CHRISTIAAN HETZNER

Tesla shows why VW, Daimler should keep their heavy trucks businesses

Tesla aims to disrupt the commercial truck market with an all-electric semi.
Christiaan Hetzner is Automotive News Europe;'s Germany correspondent.
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Volkswagen Group and Daimler are looking to simplify their businesses amid rapid changes in the industry and the obvious candidates to be auctioned off have always been their commercial vehicles operations.

In the past, this would have made perfect sense, since standard components between passenger cars and heavy trucks are not shared.

But, if ever there was a time when meaningful synergies could be achieved between the two, it could be now in the move toward electrification and autonomy. Developments at Tesla, are proof of this.

VW Group CEO Matthias Mueller revealed in September he was considering unloading parts of the company's business that could equate to as much as 20 percent of its 217 billion euros in annual revenue. The natural conclusion suggests this can only mean a possible divestment of its commercial trucks business, comprising the Scania and MAN brands as well as VW's own Brazilian lorry brand. Together they accounted for 32 billion euros in turnover last year.

Daimler meanwhile is undergoing its first major group-wide reform since CEO Dieter Zetsche sold Chrysler off a decade ago. Following an initial feasibility study into a new holding structure launched only about three months ago, Daimler announced in mid-October that it would in fact greenlight these plans, which foresee spinning its manufacturing business off into two entities legally separate from the group, one focused on cars and another on trucks.

The greater entrepreneurial freedom will allow the two units to develop their businesses more independently of one another, sensible given that their customers have entirely different needs. It could however also lead to a sale of the commercial vehicle business at a later date, even if Daimler currently wants to quash this speculation.

This mirrors VW Group's approach, which has already bundled its truck and bus subsidiaries into an independent umbrella holding.

The usual argument behind a divestment is to free up capital to invest in the core business, but both Daimler and VW are swimming in cash with more than 20 billion euros each at the end of September. Moreover, stockholders are happy because proceeds are frequently returned to them in the form of a special dividend. It also removes the discount investors assign to conglomerates, resulting in a higher valuation for the stub business.

But investor darling Tesla is proof that markets can embrace diversified businesses so long as there is a compelling equity story. Following his success in electric mobility and autonomous driving with the Model S and Autopilot, Elon Musk unveiled a battery-powered semi on Nov. 16, the first commercial vehicle his Silicon Valley company has developed.

Electric synergies

During a recent event in Hamburg, VW's trucks and bus holding offered the first convincing reasons why it is finally starting to make sense for carmakers to own both businesses. Whether it was MAN buses powered by lithium ion batteries or self-driving Scania lorries, developments were driven from the scale effects on the passenger car side.

"Of course, we're using the same cells and the same modules as the passenger car and that’s a huge benefit," said Scania engineer Nils-Gunnar Vagstedt. Meanwhile one of his bosses on the VW Trucks & Buses management board predicted "the big synergies I would expect are coming out of autonomous driving and AI."

Likewise, car brands such as VW and Audi would be well advised to copy their sibling's innovative "Rio," an ecosystem for commercial vehicle owners who traditionally have been open to logistics services such as telematics and fleet management solutions.

Startups like Munich's Loadfox are already developing third-party software for VW's cloud-based platform, for example to optimize a truck's capacity utilization. Rio could serve as a basis when developing a similar suite of digital services for their own passenger car customers, relying on outside programmers.

"We always try to use the volume and the synergies from the passenger car [unit] they have much more purchasing power than we have. And of course, it's a big benefit that not many commercial vehicle companies have," said Goetz von Esebeck from MAN's European truck and bus division.

True. Volvo and its Renault and Mack brands doesn't, nor does U.S. rival Paccar with its DAF, Kenworth and Peterbilt trucks.

In the end, it's worth considering who beat EV prophet Musk to revealing one of the first electric long haul truck concepts? Industry leader Daimler. After developing the Fuso eCanter urban distribution electric trucks that are now being delivered to its first customers, it followed this up in October with its Tokyo auto show study E-Fuso Vision One, with an electric range of up to 350 kilometers.

Loosening the ties to the parent now could endanger this.

You can reach Christiaan Hetzner at christiaan.hetzner@gmail.com.

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