July 20, 2018

Medium-Duty Trucks - Demand Outlook Improves Incrementally During Q2

DAI GR, DDAIF, F, NAV, PCAR
By Julie Woodruff

North American medium-duty truck production outlooks remain positive for 2018 as several component suppliers increased their forecasts slightly during the past 90 days, and Daimler’s Freightliner and Ford are still viewed the most positively.

Strong Economy, Final Mile Boost Optimism
All seven component suppliers expect North American medium-duty truck production to increase yy during 2018, with three increasing their expectations slightly during the past 90 days (compared with two of nine in January), driven by a strong economy and increased final-mile deliveries. One supplier to Class 6 and 7 manufacturers said, “[Production] in medium duty should grow [yy] by 6,000 or so units. Our forecast is for roughly 4% growth.” Another source said, “A lot of it has to do with last-mile delivery. We really like to see that, when it’s doing well. You go back to the construction and housing starts that are up. A lot of [those] are severe-duty trucks that fall into Class 7.” A supplier working with Class 5 to 7 manufacturers said, “The medium-duty market has been solid with steady growth. I was at a meeting in Detroit with colleagues recently, and there was a lot of talk about how everybody was trying to build out warehouses that would be closer to customers.”

A large fleet with heavy and medium-duty trucks said their 2018 medium-duty truck orders are outpacing heavy-duty orders. “Ecommerce and final-mile delivery are driving that. We're seeing more folks consider those markets either as new entrants or as growth drivers for existing fleets. Amazon.com [Inc.] is driving some of that for sure,” he said.

Daimler Leads Medium-Duty Manufacturers
Five of seven sources (compared with four of nine in January) said Daimler AG’s Freightliner is viewed positively. “Freightliner is above the rest in Class 8 and medium-duty … class 6-7,” a component supplier said. Sources also cited Navistar International Corp. and Ford Motor Co. as strong competitors. “Navistar is starting to come back. I would include Ford in that too -- the lower medium-duty ranges. I think these guys are getting more into it because they do see the growth and opportunity for the last mile,” a source said. One source expects Paccar Inc. to have an advantage upon entering the medium-duty market in 2020. “Paccar will be entering the medium-duty market in 2020, so probably will take share by 2022. I think they can be successful because they are good at leveraging new products using existing ones.”

Additional Quotes
“Instead of someone buying a Class 8 tractor to haul a trailer, they might get a sprinter van. Medium duty is more of an average sum of the GDP growth or the economy in general.” Component supplier

 “When we discuss new projects with [OEMs] that we supply medium-duty parts to, there are definitely plans to try to garner market share. I would say that Navistar partnering with GM gives them a potential leg up.” Component supplier

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