North American commercial vehicle market trends

Paccar enjoys market share expansion; Navistar rethinks use of SCR technology

2013/01/28

Summary

Market share of heavy-duty trucks (Class 8) in North America by OEM The medium- and heavy-duty truck market in North America (U.S. and Canada) dropped 30% y/y to 223K units due to the economical crisis in 2009, but recovered to 246K units in 2010 and made a huge leap to 344K units in 2011 and 355K units during the January to November 2012 period.

 The sales of heavy-duty trucks (Class 8) grew 17.9% y/y to 204K units during the January to November period in 2012. According to Paccar's estimation, the heavy-duty truck market in North America is likely to achieve an annual sales volume of 210K to 220K units in 2012 and 210K to 240K mainly from replacement demand in 2013.

 The heavy-duty truck market for the January-November 2012 period in North America is split among four major manufacturers: Daimler (34.3%), Paccar (28.8%), Volvo (19.3%) and Navistar (17.6%). The sales volume and the market share for the three OEMs excluding Navistar increased, but the figures dropped for Navistar, which has not met the 2010 gas emission standards for heavy-duty diesel vehicles. Navistar's market share declined by 3.4 percentage points during that period.

 Paccar achieved record heavy-duty truck market shares in Europe and the U.S. The company's businesses in emerging markets are also growing; a DAF truck plant is currently under construction in Brazil while DAF trucks have been launched and a parts distribution center was established in Russia. In China and India, parts have been procured.

 Navistar had chosen not to use SCR technology to meet the U.S. 2010 emission standards, but even by mid 2012, the company still hadn't passed the testing, which resulted in the declined sales. In August 2012, the company changed its strategy and made a decision to introduce SCR. To restore its performance, Navistar will use engines and SCR systems supplied from Cummins and launch trucks meeting the standards from the beginning of 2013. Daimler and Volvo will be featured in our upcoming reports.


Related report: North American CV manufacturers (February 2012)



Medium- and heavy-duty truck markets in North America: a 17.7% increase during January-November 2012 period to 355K units

 The Medium-duty truck (Classes 4 to 7) market in the U.S. and Canada increased during the January to November 2012 period by 12.1% y/y to 150K units. In the U.S., the number of volume declined for Classes 4 and 6, but increased for Classes 5 and 7. Heavy-duty truck (Class 8) market showed an increase of 17.9% to 204K units. It grew by 17.4% in the U.S. and 20.9% in Canada, showing a similar increase in both markets.

 According to Paccar's estimation announced in October 2012, the heavy-duty truck (Class 8) market in the U.S. and Canada is likely to mark an increase in 2013 to 210K to 240K units mainly attributable to a replacement demand. Meanwhile, Navistar revealed its forecast in October 2012, that the market during the fiscal year ending October 2013 (November 2012 to October 2013 period) will be 215K units.

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

(units)
2006 2007 2008 2009 2010 2011 Jan.-Nov.
2011
Jan.-Nov.
2012
Class 4
Class 5
Class 6
Class 7
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
10,459
42,483
40,677
41,212
9,588
37,631
37,652
37,589
8,504
49,098
36,812
42,956
Medium Total 260,573 220,128 164,951 104,888 110,550 134,831 122,460 137,370
Heavy(Class 8) 284,008 150,965 133,473 94,798 107,152 171,358 150,419 176,585
Medium+Heavy 544,581 371,093 298,424 199,686 217,702 306,189 272,879 313,955
Medium-/heavy-duty truck sales volume in Canada
(units)
2006 2007 2008 2009 2010 2011 Jan.-Nov.
2011
Jan.-Nov.
2012
Medium Duty 15,090 14,948 15,730 10,072 9,772 12,722 11,664 12,971
Heavy (Class 8) 38,458 24,835 23,971 13,460 18,916 25,512 23,056 27,880
Medium+Heavy 53,548 39,783 39,701 23,532 28,688 38,234 34,720 40,851

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) 6.4-7.3 -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 share in North America: Daimler's share increases to 34.3% and Paccar's to 28.8%

 Four major manufacturers in the U.S. and Canada, Daimler, Paccar, Volvo, and Navistar are engaged in a severe share race in the Class 8 heavy-duty truck market. Daimler continued to maintain more than 30% of the market share during the January to November 2012 period. Paccar's Kenworth and Peterbilt brands achieved record shares, expanding the group share to 28.8%. Navistar, which has yet to meet the gas emission standards, decreased its share from 21% down to 17.6%.

