Sorting Out 2010

Never before has the North American heavy-duty truck industry faced such complex environmental regulations. Of all the emission-related regulations that were introduced in the past or are scheduled to be introduced in the short-term on a global level, none is as harsh or as stringent as the EPA 2010 regulation. The sustainable development of the North American society requires implementation of such regulations and calls for harmonization of such regulations globally.

Selective Catalytic Reduction (SCR) and cooled exhaust gas recirculation (EGR) are the two key regulation compliance technologies being adopted by the truck makers. Except for Navistar International, most truck makers and engine suppliers have opted the SCR technology for regulation compliance. This implies that the aftermarket has to cater to two disparate emission reduction technologies and related service and maintenance requirements. The overwhelming majority of truck makers and engine suppliers have chosen SCR, which means that there is an urgent need for developing a continental urea infrastructure. The service and maintenance industry must act urgently to hit the ground running to convert demand into dollars.

New products and technologies such as diesel particulate filters, diesel oxidation catalysts, urea-based diesel exhaust fluid (DEF), variable geometry turbochargers, sensors, filters, SCR components, low-ash engine oil, among others will be demanded by fleets and owner-operators. Service and maintenance professionals and technicians need to be trained and educated to effectively and efficiently cater to the service and maintenance demands of EPA 2010 compliant trucks.

The most arduous task for the aftermarket is to create a urea infrastructure. The diesel exhaust fluid or DEF market alone will post a 167 percent compound annual growth rate and grow from about 65 million dollars in revenues to about $800 million in revenue size by 2015, which will be attained through unit shipments of about 330 million gallons of the DEF fluid. This fluid, necessary for SCR trucks, will be the single largest contributor of the new aftermarket revenue stream opening up with EPA 2010 regulation compliant trucks running on North American highways. The production, distribution, retailing and all other activities associated with providing this fluid to the SCR equipped trucks will open up several aftermarket revenue growth opportunities to various aftermarket stakeholder groups.

Considering DEF and all other new technologies, products and services unique to EPA 2010 regulation compliant trucks it can be seen that the aftermarket will experience the creation of new and lucrative revenue streams in the short-medium term.

Frost & Sullivan's recently published study titled "Potential Impact of EPA 2010 Regulation on the Class 4-8 Truck Aftermarket" analyzes and forecasts the markets for the constituent technologies and services that will emerge in the North American aftermarket as the EPA 2010 regulation compliant trucks begin penetrating the commercial truck population. The study reveals that the total aftermarket revenue opportunity arising from service and maintenance of EPA 2010 regulation compliant trucks will be of the size of $131.8 million in 2010, and increase exponentially to $1.36 billion by 2015.

There is no denying that the EPA 2010 regulations will lead to the introduction of several new technologies, products, and services into the North American Class 4-8 truck aftermarket. Based on the OEMs' choices of compliance technologies, it seems that SCR technology will feature in the larger majority of compliant trucks. The DEF fluid and urea filter related service and maintenance are one of the two key focal points for SCR trucks. DPFs and DOCs will feature in both SCR and cooled EGR trucks and will offer aftermarket service and maintenance opportunities through the 2010-2015 period. The same is true for low-ash engine oils which will offer price growth and revenue growth opportunities to developers, distributors, and retailers of this new type of engine oils.

This is a good time for the aftermarket to prepare for new growth opportunities associated with EPA 2010 regulation compliant trucks. The question for the aftermarket service and maintenance providers is... Is your business prepared to move rapidly and derive impressive revenue growth by turning this rapidly growing market segment into your growth driver?

Frost & Sullivan partners with clients to accelerate their growth. Sandeep Kar is the program manager, heavy-truck technologies at Frost & Sullivan. He specializes in advanced heavy-truck technologies and markets spanning powertrain, chassis, safety and telematics.