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Global Heavy-Duty Truck Sales Gain Momentum Amid Mounting Risks

This report does not constitute a rating action.

Chart 1


Improving deliveries in China and Russia will materially boost growth in APAC and Europe, respectively.   According to S&P Global Ratings' forecast, global sales of heavy-duty trucks will grow by 12.5%-17.5% in 2023 to slightly more than 2.0 million units. This is supported by improved sales in China following significant prebuying in 2021, which triggered collapsing deliveries in 2022. In addition, deliveries in Russia have grown rapidly in 2023, materially boosting the units sold in the European continent. Overall, for Europe (excluding the Russian market, where rated European and North American truck makers are no longer operating) and the U.S., the high order backlog accumulated by truck makers should support growth as supply chain constraints are being progressively managed.

Sales data from S&P Global Mobility (formerly known as IHS Automotive) for first-half 2023 show that global class 8 truck sales increased by 16% versus the same period a year earlier, supported by a marked growth in China (a 29% increase) where the reopening-driven economic rebound is fueling demand, followed by Europe (up 27%, including Russia) and the U.S. (up 17%).

For 2024, we anticipate fewer supportive demand drivers in developed economies, while a continued recovery in APAC and a small rebound in South America should support flat to 5% global unit sales growth.

Heavy duty trucks growth forecast--unit sales
% 2019* 2020* 2021* 2022* 2023e§ 2024e§ Units sold, 2022*
Europe (1.9) (22.8) 25.6 2.8 10-15 (2.5)-2.5 406,986
Asia-Pacific 0.4 17.9 (2.2) (48.4) 22.5-27.5 2.5-7.5 903,770
North America 7.3 (25.1) 13.4 7.8 5.0-10.0 (5)-0 274,089
South America 18.4 (9.4) 49.0 (0.4) (22.5)-(17.5) 0-5 138,160
Total 1.8 3.5 5.1 (31.4) 12.5-17.5 0-5 1,773,365
Sources: *S&P Global Mobility, §S&P Global Ratings.

Still-healthy backlogs are supporting truck deliveries.   In 2023, truck makers have continued to benefit from a solid order backlog which they carried over from 2022, when production was still meaningfully held back by supply chain constraints. In addition, based on publicly available information, we understand that the level of cancellations remained relatively low to immaterial in the first half of 2023. However, looking at the recent book-to-bill ratios--and partly because of cautious order slotting--the current order intake is taking a hit compared with a few quarters ago, which suggests the rate of unit sales should slow down in 2024. For example, Daimler Truck and AB Volvo, the two largest truck manufacturers worldwide, reported a year-on-year decline in new orders of 18% and 10%, respectively, in second-quarter 2023 compared with the same period a year ago.

Chart 2


Chart 3


Transport activity across most regions remains strong, while demand risks are mounting for 2024.   Truck fleets' increasing age is a supportive factor for new truck demand, in our view. For example, according to European Automobile Manufacturers' Assoc. (ACEA) data, medium- and heavy-duty (MHD) vehicles in the EU were 14.2 years old on average as of January 2023, versus 13.9 as of January 2022 and 13.0 as of January 2021. However, we think this is unlikely to fully offset the less supportive macroeconomic environment in developed economies.

That said, we have observed some decoupling of demand for trucks compared with the GDP growth evolution over the past few quarters. Diminishing consumer and business confidence, coupled with high inflation and rising interest rates, are variables that influence investment decisions for new trucks. Moreover, pent-up demand from COVID-19 is fading out. We therefore forecast a less strong demand environment for new trucks for 2024. As a result, we foresee a slowdown in the growth rate of global unit sales to 0%-5% in 2024.