 The three major manufacturers, Ford, Navistar, and Daimler, accounted for approximately 75% of the Classes 4-7 medium-duty truck market between January and November of 2012. Ford and Daimler both increased their shares, but the sales volume declined for Navistar whose market share dropped by 4.6 percentage points.

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

Sales volume (units) Market share
Jan.-Nov. 2011 Jan.-Nov. 2012 Jan.-Nov. 2011 Jan.-Nov. 2012
Ford 37,214 42,940 27.7% 28.6%
Navistar 37,600 35,243 28.0% 23.4%
Freightliner
Mitsubishi Fuso
Sterling
28,296
2,045
5
32,268
2,505
0
21.1%
1.5%
0.0%
21.5%
1.7%
0.0%
Daimler total 30,346 34,773 22.6% 23.1%
Chrysler 8,049 10,761 6.0% 7.2%
Isuzu 7,843 9,341 5.8% 6.2%
Kenworth
Peterbilt
3,488
3,181
4,585
4,378
2.6%
2.4%
3.0%
2.9%
Paccar total 6,669 8,963 5.0% 6.0%
Hino 5,688 7,360 4.2% 4.9%
UD Trucks 677 960 0.5% 0.6%
GM 38 0 0.0% 0.0%
Total medium-duty trucks 134,124 150,341 100.0% 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 OEM

Sales volume (units) Market share
Jan.-Nov. 2011 Jan.-Nov. 2012 Jan.-Nov. 2011 Jan.-Nov. 2012
Freightliner
Westin Star
Sterling
52,760
3,332
1
65,586
4,537
0
30.4%
1.9%
0.0%
32.1%
2.2%
0.0%
Daimler total 56,093 70,123 32.3% 34.3%
Kenworth
Peterbilt
24,199
23,866
30,508
28,409
13.9%
13.8%
14.9%
13.9%
Paccar total 48,065 58,917 27.7% 28.8%
Volvo
Mack
20,141
12,723
21,881
17,628
11.6%
7.3%
10.7%
8.6%
Volvo total 32,864 39,509 18.9% 19.3%
Navistar 36,434 35,905 21.0% 17.6%
Others 19 11 0.0% 0.0%
Total hevy-duty trucks 173,475 204,465 100.0% 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's sales in January-November 2012 period in North America increase by 24% to 68K units

 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 U.S. rose by 23.4% in January-November 2012 from the same period a year earlier along with the sales in Canada which rose by 27.6%. As a result, Paccar's sales in North America increased by 24% to 68K units. During the January to November 2012 period, the Class 8 market share in North America increased to 28.8% owing to share expansion by both the Kenworth and Peterbilt brands.

 Paccar's total revenues for the January to September 2012 period rose 13.5% y/y to 13.05 billion dollars and net income increased by 20.1% to 860 million dollars with a 6.6% net income ratio (compared to 6.2% in the same period a year earlier). The profit grew from the increase in market volume, market share, and sales from product with high profitability.

 During the January to September 2012 period, supported by excellent balance sheet and cash flow, Paccar made a capital expenditure of 350 million dollars and invested 210 million dollars for R&D. During the same period, it introduced new heavy-duty truck models from three of its group brand. To continue the investment on the construction of DAF plant in Brazil as well as for product engineering, Paccar will make 400 to 500 million dollar capital expenditure and spend between 275 to 325 million dollars for R&D.

 The company's businesses in emerging markets are also growing. Besides a new plant construction in Brazil, DAF trucks have been launched and a parts distribution center was established in Russia. Also, parts are being procured in China and India.

Paccar Group's sales volume by region

(units)
2008 2009 2010 2011 Jan.-Nov.
2011
Jan.-Nov.
2012
US 38,200 28,300 29,100 59,400 46,575 57,467
Canada 6,700 4,400 6,100 10,500 8,159 10,413
North America total 44,900 32,700 35,200 69,900 54,734 67,880
Europe 63,700 22,200 31,200 51,100 n.a. n.a.
Mexico, Australia, and others 17,300 6,100 12,400 17,000
Worldwide 125,900 61,000 78,800 138,000
Source: Paccar Annual Report 2011 (Ward's Automotive Report for the figures of Jan.-Nov. 2011/2012)
Note 1. The DAF trucks enjoyed a record 16% share in January-September 2012 (15.2% during Jan.-Sep.2011 period) in GVW 16t+ segment in Europe.
2. According to Paccar's estimation announced in October 2012, the Class 8 market in the U.S. and Canada by volume is likely to achieve 210K to 240K units for 2013 mainly with a replacement demand. The sales volume for the European 16t+ truck market will be 210K to 250K units for 2013 from a last minute surge in demand for Euro 5 compliant vehicles before the enforcement of Euro 6 due to begin in 2014.

