Do you expect a sharp slowdown for truck purchases in October due to the possible resurgence of the Coronavirus this fall?
PSR Analysis: At this point, no. The “shock and awe” of the pandemic appears to be well behind us. During the past few months, commercial truck demand has stabilized albeit at a low level but continues to improve.
Recent surveys have indicated that trucking conditions are improving. The biggest threat to the health of the industry would be a further lockdown of the economy which would cause trucking conditions to slow but would not likely upend the market. However, we do believe it will take a further 18-36 months for the economy to return to a pre-virus level.
Are OEMs significantly reducing R&D spending on electrified vehicles?
PSR Analysis: Not so much on electrified vehicle technology. The OEM’s realize the importance of keeping up with their peers and not allowing themselves to fall behind in this arena. This along with future government driven emission regulations will ensure that OEM’s will continue to focus R&D into this segment. All of the OEMs have most likely reduced or pushed back R&D spending on other projects not related to electrification.
Will Volkswagen (TRATON) acquire all of Navistar?
PSR Analysis: Earlier this year, TRATON made a $2.9 billion all cash offer for the 83% outstanding shares of Navistar in an effort to capture a significant share of the medium and heavy commercial vehicle market in North America (TRATON is a holding company for MAN and Scania and also the Brazilian OEM Caminhões e Ônibus).
Initially, it looked like this offer was a done deal. However, with the impact of the Coronavirus it appears this acquisition is on hold as TRATON preserves cash until the economic conditions improve.
We should also note that since the offer, TRATON CEO Andreas Renschler and Navistar CEO Troy Clarke have departed from their company roles which could impact this potential acquisition. The pandemic along with the high cost of R&D related to the electrification of commercial vehicles has likely derailed this proposal at least in the near term. Over the longer term, this acquisition still makes good sense. PSR
Chris Fisher is Senior Commercial Vehicle Analyst at Power Systems Reseach
