North American commercial vehicle market and trends of CV manufacturers

Truck market sees substantial recovery; Paccar and Navistar expand emerging market business

2012/02/14

Summary

 Reported below are the present conditions of the medium- and heavy-duty truck markets in North America (US and Canada) and the trends of initiatives being taken in North America and other areas by Paccar and Navistar, manufacturers of medium- and heavy-duty commercial vehicles.

 The medium- and heavy-duty truck market in North America plummeted to 223,000 units in 2009 due to the economic crisis. It regained slight momentum to 246,000 units in 2010, and recovered substantially to 308,000 units in January to November 2011, up 39.2% from the same period a year earlier. In Navistar's forecast, the market is likely to see a 15 to 20% year-on-year increase in 2012.

 The heavy-duty truck market in North America is setting the scene of severe competition among the four major manufacturers including Daimler (32.3% market share in January-November 2011), Paccar (27.7%), Navistar (21.0%) and Volvo (18.9%). All four manufacturers registered an increase in North American sales in the same period and, in particular, Paccar's share rose significantly by 4 percentage points from the same period a year earlier.

 Both Paccar and Navistar are each following an aggressive business policy in emerging markets. Paccar is building a new plant in Brazil to produce DAF trucks to enhance business in South America. Navistar is launching models of finer design quality and better operability in Latin American markets to increase its share there. The company is also expanding business in areas outside North America in cooperation with Caterpillar.

Related reports:  Daimler's commercial vehicle business (November 2011);
North American CV manufacturers (November 2010)



Medium- and heavy-duty truck markets in North America: A 40% increase in January-November 2011 to 308,000 units

 The medium-duty truck (Class 4-7) and heavy-duty truck (Class 8) market in the United States and Canada is declining after the peak year of 2006 (sold 598,000 units) to 338,000 units in 2008 as a result of the economic crisis, and to 223,000 units in 2009. It recovered slightly to 246,000 units in 2010 and significantly to 308,000 units in January-November 2011, up 39.2% from the same period a year earlier. The sharpest growth was seen with heavy-duty truck sales in the US with a 57.7% growth at 150,000 units.

 According to Paccar's estimation, the heavy-duty truck (Class 8) market in the US and Canada is likely to mark a 10-15% year-on-year increase in 2012 to 205,000 to 230,000 units attributable to a replacement demand and other factors (as of October 2011). Navistar estimates the Class 6-8 truck market in the US and Canada will mark 15 to 20% growth in FY2012 to 275,000 to 310,000 units (as of December 2011),

Medium-/heavy-duty truck sales volume in the US

(units)
2005 2006 2007 2008 2009 2010 Jan.-Nov. 2010 Jan.-Nov. 2011
Class 4 Class 5 Class 6 Class 7 48,493 46,278 60,154 88,858 50,286 49,466 70,029 90,792 50,991 44,922 53,789 70,426 36,374 40,300 39,397 48,880 19,858 23,942 22,001 39,087 12,081 30,976 29,143 38,350 11,232 26,831 26,832 34,630 9,588 37,631 37,652 37,589
Medium Total 243,783 260,573 220,128 164,951 104,888 110,550 99,525 122,460
Heavy(Class 8) 252,792 284,008 150,965 133,473 94,798 107,152 95,410 150,419
Medium+Heavy 496,575 544,581 371,093 298,424 199,686 217,702 194,935 272,879

Medium-/heavy-duty truck sales volume in Canada

(units)
2005 2006 2007 2008 2009 2010 Jan.-Nov. 2010 Jan.-Nov. 2011
Medium Duty 15,450 15,090 14,948 15,730 10,072 9,772 8,887 11,664
Heavy (Class 8) 34,663 38,458 24,835 23,971 13,460 18,916 17,101 23,056
Medium+Heavy 50,113 53,548 39,783 39,701 23,532 28,688 25,988 34,720

Source: Ward's Automotive Reports

(Reference) US and Canadian medium-/heavy-duty truck classification
Medium Duty Heavy Duty
Class 4 Class 5 Class 6 Class 7 Class 8
GVW (pounds) 14,001-16,000 16,001-19,500 19,501-26,000 26,001-33,000 33,001≦
GVW (tons) -7.3 -8.8 -11.8 -15.0 15.0-

(Note) The values in the bottom row are the converted GVW from pounds to tons. The Class 4 of GVW 7.3 tons or lighter trucks is generally equivalent to the trucks of a truckload of 3 to 4 tons in Japan, and the Class 8 of GVW 15 tons or greater trucks are generally equivalent to the trucks of a truckload of 8 to 9 tons.