Regulation will also affect demand volatility in the truck market.   Emission regulation often results in significant pre-buying effects ahead of the introduction of new legislation, and is therefore a significant factor when considering demand for new trucks. For example, in the U.S., class 8 truck sales collapsed by 39% year on year in 2007 after growing by 37%, 25%, and 8% in 2004, 2005, and 2006, when fleets and dealers rushed to buy before the new Environmental Protection Agency (EPA) emission standards for heavy-duty vehicles (HDVs) became effective on Jan. 1, 2007. More recently, in China, sales of class 8 trucks increased by 35% in the first half of 2021 before collapsing by 54% in the second half of the same year, as the tighter emission regulations VI-a became effective for all new HDVs on July 1, 2021.

Similarly, we expect the P-8 standards in Brazil--effective from Jan. 1, 2023, and applicable for all new on-road HDVs with diesel or gas engines--will take a toll on unit sales for the South American region, where we forecast a 17.5%–22.5% decline in deliveries for 2023.

Over the coming years, new emission legislation and the energy transition to zero-emission powertrains will play a crucial role in demand for internal combustion engine (ICE) and electric trucks. We expect the most important regulatory developments will be the transition to Euro VII standards in Europe, which could be implemented from July 1, 2027; and the U.S. Environmental Protection Agency's Clean Trucks Plan, which will set stronger emission standards for HDVs and engines from 2027.

Supply chain gaps are improving and supporting higher deliveries, although they are not yet fully resolved.  Supply chain pressures are continuing to ease, with companies in both the eurozone and the U.S. reporting improving lead times. In contrast with 2022, where supply chain constraints dictated the pace of deliveries, we see an improving environment in 2023, which is critical for original equipment manufacturers (OEMs) to fulfil their order backlogs. Our revised assumptions for 2023-2024 incorporate more predictable and stable supply chain conditions. However, we understand that some truck OEMs are still not producing at full capacity because of occasional supply chain disruption.

More-agile business models and manufacturing are key to resilience in the rapidly changing environment.  Manufacturers must navigate today's less-supportive macroeconomic environment as well as the transition toward zero-emission vehicles (ZEVs), amid more stringent global carbon dioxide emission regulation. In this context, we think Paccar Inc. and AB Volvo should be more resilient to volatile market conditions than Daimler Truck AG and TRATON SE, because they can rely on more-agile business models and a lower operating leverage.

Paccar has historically delivered stable profitability through the cycle thanks to its position in, and focus on, the highly profitable U.S. premium market.

Chart 4


The Forecast By Region


The high order backlog at OEMs and easing supply chains, coupled with persistent replacement needs, should prompt a 10%-15% increase in unit sales in 2023. This is despite a moderately less supportive macroeconomic environment, where we expect real GDP growth to slow down in the eurozone from 3.6% in 2022 to 0.6% in 2023.

From a geographic perspective, Russia should contribute significantly, because we expect the Russian market to increase by about 12.5%-17.5% in 2023. Excluding Russia (which represented about 17% of units sold in 2022), we anticipate growth of about 7.5%-12.5%.

For 2024, we expect fewer supportive demand drivers, which should translate into a broadly flat evolution of unit sales. We think a key factor for truck demand is GDP growth, which we expect to grow in the eurozone by 0.9% in 2024. However, variables such as the fleet's aging and mileage, more energy-efficient engines that could lower the total cost of ownership, and regulation, could help offset a weaker macroeconomic environment.


We expect new truck unit sales in 2023 will increase 5.0%-10.0% in the U.S., and approach pre-pandemic (circa 2019) volumes, despite experiencing some constraints in its labor and supply chain. We continue to see lingering pent-up demand from the pandemic-induced, less-than-optimal manufacturing levels of 2021 and 2022, with supply falling short of demand. We think this pent-up demand will continue into at least the early part of 2024, before normalizing to somewhat lower levels by the end of the year. Healthy demand and what we view as a stable production environment should enable 2024 volumes to be muted compared with 2023.

On the other hand, the spot market pricing in the U.S. indicates there is an oversupply of trucking capacity, with trucks needing to be taken offline in the near term because of freight volume levels. This could create an increased supply of used trucks, depending on whether businesses are forced to shut down operations or choose to park trucks until freight volumes improve. However, we expect that the trucks coming offline will generally be older models that lack the fuel efficiencies newer trucks have, which also have lower associated maintenance expenses. As a result, we do not expect this dynamic to affect the production levels of new trucks.


