Annual report 2007 - Torotrak

Chief Executive’s Review - continuedIf these proposed legislative changes become ratifiedthey would intensify the industry’s requirement foraccessible technologies which can deliver fuel economysavings to meet the mandatory deadlines. Torotrak will bewell positioned to capitalise on any such developmentswith its proven implementation-ready technology.Truck and BusThe truck and bus market now represents a significantopportunity for our technology. As part of our strategy oftargeting broader applications, we have accelerated ourdevelopment of this market. I am pleased to report thatwe are beginning to see a positive contribution from ourbusiness development initiatives in this market, throughthe earning of early-stage revenues.In parallel to this development, we have continued ourwork in conjunction with another European busmanufacturer, as previously reported in the interimresults. With further development of the transmissionfitted to a prototype bus we have delivered a measuredimprovement of 20% in fuel consumption. We have alsocalculated that, with an IVT specifically configured for thisapplication, a further improvement in fuel economy wouldbe possible. Although we have a clearly defined productproposition with measurable environmental benefits, thisparticular bus manufacturer is not large enough tosupport a stand-alone development programme for aseries production transmission. We have therefore agreedto look at ways in which we can work together tostimulate broader interest and support for this valuableopportunity for fuel economy improvement.We have found that the product development processesin this market are generally of greater duration than is thecase in other markets (around five years from start ofdevelopment to series production), but the industry isalso looking for new technologies to help it address thechallenge of maintaining good fuel economy levels whilstalso meeting the requirements of planned emissionslegislation.In particular, during the past year our relationship with aleading European truck and bus manufacturer hasstrengthened and we have now completed a detailed coststudy on a proposed main-drive transmission for one oftheir vehicles. The results of this study look veryappealing and show that a Torotrak IVT, as a maintransmission in a distribution truck, a heavy haulagetruck, or a bus, can offer significant technical andfunctional benefits at very attractive cost levels. This newinformation is a further major breakthrough for ourbusiness and gives third party endorsement to our beliefthat Torotrak’s IVT is a compelling commercial andtechnical proposition for both the truck and bus sectors.We anticipate that these promising results will lead to adeeper working relationship with this vehiclemanufacturer that will add to our future order book.Competitive LandscapeIn the OPE market, our main competition is the existinghydrostatic variable drive technology. We know from ourwork to take into production the TTT through Infinitrakthat we have a highly competitive product offering whichis more efficient, quieter and easier to control than theincumbent technology. We have also demonstrated thatwe have been able to deliver the transmission at a costadvantage to an established technology which has hadthe benefit of some 40 years of work on cost efficiency inproduct and manufacturing. The fact that we arecompetitive at our first launch makes a compellingcommercial proposition.Competitive advantage and market share in OPE is driventhrough product innovation. Our JV partner, MTD, seesthe benefit that IVT can bring to its brand developmentand to lawn tractor sales.In the off-highway market, our work with partnersand industry-leading businesses continues todemonstrate that there is a gap in the market for avariable drive which delivers performance, robustnessand controllability at an affordable price.Small and compact tractors are available with hydrostatic8Annual Report and Financial Statement 2007