 



Heavy-duty truck market shares in North America: Daimler maintains its share at around 30% while Paccar's share rises to 28%

 Three manufacturers, Navistar, Ford and Daimler, accounted for approximately 78% of the Class 4-7 medium-duty truck market in the US and Canada in January to November 2011.

 Four manufacturers, Daimler, Paccar, Navistar and Volvo, are engaged in a severe share race in the heavy duty truck market. Daimler kept an approximately 30% market share in January-November 2011 due mainly to the high competitive standing of its model compatibility with the 2010 emissions standards in the US. Paccar's share rose from 23.7% to 27.7% over the same period attributable among others, according to Paccar, to the low maintenance costs of its Kenworth and Peterbilt brand tucks.

US and Canada:Sales volume and market share of medium-duty trucks (Class 4-7) by make

Sales volume (units) Market share
Jan.-Nov. 2010 Jan.-Nov. 2011 Jan.-Nov. 2010 Jan.-Nov. 2011
GM 3,738 38 3.4% 0.0%
Ford 28,210 37,214 26.0% 27.7%
Chrysler 5,466 8,049 5.0% 6.0%
  Freightliner Mitsubishi Fuso Sterling 20,535 2,339 354 28,296 2,045 5
Daimler total 23,228 30,346 21.4% 22.6%
Navistar 31,703 37,600 29.2% 28.0%
  Kenworth Peterbilt 2,775 2,155 3,488 3,181
Paccar total 4,930 6,669 4.5% 5.0%
Hino 4,042 5,688 3.7% 4.2%
Isuzu 6,095 7,843 5.6% 5.8%
UD Trucks 1,000 677 0.9% 0.5%
Total Medium Duty 108,412 134,124 100.0% 100.0%

(Note) GM withdrew from medium-duty truck business at the end of July 2009.

US and Canada:Sales volume and market share of heavy-duty trucks (Class 8) by make

Sales volume (units) Market share
Jan.-Nov. 2010 Jan.-Nov. 2011 Jan.-Nov. 2010 Jan.-Nov. 2011
  Freightliner Mitsubishi Fuso Sterling 35,157 599 2,121 52,760 1 3,332
Daimler total 37,877 56,093 33.7% 32.3%
Navistar 28,655 36,434 25.5% 21.0%
  Kenworth Peterbilt 13,476 13,184 24,199 23,866
Paccar total 26,660 48,065 23.7% 27.7%
  Volvo Mack 9,412 9,885 20,141 12,723
Volvo total 19,297 32,864 17.2% 18.9%
Others 22 19 0.0% 0.0%
Total Heavy Duty 112,511 173,475 100.0% 100.0%

Source: Ward's Automotive Reports (Note) The figures in blue in the Daimler, Paccar, and Volvo data show the breakdowns by brand.

 



Paccar: Sales in the US mark an 82% increase to 47,000 units in January-November 2011

 Paccar is selling medium- and heavy-duty commercial vehicles under the Kenworth and Peterbilt brands in North America, DAF brand in Europe, and mainly Kenworth and DAF brands in Australia, South America and other areas.

 Paccar's sales in the US rose sharply by 81.5% in January-November 2011 from the same period a year earlier along with sales in Canada that rose by 37.5%. As a result, Paccar's sales in North America rose 73.3% to 55,000 units.

 Paccar's total revenues in January-September 2011 rose 58.9% from the same period a year earlier to US$11.5 billion with the net income increasing nearly 2.5-fold to US$714.6 million with a 6.2% net income ratio (compared to 4.0% in the same period a year earlier). Increases in truck sales, aftermarket parts sales and financial services revenues contributed to boosting profits. The company ended the period with an operating cash flow of US$1.15 billion.

 Supported by favorable earnings statement and cash flow, Paccar made a capital investment of US$450 to 500 million and R&D expenses of US$280 to 300 million in 2011 for product development and for constructing production facilities. The company will increase capital investment to US$450 to 550 million and R&D expenses to US$275 to 325 million in 2012.

 As for the emerging markets, Paccar will build a new DAF truck plant in Brazil and launch DAF-brand vehicles in the Andean area (Chile, Peru, Ecuador, etc.) to strengthen its business in South America. Paccar will form a capital alliance in the Czech Republic with Tatra, a local manufacturer, and supply engines and cabs to the Czech company.

