Through adoption of new technologies and key partnerships, revenues are expected to cross €40 billion by 2025
TRATON SE (TRATON) is one of the two entities making commercial vehicles (CVs) in the Volkswagen Group, the other being Volkswagen Commercial Vehicles, a prominent manufacturer of Light Commercial Vehicles (LCVs) in Europe.
TRATON comprises four brands that were a part of VW Truck and Bus – MAN, Scania, VW Caminhões e Ônibus and Rio. Globally, the group has 29 production facilities across its three brands – MAN, Scania and VW Caminhões e Ônibus– across 17 countries.
Frost & Sullivan’s Commercial Vehicle research study “ Strategic Analysis of TRATON SE, 2025” finds that with investments in connected and electric vehicles (EVs), and strategic partnerships, the group is poised to touch a revenue mark of €40 billion by 2025. The most significant growth in revenue will be from services based on telematics and the RIO platform.
In the last two years, TRATON has witnessed double digit growth in vehicle deliveries, driven primarily by the robust growth in the EU – its primary market, which accounts for 56% of the global unit sales.
Why TRATON?
In the era of great transformation in the CV industry towards Connected, Autonomous, Shared and Electric (C.A.S.E.) solutions, the vision to transform itself into a mobility service provider is the primary reason why VW Truck and Bus was rebranded as TRATON in 2018. In the words of Andreas Renschler, Chairman of the Board of Management of TRATON SE and member of the Board of Management of Volkswagen AG, “The first three letters hint to the transportation business we operate in. They invoke our vision to transform and reinvent ourselves and also the entire transportation system. And of course they also show our respect for over a century of our brands’ tradition. A tradition of creating innovative solutions for the movement of people and products. The last three letters explain our great responsibility for moving immense tonnage around our world.”
Ever since the diesel emission scandal hit the VW passenger car business in 2015, the group has been looking to spin off its truck and bus division as a separate entity.
Further, after the acquisition of rivals—German OEM MAN and Swedish OEM Scania—the group was struggling for several years to unify the culture, vision, and mission of the brands. The rebranding was a definitive step to achieving synergies.
Alternative powertrains– a multi-pronged strategy
Over the last two years, TRATON has made eight key landmarks in its alternative powertrain program, launching pilot programs or announcing product launches across the EU and the Americas. The company is pursuing a variety of alternative fuel options, into 2025 and beyond.
The company is developing a common base 13L engine for an uncertain future, where multiple fuel types are under use. The engine is part of a joint HD powertrain platform development at TRATON. The company has a two-pronged strategy for its future powertrains – EV for intra-city transportation and LNG or synthetic diesel for long-haul transportation.
RIO – the digital edge
RIO is building its connected truck strategy on RIO, an open architecture platform. This is aiding the group balloon its subscriber database. RIO is considered to be the first transparent platform for freight transport, providing a holistic approach to the supply chain vision. It comes with a comprehensive starter package – RIO Essentials – that combines key functions and is provided to all RIO users free of charge.
RIO’s open platform functioning is independent of the manufacturer and telematics systems. It bundles digital services for the entire transport and logistics ecosystem, and all its participants. It enables an app ecosystem and has retrofit options. The RIO marketplace is being powered by digital brokerage solutions such as those of start-ups Loadfox and Sennder, which TRATON has invested in apart from U.S.-based FR8 Revolution.
Aided by such platforms, TRATON is well-equipped to transform itself into a mobility service provider in a rapidly digitalizing world.
Autonomous Driving: From operating an L3 autonomous truck in an Australian mine to testing L4 autonomous safety vehicles on the German Autobahn, TRATON is well poised to lead the autonomous driving technology market.
Platooning: The company is a participant in the EU Truck Platooning Cooperation. Also, TRATON’s MAN has a special project underway with DB Shencker in this regard. Platooning is an advanced driver assistance system in which two or more trucks travel in close proximity to each other on the highway with the driver being assisted in braking and acceleration by the system. All platoon vehicles are interconnected by an electronic tiller. The leading vehicle specifies the speed and the direction.
Automotive cloud: From 2020 onwards, VW group plans to build more than five million new vehicles (both passenger and commercial vehicles) per year, fully connected to the Volkswagen Automotive Cloud (VAC) developed by Microsoft. TRATON autonomous driving development is being supported by leading Tier-1 suppliers such as Bosch, Continental, Hella as well as new age technology suppliers.
Stake in Navistar – roadway to North America
In 2016, TRATON (then Volkswagen Truck & Bus AG), acquired a 17% stake in North American heavy truck manufacturer Navistar. This had been a long awaited investment since TRATON has no presence in the second largest truck market globally. Under the alliance TARTON will be delivering powertrain solutions to Navistar with synergies primarily through a joint venture (JV) in purchasing operations, tapping into benefits of economies of scale for both parties. Navistar is also to harmonize its On-command connection telematics solution for Hardware and Software Commonality with RIO.
Investing right
Over 72% of the group’s investments over the last decade are focused on modernization of its plants and preparedness for an electric future. Excluding the investments planned into 2020 towards MAN plant modernization, nearly 55.4% of all key investments by the group have been towards a future of electric vehicles.
Over 44% has been towards strategic partnerships in China and partnerships with original equipment manufacturers that will help the group expand its global footprint in the world’s largest truck markets of China (CNHTC) and North America (Navistar). Shared services have garnered a minor share of 0.3% in key investments.
The group also has several strategic partnerships in place such as with:
- Hino Motors Ltd., for the development of an EV platform as well as a JV signed in 2019 for global parts procurement
- Solera Holdings Inc., for development of solutions in fleet management, driver service and digital sales
- Wabco Holdings Inc., for Rio to integrate WABCO’s fleet management solution (FMS) especially for driver behavior monitoring and trailer telematics
Conclusion
While its 2019 IPO failed to meet expectations, TRATON SE is on a definitive growth trajectory. Through its strategic rebranding and new revenue stream interventions, TRATON is expected to witness CAGR of 6.7% between 2018 and 2025. The sustained double digital growth of Scania Fleet Management services, combined with growth in MAN Digital Services via strategic bundling of RIO platform based connected and shared services, is expected to push services revenue at CAGR of 15% to € 6.90 Billion by 2025 from € 2.59 Billion in 2018.
Scania is the leading brand in terms of revenue growth, profit margins, and connected services growth in the group. MAN group will look to adopt and improve in concept of modular design as well as expand RIO platform to improve its operating margins and revenue. The alliance will Navistar in North America will help the group make in-roads in the region and achieve commonality in telematics services and hardware between RIO and Navistar On-Command connection. The group will continue to leverage its other strategic partnerships, strong brands, market growth, new service revenue streams and shareholders to transform itself in the era of Connected, Autonomous, Shared and Electric (CASE).
Authored by Silpa Paul, Team Lead, Commercial Vehicles. The author can be contacted at silpap@frost.com. To purchase our complete analysis, click the below link https://store.frost.com/strategic-analysis-of-traton-se-2025.html.
