If we look at the past three decades of deploying additive manufacturing (AM) in the real world, we can find a few killer applications that have commercialized technologies and spread 3D printing globally. But, what will be the next big AM application? After prototyping, jewelry molds, dental crowns and bridges, invisible aligners, orthopedic implants, jigs and fixtures, and housings, what will be the next 3D printing application that produces millions of parts and billions in value? My first educated guess was in the rather exotic area of horse trailers. Today, we will be looking at a broader and bigger opportunity: specialty vehicles.
Specialty Vehicle Market Overview
Specialty vehicles represent a big net, kind of a grab bag, really. What is mostly meant by the phrase “specialty vehicle” is any kind of vehicle that has been customized to fit a particular work purpose: ambulances and fire trucks; mobile veterinary, medical, and prosthetic clinics and blood donor vans; police command, SWAT, bomb disposal, crime lab, riot police, and detainee vehicles; utility and specialty trade trucks; and other miscellaneous vehicles, like urban electric trollies, food trucks, safari jeeps, VIP vans, refrigerated vans, and mobile classrooms. We would not consider custom cars or military vehicles as a part of this segment.
On the whole, a donor vehicle is usually a bare bones truck or van supplied by firms such as Daimler, Iveco, Ford, Nissan, Volkswagen Commercial Vehicles, Toyota (Hino), Dongfeng, GM and others. Some come from specialized commercial vehicle companies. Meanwhile, in some cases, companies play in adjacent markets such as heavy trucks (Iveco), while others are a part of large automotive groups or large capital goods companies like Exor. The vehicles themselves can be small truck manufacturers (Ranger), small panel vans (Volkswagen Caddy), large panel vans (Fiat Ducato or MAN TGE), or full-sized U.S. vans (Ford Econoline, Ram Promaster, Chevy Express). Estimates on market size differ between around $90 and $130 billion in revenue globally. Growth is expected to be slow: low single digits.
Specialty Vehicle Market Dynamics and Considerations
On the donor vehicle side, manufacturers are some of the world’s biggest, multi-billion-dollar automotive companies. Customization is performed by much smaller firms, however, often with revenues below $50 million. Some businesses are local car shops with a little more wherewithal, while other operations are specialized manufacturers with specific production equipment. Specialized companies are rampant, but some small firms customize just about anything that comes their way. Often businesses have very established brands in their own niches.
Often customers are companies wanting one or a few vehicles that must be outfitted just so. In other cases, vehicles are made using general patterns and ideas, but with local customized elements. Police departments, SWAT teams, or hotdog businesses can be one of the diverse clients in these cases. The largest customers are companies such as FedEx, UPS, and the U.S. Postal Service. There are other medium-sized clients, such as Snap On for its tool vans which are now made by LDV. Mostly, however, individual orders are low volume. For emergency vehicles, one standard is sold with many custom elements for local hospitals or other companies.
Cummins and other engine firms play a role in the market, as well. Engines may be bundled with existing chassis, while other times these are options. Some companies build their own chassis, mainly in the firetruck segment. Typically, an integrator will allow customers to choose from several different donor vehicles from a variety of suppliers. However, companies, such as Gruau Group, work with 24 different vehicle brands. Meanwhile, Bush allows customers to choose from 101 different automobile models. There are also suppliers making pumps, generators, and all manner of kit that gets used extensively by integrators. There are specialized regional dealers for these vehicles, but a lot of sales are direct.
Most of the integration companies are indeed small, but some are larger, such as Morgan Olson, which specializes in step vans, a particular type of delivery van. This company is owned by JB Pointdexter & Co., whose subsidiaries include truck cap manufacturer LEER, tool van interior provider MasterRack, alongside a firm dedicated to hearses, among others.
With $2.3 billion in revenues, REV Group (XNYS: REVG) is a consolidator that has bought storied companies such as Ferrara, Ladder Tower, KME and others to secure a solid position in manufacturing fire, rescue, and ambulance vehicles in the U.S. REV also makes oft-used component assemblies, such as the Per4Max seatbelt set up for paramedics. The Shyft Group (NASDAQ: SHYF) has $676 million in revenue and backlogs of close to $1 billion. Rosenbauer has revenues of over $1 billion along with backlogs of over $1 billion. Pierce is owned by truck and military giant Oshkosh. Sutphen meanwhile is a family firm that has been in business for over 133 years.
REV Group and Rosenbaur have revenue per employee ratios of a little less than $400,000. Shyftt more than doubles this. GM and Ford, however, have a revenue per employee of $800,000, while other firms, such as Kia and BWM, have much higher employee-revenue ratios. On the whole, we can assume that, comparatively, a lot of labor is going into this segment while they have comparatively little of the Tier 1, 2 and 3 OEM support that the large automakers can rely on.
Overall, we can see operating margins of 1% or 3% in this market, which is not great. Shyftt has operating margins of 8%, which is good for this segment but scary in others. Similar companies with stronger market positions, such as Caterpillar and John Deere, have operating margins of around 15%.
The market is intensely national, with vehicle regulations and local donor vehicle market share governing designs and the sector as a whole. Ford and other firms are active in several areas, but often with very different vehicles and configurations. Understandably, businesses are trying to make single vehicle models more prevalent globally. However, so far, Ford Super Duty Chassis Cab is a big part of Ford’s U.S. commercial vehicle offering, but absent in other regions. Meanwhile, the small Ford E-Transit van and small panel Transit Connect van is being pushed worldwide, while the Transit Courier is more aimed at Europe. Ford’s large Transit is everywhere, but the F-59 Commercial Stripped Chassis is very much a U.S. product.
Local regulations are often very specific, especially for emergency vehicles. In some Latin American and Asian countries, an ambulance is a van with a bed that is meant to get you to the hospital quickly. U.S. ambulances are much bigger, have much more equipment, and travel much slower. European ambulances differ per nation and vacillate between these two extremes. There is no such thing as an archetypical ambulance.
Clients are different as well, with health systems buying or specifying ambulances extensively in Europe and individual commercial ambulance companies commissioning them elsewhere. In the U.S. there are also three types of ambulance: one is a truck-style vehicle with a container on the back; the other is a van-based vehicle; and the other is larger van still with better egress. There are also local specializations, such as Bariatric ambulances for extremely overweight people, and cardiac ambulances. There are some international standards, such as the EN 1789:2020 for medical vehicles, but a lot of the regulatory landscape is very local.
Trends in the Specialty Vehicle Market
Electrification and hybrid vehicles are a definite trend in this market. LED lighting, more computers, screens and automation on board is also visible. There’s little in breakthrough products or manufacturing innovation. Its easier to see a company like Beckhoff making loads of money from this market as it goes into a more digital realm. The first electric firetruck cost $1.2 million configured over a base price of 900,000. Electrification will be an opportunity but it is unclear how much this will be a nice to do kind of thing for wealthy or big communities for a long while. Electrification of electric commuter bus systems would bring real benefits in noise and pollution reduction that would be of limited concern in fire fighting. Meanwhile electrification means that a lot of the ticket is going to Panasonic, Bosch and the like. The investments needed to transition seem considerable as well. Things such as blind spot detection and more cameras and sensors are also trends. More modular construction ideas that enable lower cost customization is also happening. There is some use of customization software but usually sales and customization happen in person. In some cases there are over a 100,000 different options.
In the next post in this series, I will look more at how these vehicles are made and where 3D printing can come in to disrupt the market.
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