Earnings season is now under way, and it seems to be Europe that is the most pressing cause for concern with regards to truck OEMs and Tier Ones. A combination of reluctance on the part of many truck buyers to commit to new purchases, along with a still highly restrictive credit environment makes for a significantly more pessimistic landscape than might have been predicted 18 months ahead of the highly significant change to Euro VI, due on 1 January 2014. And while Europe is the primary source of concern, North America has pretty much failed to launch during 2012, further reducing cause for optimism. Add to this a post-Proconve 7 Brazil, a stumbling China and a slowing India, and the global truck industry is a grim place at present.
Little interest, few orders and minimal activity seem to sum it up, and with a parlous macro environment casting yet more gloom about the place, the second half of 2012 is set to get even worse
No more so than Europe: a few calls made over the past few weeks point to lead times of anywhere between six to eight weeks down to just four weeks. Given that European manufacturing tends to head for the beach in August, this is worryingly short and, when one considers that at the very top of the last peak, lead times for some truck models were in excess of 52 weeks, the depth of the current trough is clear. Little interest, few orders and minimal activity seem to sum it up, and with a parlous macro environment casting yet more gloom about the place, the second half of 2012 is set to get even worse.
And yet, Europe should be heading full tilt in to a pre-buy: Euro VI lands on 1 January 2014, and, by now, even if trucks are not flying off the forecourts, we would expect to be seeing a marked increase in quoting activity on the part of the dealer networks. This does not seem to be happening, something that may be indicative of a far greater malaise than previously thought.
That buyers are not seeking to get ahead of this problem by reinvesting in Euro V products is strange and worrisome, and suggests a truck market that is perhaps far weaker than previously thought
We expect a pre-buy, because pre-buys are a traditional part of the legislative process. Many truck buyers are technology-averse, and will opt for the devil better known. In the case of Euro VI, this is probably with good reason: despite, undoubtedly, the best efforts of all involved, the 2014 legislation will have some negative impact upon truck operators, be it in the form of windshield price or, worse, cost of operation. That buyers are not seeking to get ahead of this problem by reinvesting in Euro V products is strange and worrisome, and suggests a truck market that is perhaps far weaker than previously thought. And, while we expect some form of MAUT incentive to be announced at IAA, it seems inconceivable that it will be generous enough to repeat the Euro V experience.
So, earnings look set to be very weak, and guidance even weaker. The last cyclical dip was 2009, during which Brazil stepped up to the plate and saved the day. Brazil isn’t around to save anything this time. If a change as fundamental as Euro VI is not enough to stir the marketplace, then pessimism is clearly the order of the season.
The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.
Oliver Dixon is Editor, World Truck Analysis.
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