 

Paccar Group's business results

(in millions of USD)
2008 2009 2010 2011 Jan.-Sep.
2011
Jan.-Sep.
2012
Truck and other Net Sales 13,709.6 7,076.7 9,325.1 15,325.9 10,738.3 12,252.5
Financial Services Revenues 1,262.9 1,009.8 967.8 1,029.3 763.1 801.0
Total Revenues 14,972.5 8,086.5 10,292.9 16,355.2 11,501.4 13,053.5
Net Income
Net Income ratio
1,017.9
6.8%
111.9
1.4%
457.6
4.4%
1,042.3
6.4%
714.6
6.2%
858.1
6.6%
Long-term Debt
Financial Services Debt
19.3
7,465.5
172.3
5,900.5
150.0
5,102.5
150.0
6,505.4
150.0
7,811.6
150.0
8,748.7
Stockholders' Equity 4,846.7 5,103.7 5,357.8 5,364.4 5,364.4 5,862.1
Source: Paccar Annual Report 2011, Q3 2012 Earnings Statement
Note 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 2006 2007 2008 2009 2010 2011
Kenworth USA 37,160 21,624 18,729 12,679 14,916 30,625
Mexico 12,946 14,224 13,611 6,037 10,325 15,870
Canada 7,457 4,661 3,968 3,044 5,622 9,880
Peterbilt USA 41,707 20,974 17,794 12,814 13,853 28,124
Canada 6,936 5,413 3,805 2,774 (Note 3)
DAF Netherlands 56,200 42,586 42,515 13,369 22,168 n.a.
(Leyland Trucks) UK 16,954 17,478 24,662 8,201 9,290 14,400
Foden UK 264
Total 179,624 126,960 125,084 58,918 76,174 121,235
Source: OICA (Ward's Automotive Yearbook and INOVEV for 2010/2011)
Note 1. The counted are GVW 6t+ trucks. The production of buses ended in 2001.
2. Leyland Trucks is not a brand name but a manufacturing company. It produces and develops DAF brand vehicles.
3. The 2010/2011 production volume for the Peterbilt brand in Canada is included in the Kenworth brand.

 

Paccar launches the new Kenworth T680, Peterbilt Model 579, and DAF XF Euro 6

Kenworth/Peterbilt  In March 2012, Paccar showcased its new Class 8 models, the Kenworth T680 and Peterbilt Model 579, which share the fundamental structure of the cab, at the Mid-America Truck Show. Four years and 400 million dollars were spent for the development of this aerodynamic truck with a 2.1m wide cab (1.9 and 2.3m versions were available for the previous models). It is powered by the PACCAR MX-13, a fuel efficient diesel engine, with a range of 380-485hp and maximum torque of 1,750lb-ft. The company expects to expand its share for 2012 in the North American market with the launch of these models.
DAF  In September 2012, Paccar introduced its new heavy-duty truck with a fuel efficient, Euro 6 compliant, PACCAR MX-13 engine, DAF XF Euro 6, at the IAA truck show held in Hanover, Germany. It is built on a newly designed chassis with aerodynamic exterior design and spacious and modern interior. The production will begin in the spring of 2013.

Paccar expands business in emerging countries

Brazil  In January 2012, with an investment of 200 million dollars, construction work started for Paccar's DAF truck assembly plant in Brazil (Ponta Grossa, Parana State). The production of high-end DAF brand trucks, DAF XF, CF and LF as well as PACCAR MX engines will begin in the latter half of 2013, and sold in Central and South America.
 According to the October 2012 estimate by Paccar, the 6t+ class truck market above 6 tonnes in Brazil will reach 130K units. The DAF trucks are high in quality with low maintenance cost powered by a fuel efficient engine, the PACCAR MX. The OEM aims to increase sales in South America by locally producing Paccar vehicles.
Andean area
(Chile, Peru,
Ecuador, etc.)
 Paccar, for the past 40 years, has been selling the Kenworth brand trucks in the Andean area in South America. In 2011, Paccar introduced the DAF brand trucks as well. The sales of the DAF brand trucks, the CF and LF, started with Chile, Ecuador, and Peru. Paccar's sales volume during Jan.-Sep.2012 period in the Andean area increased by 38% y/y, accomplishing a record high 5,500 units.
Russia  Paccar has been selling the Kenworth brand trucks in Russia for more than 30 years and introduced the DAF brand trucks in May 2011. It established DAF Trucks Russia in Moscow and opened 13 sales and service locations. The Paccar group's sales target volume for 2012 is expected to be 2,700 units (1,500 units for 2011).
 At the end of 2011, the automaker opened a parts distribution center with 40K square feet of floor area in Moscow. The center will allow parts for the Kenworth and DAF brand trucks to be delivered overnight to regions in western Russia.
China  Paccar hired 40 employees at the Shanghai and Beijing offices in China (as of October 2012) to procure parts. The parts procurement cost for 2011 was over 300 million dollars. It is also considering a joint production of its products with a Chinese manufacturer.
India  In October 2011, Paccar jointly established Paccar Technical Center with a U.S. technical solutions company KPIT Cummins Infosystems in Pune, India. It will hire 200 employees by the end of 2012 to provide services including IT, parts procurement, and engineering for worldwide production and aftermarket operations. Paccar has not started the sales of trucks under its own brand, but will begin with parts procurement and engineering business.

