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Morningstar | Allison Transmission Continues to Offer Fleets Improved Fuel Efficiency and Labor Productivity

Allison Transmission Holdings is the world’s leading manufacturer of fully automatic transmissions for commercial vehicles. For much of its 100-year existence, Allison was part of General Motors, but it was purchased in 2007 by private equity investor The Carlyle Group, which subsequently took it public in 2012. Because of its long history of providing reliable transmissions for demanding commercial and military applications, the Allison brand maintains a premium cachet. In marketing materials, commercial vehicle makers frequently display the Allison Transmission name prominently along with the engine manufacturer.Allison products are distinguished from traditional manual and automated manual transmissions, or AMTs, in that they have a fluid coupling called a torque converter, which enables smoother shifting and allows the powertrain to continuously power the vehicle, without momentary gaps, throughout the gear range. Automatic transmissions have grown more efficient and reliable in recent decades, but most research and development outside of Allison has focused on light passenger vehicles.Allison currently has no other large-scale competitor that makes such products for commercial vehicles. Of the North American on-highway market for fully automatic transmissions, Allison commands 60% market share, while Ford has approximately 25%. In developed economies, the main competition to Allison’s on-highway products comes from AMT manufacturers, such as Eaton, and truck manufacturers that make their own AMTs. In much of the developing world, manual transmissions are used in commercial vehicles due to their low cost. For off-highway applications, Allison’s principal competition comes from vertically integrated OEMs such as Caterpillar and Komatsu.Two factors are driving the adoption of Allison’s products. First, its fully automatic transmissions improve operator efficiency, as they eliminate the need for operators skilled at shifting manual transmissions. Second, its products provide better fuel efficiency. Because of these benefits, Allison's products can pay back the $3,000 to $11,000 upfront premium over manual transmissions in less than three years.