Paccar Group's sales volume by region

(units)
2007 2008 2009 2010 Jan.-Nov. 2010 Jan.-Nov. 2011
United States 44,700 38,200 28,300 29,100 25,657 46,575
Canada 8,300 6,700 4,400 6,100 5,933 8,159
North America total 53,000 44,900 32,700 35,200 31,590 54,734
Europe 60,100 63,700 22,200 31,200 n.a. n.a.
Mexico, Australia, and others 20,800 17,300 6,100 12,400
Worldwide 133,900 125,900 61,000 78,800
Source: Paccar Annual Report 2010 (Ward's Automotive Yearbook 2011 for the figures of Jan.-Nov. 2010/2011)
(Notes) 1. The DAF trucks enjoyed a 15.2% share in January-September 2011 (15.2% also in 2010) in GVW 15t+ segment in Europe.
2. According to ACEA (European Automobile Manufacturers Association), 237,000 units of 16t+ trucks were sold in Europe in 2011. Paccar predicts that the 15t+ truck market in Europe in 2012 will be 225,000 to 250,000 units (announced in October 2011).

 

Paccar Group's business results

(in millions of USD)
2006 2007 2008 2009 2010 Jan.-Sep. 2010 Jan.-Sep. 2011
Truck and other Net Sales 15,503.3 14,030.4 13,709.6 7,076.7 9,325.1 6,513.3 10,738.3
Financial Services Revenues 950.8 1,191.3 1,262.9 1,009.8 967.8 724.0 763.1
Total Revenues 16,454.1 15,221.7 14,972.5 8,086.5 10,292.9 7,237.3 11,501.4
Net Income 1,496.0 1,227.3 1,017.9 111.9 457.6 287.8 714.6
Net Income ratio 9.1% 8.1% 6.8% 1.4% 4.4% 4.0% 6.2%
Long-term Debt 20.2 23.6 19.3 172.3 173.5 150.0 150.0
Financial Services Debt 7,259.8 7,852.2 7,465.5 5,900.5 5,102.5 6,092.2 7,060.9
Stockholders' Equity 4,456.2 5,013.1 4,846.7 5,103.7 5,357.8 5,357.8 5,593.9
Source: Paccar Annual Report 2010, Q3 2011 Earnings Statement
(Notes) 1. Paccar produces industrial winches in addition to commercial vehicles.
2. Net income ratio is calculated by dividing net income by total revenues.

 

Paccar Group's production of medium- and heavy-duty trucks by country

(units)
Brand Country 2005 2006 2007 2008 2009 2010
Kenworth USA 33,282 37,160 21,624 18,729 12,679 14,916
Mexico 10,474 12,946 14,224 13,611 6,037 10,325
Canada 5,657 7,457 4,661 3,968 3,044 5,622
Peterbilt USA 36,232 41,707 20,974 17,794 12,814 13,853
Canada 6,447 6,936 5,413 3,805 2,774 (注3)
DAF Netherlands 40,528 56,200 42,586 42,515 13,369 22,168
(Leyland Trucks) UK 16,277 16,954 17,478 24,662 8,201 9,290
Foden UK 732 264
Total 149,629 179,624 126,960 125,084 58,918 76,174
Source: OICA (Ward's Automotive Yearbook 2011 and INOVEV for the figures of 2010)
(Notes) 1. The counted are GVW 6-ton or greater trucks. The production of buses ended by 2001.
2. Leyland Trucks is not a brand name but a manufacturing company. It produces and develops DAF brand vehicles.
3. Production volume of Peterbilt brand in Canada in 2010 is included in that of Kenworth brand.

 

Paccar: Bolstering business in South America

Brazil  In January 2012, construction work started for Paccar's DAF truck assembly plant in Brazil (Ponta Grossa, Parana State) with completion scheduled for 2013 at a cost of US$200 million. The new plant with a 300,000 square foot floor space will produce DAF XF, CF and LF trucks and PACCAR MX engines and sell them in Brazil and other markets in Central and South America. The plant will hire 500 workers during full operations.
 According to Paccar, the scale of the 6t+ truck market in Brazil is 170,000 units and is expected to grow further in the next few years.
Andean area (Chile, Peru, Ecuador, etc.)  Paccar for more than 40 years has been selling the Kenworth brand trucks in the Andean area in South America. Recently, Paccar introduced DAF brand trucks as well. In March 2011, Paccar introduced DAF CF series trucks, designed for rough terrains, in Chile, Ecuador and Peru. In the second half of 2011, Paccar introduced the higher operability LF series trucks.
 Paccar estimates that the 15t+ truck market in 2011 in the Andean area will be 30,000 to 35,000 units.