 

 



Navistar to start sales of trucks with SCR system from 2013

 Navistar, a Navistar International Corporation's subsidiary, produces and sells the International brand trucks and military vehicles, IC Bus brand buses, MaxxForce brand diesel engines as well as recreational vehicles under the Navistar RV brand. In addition to North America, the company operates in areas including Australia, Brazil, and South Africa.

 Navistar's global sales during the fiscal year ended October 2012 (November 2011 to October 2012) decreased 3% y/y to 105K units with a decline in both the North American market and other markets. The revenues declined 7.2% to 12.95 billion dollars, and the company posted a net loss of 3.01 billion dollars (a profit of 1.72 billion for the fiscal year ended October 2011). The major causes of the loss are declined sales of military vehicles, unfavorable product mix, declined sales of engines in South America, increased material costs, and increased warranty expenses.

 Navistar has been trying to meet the U.S. 2010 emission standards for heavy-duty diesel vehicles (Class 4-8) by using EGR (Exhaust Gas Recirculation) only without using SCR (Selective Catalytic Reduction) while other companies are using both SCR and EGR for their products. However, Navistar was not able to fulfill the gas emission standards by mid 2012, resulting in fines and the sales continued to decline. In August 2012, the company changed its strategy and announced a new turnaround plan called "Drive to Deliver" including the introduction of SCR. Also under the plan, the company will close its Texas plant and sell shareholding of joint ventures in India in order to cut costs. As for the new product launching plan, Navistar will use engines and SCR systems supplied by Cummins and launch trucks meeting the emission standards from the beginning of 2013.

Navistar's sales volume of trucks/buses and engines

(units)
FY ended
Oct. 2010
FY ended
Oct. 2011
FY ended
Oct. 2012
Truck/bus
(units)
US and Canada Bus 12,400 9,200 9,700
Medium-duty trucks 18,500 27,100 21,900
Heavy-duty trucks 21,600 25,700 27,100
Severe service trucks (Note 1) 14,000 13,300 13,600
North America total 66,500 75,300 72,300
Other regions Military 1,400 1,400 1,600
Non-military 19,100 31,700 31,200
Total 87,000 108,400 105,100
Diesel
engine
(units)
OEM sales - South America 132,800 138,600 106,700
Ford sales - US and Canada (Note 2) 24,900 - -
Other OEM sales 14,200 16,200 10,100
Intercompany sales 68,500 88,800 83,100
Total 240,400 243,600 199,900
Source: Navistar Q4 2012 Earnings Presentation
Note 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 two companies regarding such supplies.

 

Navistar's business results

(in millions of USD)
FY ended
Oct. 2006
FY ended
Oct. 2007
FY ended
Oct. 2008
FY ended
Oct. 2009
FY ended
Oct. 2010
FY ended
Oct. 2011
FY ended
Oct. 2012
Net sales and revenues 14,200 12,295 14,724 11,569 12,145 13,958 12,948
Net income (loss) 301 (120) 134 320 223 1,723 (3,010)
Manufacturing segment profit
(loss) (unaudited)
838 462 693 836 741 707 (642)

Source: Navistar Q4 2012 Earnings Presentation

 

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

(units)
Medium-/heavy-duty Trucks Buses
2008 2009 2010 2011 2008 2009 2010 2011
USA 40,087 30,483 32,479 42,998 13,962 13,820 n.a. 9,487
Canada 15,986 3,892 8 1
Mexico 20,114 17,169 26,128 36,363
Russia 115
Total 76,302 51,544 58,615 79,362 13,962 13,820 n.a. 9,487

Source: OICA for 2008/09 and Ward's Automotive Yearbook for 2010/2011
(Note) The counted are GVW 5t or greater trucks and buses.

