Soaring raw material prices led to significant price hikes for new trucks

Soaring raw material prices led to significant price hikes for new trucks

Market prices of new trucks and trailers have risen significantly in the squeezed truck market. An average 400pk tractive unit trades around €100,000-110,000, an increase of some 15-25% from pre-pandemic levels. Higher commodity prices – raised further by the war in Ukraine – led to price hikes for important components such as steel, plastics, and rubber (tires). Prices are also higher due to more expensive new generation models (like the more aerodynamic DAF XF/DG), which also have their own impact and limited production capacity. Despite pricing power, manufacturers struggle to commit to fixed price quotations for deliveries a year in advance. In practice, it depends on both the manufacturer and the specific characteristics of a deal.

Due to the nature of higher elasticity, price increases of available used trucks tend to be more pronounced. Trucks used for less than three years are especially popular, and can even approach the same price levels as new equipment. As soon as the market normalises this, prices are expected to face a correction.

European truck production to end up lower in 2022

European production of medium and heavy duty vehicles > 3.5 tonnes

Soaring raw material prices led to significant price hikes for new trucks - 1

Source: IHS Markit, ING Research

New interruptions push back European truck production in 2022

Although demand naturally drives production, supply is still the limiting factor for truck manufacturers and dealers in the current market. Following pandemic-related closures, manufacturers had to limit production due to chip shortages. Large numbers of almost finished products were parked to keep production up as much as possible. In 2022, the war in Ukraine added to production constraints. MAN (part of Traton and VW) in particular faced instant shortages of cable harnesses, leading to a production interruption at sites in Munich and Krakow during March and April of 2022. Volvo also experienced new difficulties on the sourcing side which limited production. Although chip shortages have partially subsided and the second half of the year may be better, total annual European truck production figures are not expected to increase in 2022.

In the meantime, delivery times may still run up to 12 months. The release of Russian production slots following imposed sanctions created some space for some clients to receive orders earlier, but this is not substantial. Daimler's exports to Russia, for example, only accounted for some 1% overall.

Production ambition DAF-trucks reveals market potential

Announced daily production numbers DAF-trucks

Soaring raw material prices led to significant price hikes for new trucks - 2

Source: DAF, ED, ING Research

Strong orderbooks preludes production increase in 2023, even if intake slows

Assuming that supply conditions improve in 2023, order backlogs will enable manufacturers to ramp up production in 2023 despite economic headwinds. Although transport capacity remains tight as a result of slowing order intake, there do not appear to be any signs of notable cancellations. Traton reported a declined order intake for Europe in the first quarter, which may have been influenced by muted ordering at Scania. On a global scale, market leader Daimler still talked of a global ‘record high’ orderbook in May 2022.

European truck registrations expected to increase in 2023

Registrations of new trucks > 3,5 tonnes EU + EFTA + UK

Soaring raw material prices led to significant price hikes for new trucks - 3

Source: ACEA, ING Research

Increase of new truck registrations in 2023 following higher production

Heavy-duty truck registrations in the EU, EFTA, and the UK (>3,5 tonnes) recovered to 341,500 in 2021 – an increase of almost 15% year-on-year, but still below the 10-year average. In the first five months of 2022, registrations were still a fifth below their pre-pandemic base, and just below the 10-year average. Following a decline in production, new registrations will also slip into a slight decrease again in 2022 (335,000). Manufacturers are also expected to finalise and deliver parked vehicles with improved chip supplies over the course of 2022. On the back of significant order backlogs and the gradual improvement of chip shortages, 2023 seems set to be a better year – even if order intake continues to slow.

Mercedes still leads the European truck market

The European truck market is dominated by six companies and seven brands: Daimler

(Mercedes), Paccar (DAF), Volvo Trucks, Traton (Scania, MAN), Stellantis (Iveco), and the Renault Group. Market shares changed modestly from year to year, but have grown slightly closer in the long run. Mercedes (Daimler) is still the market leader in medium and heavy-duty trucks (>3.5 tonnes), followed by MAN, DAF, and Volvo. DAF grew its market share in the heavy-duty truck segment (>16.0 tonnes), where Volvo and Scania also have a larger share.

Few changes in the consolidated truck market; Mercedes leads, MAN, DAF and Volvo follow

Soaring raw material prices led to significant price hikes for new trucks - 4

Source: MAN, ING Research *EU + EFTA + UK

Source: It’s all about capacity in the truck market | Article | ING Think

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Transport sector Transport

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