Volkswagen AG and Toyota Motor Corp are forming a truck-based alliance, allegedly to cut RD costs. While the two automakers joust for the title of biggest in the world, their trucking arms must have had a rough 2017 to necessitate an alliance solely on the grounds to limit development expenditures… right?
Not exactly.Â Volkswagen Truck Bus actually had a really good year. Strong sales pushed revenues up 12.1 percent, and operating profits before special items increased by 26.8 percent (for over $2.41 billion). Meanwhile, Toyota’s Hino saw operating profits improve byÂ 21.5 percent. So why bother with the alliance of both truck builders saw strong returns based on their respective sizes?
Like car builders, commercial vehicle manufacturers are seeing elevated costs due to the development of lower-emission powertrains and automated technologies. However, both of these truck units have parent companies with very deep pockets and didn’t fare terribly after accounting for last year’s RD expenditures, so another reason for the team-up could have something to do with achieving global domination by joining forces with a business that doesn’t compete in the same region.
VW Truck Bus moved over 200,000 units last year, while the smaller Hino delivered about 170,000. But the important part of the equation is that the divisions did so without much market overlap. VW operates primarily out of Europe and South America, where its MAN andÂ Scania brands dominate. While Hino also does a little bit of business in South America, the majority of its sales are spread across Asia, the United States, and Canada.
According to Reuters,Â the companies announced Thursday that they will consider cooperating in areas such as diesel and gasoline-electric hybrid engines, vehicle connectivity, and self-driving technologies. They also suggested that the combined output could offer economies of scale in research and development as well as procurement.
“We can join forces and spend RD money only once instead of twice or three times,” explained Volkswagen Truck Bus CEO Andreas Renschler in Tokyo this week. “We see potential to save on our budgets and also to combine our resources to be faster at bringing products to market than we would be alone.”
Look out, Daimler Trucks, AB Volvo, Paccar, andÂ Mitsubishi Fuso TruckÂ Bus Corporation. Hino andÂ Volkswagen Truck Bus are coming for you through shared resources and fiscal conservation. We’re on pins and needles, frankly.