 

Navistar announces a new turnaround plan "Drive to Deliver" in August 2012

Plan overview  In August 2012, Navistar announced a new turnaround plan called "Drive to Deliver". It has studied and analyzed the return on invested capitals (ROICs) for all business plans to prioritize the areas to be funded.
Cost/ ROIC  The company will execute a layoff and restructuring plan aiming to cut 150 to 175 million dollars from the current budget. The company plans to shutdown the Garland plant in Texas and sell its shareholding of the joint ventures in India. (Details will be explained later)
Products  Navistar has been trying to meet the U.S. 2010 emission standards by using EGR (exhaust gas recirculation) and turbochargers without using SCR (selective catalytic reduction) which requires installations of new equipment and urea injection systems. However, Navistar was not able to meet the standards even by mid 2012, resulting in costly fines. In July 2012, Navistar stopped using the conventional method and decided to introduce SCR to its systems. The sales of trucks with SCR system will start from 2013. (Details will be explained later)

Source: Navistar Press Release 2012.10.30/2012.12.18
(Note) In August 2012, the Environmental Protection Agency (EPA) announced its final decision regarding Navistar's products. Navistar will be allowed to continue the manufacturing and sales of heavy-duty diesel engines which do not meet EPA 2010 NOx regulation by paying a fine. However, the fine per engine with NOx emissions of 0.50 g/bhp-hr (emissions limited to 0.20 g/bhp-hr under this regulation) will be doubled from the current 1,919 dollars to 3,775 dollars. Final decisions regarding medium-duty engines will be announced at a later date.

Cost reductions with shutdown of Texas plant and sales of Indian joint ventures' shareholding under "Drive to Deliver"
Closing of
Texas plant
 In October 2012, Navistar announced that it would close its Garland plant in Texas during the first half of 2013 to cut sales cost and production capacity. There are 900 employees, including contractors, currently working at the plant. Production at this plant will be transferred to the Springfield plant in Ohio and the Escobedo plant in Mexico starting from January 2013. In Q4 2012, ten million dollars will be posted as a layoff cost and in FY2013, 30 to 50 million dollars will be posted for costs relating to plant shutdown. Once the plant is closed, Navistar expects to save 25 to 35 million dollars annually for its operation fee.
Sales of Indian
joint ventures'
shareholding
 In December 2012, Navistar announced the selloff of 49% of its shareholding for two joint ventures established with Mahindra & Mahindra in India to Mahindra. One produces and sells CVs and the other, engines. Mahindra will buy the shareholding with Rs.1.75 billion (33 million dollars) from Navistar, making them both its wholly owned subsidiaries. Navistar will continue to procure parts in India and support Mahindra through licensing contract while Mahindra will provide engineering services to Navistar.
Shipping of the first Class 8 truck with SCR under "Drive to Deliver"
ProStar+ (powered
with Cummins
ISX15 engine)
 In December 2012, Navistar shipped 300 units of the International ProStar+, its first Class 8 truck with SCR, from the Excobedo plant in Mexico. The truck is equipped with a Cummins ISX15 engine and an SCR-based aftertreatment system, also from Cummins. As of November 2012, the company has received orders for 1,000 units for this model.
ProStar+ (powered
with MaxxForce
13 engine)
 Equipped with an in-house engineered MaxxForce 13 engine and an SCR-based Cummins' aftertreatment system, the International ProStar+ is set to begin a test production in March 2013 and go into a full production in April.
 Other heavy-duty truck models will be equipped with an SCR-based system over time, within 2013. The company will continue to produce and sell trucks in all classes by utilizing emissions credits and paying fines until the transition is complete.

Navistar establishes an engine joint venture with JAC in China

 In August 2012, Navistar held an establishment ceremony for Anhui JAC Navistar Diesel Engine Co., Ltd., a diesel engine manufacturing company, with an Anhui-based Chinese OEM Jianghuai Automobile Co. Ltd (JAC). Navistar's 3.2-liter, 4.8-liter, and 7.2-liter engines under the MaxxForce brand and JAC's 2.8-liter engines will be manufactured at this joint venture. The construction of the manufacturing plant has already started in Hefei Economic Development Area, and test production is set to start in September 2013. Series production will begin at the end of the same year.

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