There’s some hope in the commercial vehicle supplier marketplace, early results in recent MEMA supplier surveys show, the company reported Tuesday in its monthly Pulse webinar.
Over the past three months, suppliers have grown steadily more optimistic, Joe Zaciek, director of research and industry analysis for MEMA says. That said, there’s still a “tremendous amount” of uncertainty surrounding global trade and U.S. regulations on commercial vehicles.
[COMING SOON: TPS looks at the state of the industry for dealers, distributors and suppliers. Look for the results of our survey in January.]
“This is obviously causing a tremendous amount of pain for our members,” Zaciek says of changes in government trade policy, including tariffs. Across the whole of suppliers, automotive and commercial vehicles, he says tariffs are adding about 9% to the total cost of products.
The worry is also fueling worries about employment among suppliers. Zaciek says commercial vehicle suppliers employee count among both production and non-production employees is down from the pre-tariff era while investment is starting to recover, landing at a net neutral.
That's a positive signal, he says, and the expectation overall is that suppliers will be adding headcount.
MEMA also asked suppliers about semiconductors, specifically about Nexperia, a chip company seized by Dutch officials from its Chinese owners in September. Just over half of commercial vehicle suppliers surveyed by MEMA had been impacted by the Nexperia crisis either directly or indirectly.
“One of the bright sides, if you’re going to be an optimist about living through the semiconductor crisis, is that we received a playbook and how to manage that,” Zaciek says.
The group also asked suppliers about the Section 232 offset credit program. That program, announced in October, would allow manufacturers to claim a credit for 3.75% of the value of U.S.-assembled trucks and engines as a credit for imported parts.
Zaciek says commercial vehicle suppliers should look to light vehicles for a glimpse of the future. Around a third of commercial vehicle suppliers say they’ve gotten questions so far, but Zaciek says more are coming. The most requested piece of information was the country of origin for components, importer of record and detailed import data.
“Be ready to get these requests, because undoubtedly, they are coming,” he says.
Frost & Sullivan expert addresses profit pools for truck OEMs
In the second part of the webinar, Jean-Dominique Bonnet from Frost & Sullivan, provided an analysis of OEM profit pools in North American Class 8 trucks. His analysis showed most North American trucks are involved in carrying freight at least regionally and truck purchases are connected to gross domestic product.
Bonnet also showed the cost of inflation on the Class 8 market. In the last decade, truck prices are up 56%, his analysis showed, with newer, more expensive technology and across-the-board inflation driving the increases. This is amplified by rising capital costs and rising maintenance as repair costs.
Long-haul is the major player in North America, but vocational and construction vehicles generate more profit, Bonnet's analysis showed. That said, “it’s difficult to be a big player if you’re not in long haul,” Bonnet says.
Frost & Sullivan’s analysis also showed OEMs take a hit on truck sales profit because they’re counting on selling parts.
“You sell trucks and you can afford not to have a huge margin because you expect to sell parts the whole life of a truck,” Bonnet says, adding parts make up about 20% of OEM revenue.
Because long-haul is king in North America, most of those parts sold are related to the driveline, Bonnet says, because of the miles put on the truck. OEMs also have proprietary powertrains they profit from, Bonnet says.
“In many cases, when sales of new trucks are down, you are catching up on service and parts,” he says.