Source: Paccar Press Release 2012.1.10, Paccar Q2/Q3 Earnings Statement

 

Paccar: A DAF truck marketing office starts operations in Russia

 In May 2011, Paccar opened a marketing and sales office of DAF truck, Paccar's European brand, in Moscow to enhance its dealer network and boost sales of its trucks in Russia currently dominated by European trucks (Paccar sold 350 units in 2010, over 1,000 units targeted for 2011). Paccar has been selling the Kenworth brand trucks in Russia for more than 30 years and plans to increase its share by introducing the DAF brand trucks.

Source: Paccar Q2 Earnings Statement

Paccar: A technical center opened in India

 In October 2011, Paccar established Paccar India Technical Center in Pune, India, in cooperation with an India-based IT consulting firm, KPIT. The Center will hire approximately 200 people and provide engineering, IT, parts procuring and other services for Paccar's production and aftermarket operations around the world and accelerate the speed of product development.

Source: Paccar Press Release 2011.10.12

Paccar:Capital alliance formed with a truck manufacturer in Czech

 In August 2011, DAF Trucks, a Paccar affiliate, announced it had acquired a 19% ownership in Tatra a.s., a truck manufacturer in Czech. The amount of investment has not been disclosed. As part of the new alliance, DAF will start supplying PACCAR MX (12.9-liter) engines for heavy-duty trucks and DAF CF series cabs to Tatra in 2011. Tatra will assemble them in its chassis to produce heavy-duty trucks developed for irregular terrains and sell them on the DAF sales network. According to Paccar, Tatra products will supplement DAF's construction trucks and strengthen DAF's position in the heavy-duty truck market in Central Europe.

Source: DAF Press Release 2011.8.2

 



Navistar: Global sales in the term ended October 2011 increases 19.7% to 184,000 units

 Navistar, a Navistar International Corporation's subsidiary, is producing and selling the International-brand trucks and military vehicles, IC Bus-brand buses, MaxxForce-brand diesel engines as well as chassis for RV (recreational vehicle) and motor homes. Other than North America, the company operates in areas including India, Australia, Brazil and South Africa.

 Navistar's global sales during the term ended October 2011 (November 2010 to October 2011) increased 24.6% to 108,000 units with growth in both the North American market and other markets. Its revenues increased 14.9% to US$13.96 billion and its net income grew nearly 7 fold from the previous term to US$1.72 billion. Both revenue and income in FY2012 are expected to exceed those of FY2011 because of the market growth in North America and further development of global businesses.

 During FY2011, Navistar invested US$173 million to restructure its production facilities in North America. As for emerging markets, Navistar focused on its business in Latin America that will play a key role in its continued growth and managed to raise its share in the heavy-duty truck market to 21.6%. Navistar, in cooperation with Caterpillar, is bolstering their truck development, production and marketing activities under both brands in North American and other markets.

Navistar's sales volume of trucks/buses and engines

FY2009 FY2010 FY2011
Truck/bus (units) US and Canada Bus 13,800 12,400 9,200
Medium 13,000 18,500 27,100
Heavy 19,100 21,600 25,700
Severe service 17,200 14,000 13,300
North America total 63,100 66,500 75,300
Other regions Military 1,600 1,400 1,400
Non-military 11,100 19,100 31,700
Total 75,800 87,000 108,400
Diesel engine (units) OEM sales - South America 99,200 132,800 138,600
Ford sales - US and Canada (Note 2) 101,500 24,900 -
Other OEM sales 11,300 14,200 16,200
Intercompany sales 57,300 68,500 88,800
Total 269,300 240,400 243,600
Source: Navistar Q4 2011 Earnings Presentation
(Notes) 1. Military vehicles sold to US and Canadian armies are included in the severe service.
2. Supply of diesel engines for Ford finished at the end of 2009 due to a conflict between the two companies regarding such supplies (more details later).

