TPI measures truck production globally and across six regions: North America, China, Europe, South America, Japan & Korea and Emerging Markets. This data comes from CV Link™, the proprietary database maintained by Power Systems Research As the global economy recovers from the recession, expect modest growth during the next few years as fleets continue to replace older vehicles. The global trend of OEM’s expanding manufacturing operations outside of their “traditional” production regions will continue as the OEM’s strive to be global players. Global vehicle platforms will also be a trend moving forward. Also, expect a slowdown in China when the government begins to enforce the Euro IV emission regulations. North American production is currently at replacement levels with modest expansion expected within the next two years. While European production is expected to improve somewhat through 2015, the market will still be below historical replacement levels. In South America, Chinese OEM’s plan to establish manufacturing in Brazil which in turn, will drive regional production. In North America, commercial vehicle production is expected to increase by 8.7% this year compared with 2013. Demand improved during the second half of 2013 and order rates were strong toward the end of 2013. While the economic indicators continue to show mixed results, strength in the home construction market and very tight capacity in the used truck market are two significant factors that are driving the order books. Vehicle production in South Asia is likely to be flat through the end of 2015. However, commercial vehicle production in Japan and South Korea is expected to improve by 2.2% this year over 2013. OEMs in both Japan and South Korea continue to shift production out of their home countries to locations closer to their markets, a move that reduces the cost of production. The next update of the Power Systems Research TPI will be in April 2014 and will reflect changes in the TPI during 1Q 2014. PSR Power Systems Research has been tracking the production of engines and their use around the world for nearly 40 years. We're the leading company in the world doing this research and building these databases. We have many of the largest companies in the world as our customers, including John Deere and Caterpillar. They subscribe to our unique databases, and their facilities around the world access our data and forecasts through the internet 24/7. We're based in St. Paul, Minnesota, and we have offices and analysts located around the world, from Brussels to Beijing and Tokyo to Brazil, to help us collect and analyze this data. For information on our products and services, call +1 651-905-8400 or email us at [email protected]. Learn more about Power Systems Research at www.powersys.com. Power Systems Research Global Truck Production Index (PSR-TPI) (Class 3-8 Trucks & Bus Chassis) All Regions 180 160 140 120 100 80 60 40 20 0 2012 Q1 2012 Q2 2012 Q3 2012 Q4 China 2013 Q1 2013 Q2 2013 Q3 2013 Q4 Emerging Markets Europe 2014 Q1 2014 Q2 2014 Q3 2014 Q4 Japan & Korea North America 2015 Q1 2015 Q2 2015 Q3 2015 Q4 South America Global Expect a slowdown in China when the government begins to enforce the Euro IV emission regulations. North American production is currently at replacement levels with modest expansion expected within the next two years. While European production is expected to improve somewhat through 2015, the market will still be below historical replacement levels. In South America, Chinese OEM’s plan to establish manufacturing in Brazil which in turn, will drive regional production. Global Index 140 120 100 80 60 40 20 0 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 Global 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 Linear (Global) As the global economy recovers from the recession, expect modest growth during the next few years as fleets continue to replace older vehicles. The global trend of OEM’s expanding manufacturing operations outside of their “traditional” production regions will continue as the OEM’s strive to be global players. Global vehicle platforms will also be a trend moving forward. Power Systems Research Global Truck Production Index (PSR-TPI) (Class 3-8 Trucks & Bus Chassis) North America Index 120 100 80 60 40 20 0 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 North America 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 Linear (North America) Commercial vehicle production is expected to increase by 8.7% this year compared with 2013. Demand improved during the second half of 2013 and order rates were strong toward the end of 2013. While the economic indicators continue to show mixed results, strength in the home construction market and very tight capacity in the used truck market are two significant factors that are driving the order books. South America Index 180 160 140 120 100 80 60 40 20 0 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 South America 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 Linear (South America) Overall, South American commercial vehicle production is expected to be positive in 2014. The forecast indicates that production will increase by 3.3% over 2013. After very strong production growth in 2013, Brazilian production is expected to slow to a growth rate of 2.7% this year over last as demand and truck inventories back into balance as a result of the Euro V emission regulations. During the next few years, a number of Chinese OEM’s plan to establish production in Brazil as opposed exporting trucks from China. Power Systems Research Global Truck Production Index (PSR-TPI) (Class 3-8 Trucks & Bus Chassis) China Index 180 160 140 120 100 80 60 40 20 0 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 China 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 Linear (China) Euro IV emission regulations were implemented in July 2013. However, the Euro IV regulations have been seldom enforced. Currently, less than 10% of the engines being installed actually meet the Euro IV requirements. This in turn, has driven up demand as the truck companies update their fleets to avoid the additional cost of Euro IV emission technology. The lack of enforcement is likely due to the lack of lower sulfur fuel which is critical to operating the Euro IV compliant engines. Japan & Korea Index 140 120 100 80 60 40 20 0 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 Japan & Korea 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 Linear (Japan & Korea) Commercial vehicle production for Japan and South Korea is forecasted to improve by 2.2% this year over last. In 2014, Japanese production is expected to increase by 2.4% while South Korean production is forecasted to finish .6% higher than last year. Japanese and South Korean OEM’s continue to transfer production out of their home countries to locations closer to their markets. This trend not only lands the OEM’s closer to their export markets, but also reduces the cost of production. Power Systems Research Global Truck Production Index (PSR-TPI) (Class 3-8 Trucks & Bus Chassis) Europe Index 160 140 120 100 80 60 40 20 0 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 Europe 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 Linear (Europe) After a modest truck buy ahead during the second half of 2013, production in Western Europe is expected to decline during the first quarter of 2013. To avoid the cost of Euro VI emission techonology, a number of trucking companies updated their fleets ahead of the regulations which were implemented in January 2014. Emerging Markets Index 140 120 100 80 60 40 20 0 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 Emerging Markets 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 Linear (Emerging Markets) Medium and heavy commercial vehicle production in South Asia is expected to be flat during the forecast period. Overall, 2013 was a poor year with the flooding in Thailand and the economic conditions in India. Expect the trend to continue through Q2 2014 before demand improves and production rates will increase.