The demand recovery in China will underpin a 22.5%-27.5% unit sales growth rate for APAC in 2023. As China removed COVID-19-related restrictions, the recovery in consumption and business activities stimulated demand for trucking. HDV sales rose by 30% in January-August 2023, from a low base in the same period 2022. We expect the strong year-on-year growth will continue for the rest of 2023, though likely at a lower rate given the somewhat softer growth prospects in China (see "Economic Outlook Asia-Pacific Q4 2023: Resilient Growth Amid China Slowdown," published Sept. 25, 2023). We expect the growth rate be 4.8% in 2023 and to further decelerate to 4.4% in 2024. The current high national truck fleet indicates that massive incremental demand for trucking will be unlikely over the next two to three years. Also, replacement need was partially brought forward during the previous upcycle in 2016-2021 because of emission standard upgrade and overloading controls.

Zero-Emissions Truck Sales Will Be A Major Factor By The End Of The Decade

We think zero-emissions truck growth will depend on several factors, namely: regulatory framework developments; energy costs; customers' decarbonization strategies; battery cell developments; availability of charging infrastructure and eventually hydrogen refueling; and potential subsidies. At present, we anticipate a gradual and uneven penetration of zero-emission trucks across countries worldwide. This is because of the much-higher purchase price of electric trucks compared with ICE trucks, which often puts electric trucks at a disadvantage from a total cost of ownership perspective in the absence of significant subsidies.

In addition, the lack of charging infrastructure represents a key barrier to electric trucks' fast penetration in the market. There is also some uncertainty around the evolution of carbon dioxide regulation, at least in Europe, where the European Commission's Euro 7 proposal could still be subject to changes after negotiations between EU countries and lawmakers in 2023, potentially affecting the allocation of substantial engineering and financial resources from battery and fuel-cell electric vehicles to ICE vehicles.

In 2023, we anticipate that the share of electric trucks sold, will remain marginal, albeit growing. For example, unit sales of Daimler Truck's zero-emission trucks and buses totaled 670 units in the first half of 2023, representing 0.3% of total deliveries.

We understand that for regional transportation, available current battery technology could already cover the typical mileage. At the same time, this could require a material rationalization of logistic plans and deliveries. As a result, we anticipate that the electrification will happen segment by segment (for example, drayage, distribution, waste, construction, regional, or long-haul) and with geographic variation. Considering European net-zero policies, we think that Europe will lead in the race toward decarbonization in the truck industry.

For the second half of this decade, we expect further cost reductions for battery cells as well as higher energy densities, coupled with an expanding charging infrastructure and increasing demand for emission free transport, should support a meaningful increase in demand for zero emission trucks, including fuel cell trucks. In this context, on its path to achieve carbon dioxide-neutral transportation, Daimler Truck aims to offer only new vehicles that are carbon dioxide-neutral in driving operation (tank-to-wheel) in Europe, Japan, and North America by 2039. TRATON targets 50% of its long-haul trucks by 2030. AB Volvo as a group has a target of 35% of its deliveries by 2030 (50% for the truck business). Paccar has publicly committed to reducing Scope 1 and 2 emissions by 35% and Scope 3 emissions by 25% by 2030.

Cost Inflation And Higher Interest Rates Are Key Risks

In our view, key credit risks facing the sector include cost inflation, a prolonged inflationary environment, and increasing interest rates, which could negatively affect the investment decision of fleet owners. These factors could affect transportation needs, and ultimately the demand for new trucks, as well as truck OEMs' profit margins and cash flows.

Related Research

Primary Credit Analyst:Marta Bevilacqua, Milan + (39)0272111298;
Secondary Contacts:Mikaela Hillman, Stockholm + 46 84 40 5917;
Geoffrey Wilson, San Francisco + 1 (415) 371 5061;
Boyang Gao, Beijing + 86 (010) 65692725;
Research Contributor:Benedetta Sorge, Milan +39 272111244;

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