 

Navistar's business results

(in millions of USD)
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011
Net sales and revenues 12,124 14,200 12,295 14,724 11,569 12,145 13,958
Net income (loss) 139 301 (120) 134 320 223 1,723
Manufacturing segment profit (unaudited) 421 838 462 693 836 741 882

Source: Navistar Q4 2011 Earnings Presentation, Q4 2011 Form 10-K

 

Navistar's production of medium-/heavy-duty trucks and buses by country

(units)
Heavy Trucks Buses
2007 2008 2009 2010 2007 2008 2009 2010
USA 39,278 40,087 30,483 32,479 15,919 13,962 13,820 n.a.
Canada 9,410 15,986 3,892 8
Mexico 22,151 20,114 17,169 26,128
Russia 115
Total 70,839 76,302 51,544 58,615 15,919 13,962 13,820 n.a.

Source: OICA (Ward's Automotive Yearbook 2011 for the figures of 2010) (Note) The counted are GVW 5-ton or greater trucks and buses.

 

Navistar: Restructuring production facilities in North America

Chatham plant in Canada closed  In August 2011, Navistar announced the closing of its truck plant located in Chatham, Ontario, Canada. The plant had been inoperative and its workers laid off since June 2009 due to a failure to reach an agreement with the Canadian Auto Workers (CAW).
RV business of Monaco, a subsidiary, restructured  Part of the head office functions of Monaco, an RV manufacturing subsidiary, was transferred to Navistar's new headquarters. The Coburg plant in Oregon, US, was reduced in scale and RV production was centralized in the Wakarusa plant in Indiana, US. The head-count was reduced by 450 at the Coburg plant and increased by 400 at the Wakarusa plant.
Chassis plant of Workhorse, a subsidiary, closed  Workhorse, a chassis manufacturing subsidiary, will close the Union City plant in Indiana, US, and reduce the head-count by 225. The chassis production will be integrated in Navistar's other plants.
Restructuring cost ad effects  Navistar will invest US$100 to 130 million to close the truck plant in Chatham, and another US$100 million to restructure Monaco/Workhorse plants, of which US$173 million will be allocated in the FY2011 and the remainder in the FY2012. The restructuring is expected to lead to saving US$20 to 30 million a year.

Source: Navistar Press Release 2011.8.2

 

Navistar:Share rises to 21.6% in heavy-duty truck markets in Latin America

 Navistar's shipment to Latin American markets (other than Brazil, Argentina and Paraguay) topped 10,000 units for the first time in the term ended October 2011. As a result, Navistar's International-brand heavy-duty trucks in those markets marked a record-high share of 21.6% (compared to 14.3% in 2010), driven by a very positive product mix including the aerodynamically designed ProStar in 2010 and the TranStar of higher operability in 2011.

Source: Navistar Press Release 2011.12.5

Navistar:Global tie-up business with Caterpillar now in second phase

 In September 2011, Navistar announced that its tie-up business had reached the second phase with Caterpillar Inc., a globally leading manufacturer of construction and mining equipment, diesel and natural gas engines, etc. This makes NC2 Global LLC, a fifty-fifty joint venture company, Navistar's wholly-owned subsidiary that will sell trucks carrying the International and Caterpillar (CAT) brands on both companies' sales channels in non-US regions under the new brand licensing agreement.
 Originally, NC2's business focused on developing trucks for use on public roads in markets outside of the US, such as Australia, South Africa and Brazil. Agreement was later reached with Caterpillar to produce CAT-brand heavy-duty industrial trucks for markets in North America. The company began producing and selling the CT660 in September 2011. In the second phase of the alliance, the industrial truck business in North America will extend to other markets as well. Furthermore, Navistar and Caterpillar concluded a non-binding agreement regarding the development of industrial trucks based on Caterpillar's cab-over-engine style for international markets.

Source: Navistar Press Release 2011.9.29

Navistar: The joint venture manufacturing company in Mexico co-established with Ford to be discontinued in December 2014

 In December 2011, Ford sent a notice to Navistar to the effect that Blue Diamond Truck Company, a joint venture company established jointly with Navistar, was to be wound up in December 2014. Blue Diamond Truck (originally a fifty-fifty joint venture; 75% owned by Navistar today) is producing medium- and light-duty trucks in Mexico for the two companies (Ford produces F-650/F-750).
 Navistar and Ford have been in close relations since 1979 with Navistar supplying the V6/V8 engines for Ford until a conflict on the issue of supply developed to a lawsuit in 2007. The engine supply ended at the end of 2009 after conciliation but the joint venture in Mexico continued (Ford plans to transfer its truck production in Mexico to its own plant in Ohio, US).

Source: Navistar Q4 2011 Form 10-K

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