Daimler Targets Expansion in Heavy-Duty Vocational Market
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CLEVELAND, N.C. — is taking aim at expanding its presence in the heavy vocational market while recognizing the challenge its rivals are lodging to its dominance in the over-the-road segment.
“The heavy vocational segment is a growth opportunity,” Daimler Trucks Chief Financial Officer Eva Scherer said July 8 during the company’s presentation, hosted at the company’s Class 8 truck manufacturing factory. “We have a competitive product offering, and the segment is less volatile than the on-highway segment.”
She pointed specifically to the X-series lineup, a range of trucks that , DTNA’s CEO, described as a product line around which this growth can be built.
“We have the right products for any job our customers need to get done,” he said, stressing that the X-series gives DTNA an opportunity to gradually expand in a competitive market that is marked by robust customer loyalty.
DTNA CEO John O'Leary addresses attendees at the company's Capital Market Day event. (Joe Howard/Transport Topics)
“Our competitors are super strong in that market,” he said. “Sometimes you have buyers who won’t consider something else.”
But Daimler found an opening when demand in the segment soared over the past few years, O’Leary noted.
“We got fairly lucky when record output made it impossible for some of our competitors to meet demand,” he said during a roundtable discussion with global media. “We were able to get in there. [Customers] immediately saw a great product and great value for the money.”
But O’Leary acknowledged it will take time to increase the company’s market share.
A Western Star 49X on display during Daimler Truck North America's Capital Market Day event. (Joe Howard/Transport Topics)
“It’s basic blocking and tackling — take [customers] on small ride and drives,” he said. “There’s no real easy way to shortcut that process. Picking up a few percentages of share a year is good; to gain a point of market share is not easy.
“These are fierce competitors. It won’t be easy, but they don’t pay me to do the easy things.”
But there is room. Per Scherer, “We are underpenetrated at 24% of the market.”
She also sees an opportunity on the service side of the equation.
“Service growth is linked to service share,” Scherer said. “We see it in North America a bit more strongly.”
CFO Eva Scherer calls the heavy vocational segment a growth opportunity for DTNA. (Joe Howard/Transport Topics)
Adding to the opportunity is the customized nature of customer needs in the segment, and the longer-term opportunity for parts sales, O’Leary said. In particular, he noted that heavy vocational trucks tend to have higher spec counts based on their duty cycles. That leads to higher revenue per unit.
That opportunity also extends to the later side of a truck’s service life, O’Leary said.
“We want to get the third and fourth owner into parts revenue streams,” he said.
O’Leary noted that selling just one unit to a new customer can build toward more sales later. DTNA is eying a 35% share of the heavy vocational market by 2030.
“We feel, based on input we have received from customers, that we can continue to grow,” he said. Conversely, O’Leary also recognizes that DTNA is facing new challenges from competitors taking aim at the on-highway segment that his company currently dominates on U.S. roads. Notably, Mack Trucks and Volvo Trucks North America have recently launched new on-highway models.
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“It doesn’t surprise me that they’re coming at us hard,” O’Leary said during an exclusive Q&A with Transport Topics. “They’re really good companies and really good competitors. I would only be surprised if they weren’t coming hard at us.”
But O’Leary was quick to note that owning the controlling share of the U.S. on-highway segment is only part of the story.
“We need to continue to innovate and continue to get better,” he said, stressing the importance of maintaining profitability and operating efficiently.
It’s also vitally important to invest in understanding customer needs.
“There is an art to interacting with these big data-driven companies,” O’Leary said. “It’s not just about how the truck looks. It’s an ongoing discussion of how to make them better. That is where we have grown our knowledge.”
Speaking specifically about the company’s North American customers during her opening comments, Daimler Truck CEO Karin Radstrom said, “We want to be their partner of choice. If they wake up in the middle of the night and have a problem, we want them to call us.”
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