On the heels of reporting record profits in the third quarter—more than $1.2 billion, a 60% jump from the same period last year—the leaders of Paccar Inc. this week told analysts and investors they see the Class 8 truck market in the U.S. and Canada shrinking about 8% next year. Their peers at Traton SE, which owns U.S.-based Navistar, said Oct. 25 they have a similar outlook—although both executive teams said other segments of the market, such as vocational and medium-duty trucks, appear set for a stronger 2024.
Bellevue, Washington-based Paccar, which produces Kenworth and Peterbilt trucks in North America, sold 50,100 trucks in the three months ended Sept. 30, an increase from 44,400 in the prior-year period. (Total revenues from trucks and parts topped $8.2 billion versus about $6.7 billion in Q3 of 2022.) Of that number, U.S. and Canadian customers bought 27,500 trucks, up from 24,400. President and CFO Harrie Schippers said his team expects that number to be between 48,000 and 51,000 in the current quarter.
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For all of 2023, Paccar’s executives expect U.S. and Canadian Class 8 sales to total between 295,000 and 315,000. For next year, however, they are forecasting a range of 260,000 to 300,000 vehicles. In Europe, they are looking for total sales in the 16-ton segment to slide about 12% to a range of 260,000 to 300,000 trucks. Figuring into those projections are both a general normalization of demand—fleets are still looking to replace equipment but are also dealing with rising interest rates and other macroeconomic factors—and tighter emissions standards from the Environmental Protection Agency that will kick in with model-year-2027 trucks.
“People are trying to figure out how to think about the next three years,” Paccar CEO Preston Feight said on a conference call when asked about managing “the growth air pocket” next year. “We just feel like we’ll see some adjustments there from this year but that it should still stay at like a replacement demand level.”
Profits up while sales slip a bit at Navistar
Feight’s peer at Traton, Christian Levin, voiced similar sentiments after his team reported third-quarter net income of right around $1 billion, with the company’s profit margin climbing more than three percentage points year-over-year. Big fleets, he added, are showing no signs of backing away from their order pace.
“On top of that, with all the construction initiatives now happening as a result of the IRA, there is massive investment into … the construction material business,” Levin said. “So I’m looking very positively to development in the U.S.”
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Navistar, which produces International Trucks, sold 22,385 trucks and buses during the third quarter, down a tick from a year earlier, and grew operating profits nearly 15% to about $213 million even though sales slipped 7%. The division’s incoming orders fell 30% to 16,400 versus the summer of 2022, however, a number that Levin qualified by pointing to an order book that is “full up until summer.”
Levin added that a reason order books are still full is that Traton’s global supply chains are still struggling with “regular” bottlenecks. He singled out the company’s U.S. operations as “extremely stretched” and thus limited in their capacity to get finished vehicles to customers. Ironing out the wrinkles at Navistar and some of Traton’s other brands is a high priority, he added.
“This is now our challenge here for the coming six months,” Levin said. “We have stabilized production; now we also need to stabilize the delivery.”
At Paccar, Schippers wasn’t as urgent in describing the supply chain situation, which he said is improving. But he did note that production levels remain limited by the troubles that are persisting.
Shares of Paccar (Ticker: PCAR) popped on Oct. 24, the day Feight and Schippers published earnings, and held their ground during the following session, closing at $84.53. Over the past six months, they have risen more than 15%, growing the company’s market capitalization past $44 billion. Traton stock (Ticker: TRATF) slipped about 1% Oct. 25 in Frankfurt. They have given up about 12% since late April, trimming the company’s market value to about $9.4 billion.
