Positive trends seen during the first half of the year continue to roll on for heavy truck manufacturers in North America. However, there are concerns that such high demand will soon begin to tail off, with a growing inventory of cheap used big rigs flooding the market and an uncertain economic environment moving into the second half of the year.
On 12 July, Columbus, Indiana-based ACT Research warned that the current Class 8 market is ‘rapidly approaching a precipice.’ “Everyone should be preparing for a rapid downward correction in production levels in the next handful of months,” said Kenny Vieth, President and Senior Analyst at ACT Research. “Current data and anecdotes make a strong case that the call for a Q3’19 inflection point expectation remains intact.”
On face value, this would appear to be worrying news, but Martin Daum, Head of Daimler’s Trucks & Buses Divisions, waved off concerns voiced by the analyst community during the company’s Q2 earnings call. “2018 and 2019 had been two exceptional years… close to a record high sales,” he said. “[But] trucking is not an endless go story.”
Any correction from today’s sky-high production numbers is not only expected, he added, but would in fact prove to be a potential positive for the industry. As he explained: “I think it [could] even be healthy for the market, because if we have too long a boom, you’re only preparing for a very sharp decline. For me, a correction in 2020 is absolutely normal and nothing alarming.”
Daimler’s truck sales totalled 126,000 units in Q2, up from 116,000 units in Q1. Earnings before interest, tax, depreciation and amortisation (EBITDA) was also up 33% year-over-year to €725m (US$804m). On the bus side, sales grew by 12% to 8,400 units, with revenues of to €1.3bn. Positive results indeed, but they could have been even better: Daimler suffered slightly from a spike in raw material prices.
Looking at other regions, Ola Källenius, Chairman of the Daimler Board of Management, advised that while demand is understandably varied around the world, “overall market conditions to remain favourable.” For the second half of the year, a slight increase in truck unit sales is expected in line with growth in emerging markets such as Brazil and India. In the bus segment, a “significant” increase in sales is expected to following rising demand in Europe, Latin America and in particular India.
But North America remains the primary market of interest, and analysts were keen to understand the rationale behind Daum’s nonchalance surrounding an expected downturn. “There are concerns about the North American truck cycle in H2 or maybe Q4 2019, [but] your prepared commentary was pretty positive,” pointed out RBC Capital Markets analyst, Tom Narayan. “Trucking is always a volatile market,” explained Daum, “and as such we have set up our production system according to that—we’ve built to order.”
