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August 15, 2016 4:00 AM, EDT

OEM Engines Grow Share

Daimler Overtakes Cummins in First Half of ’16
This story appears in the Aug. 15 print edition of Transport Topics.

Class 8 engines from Daimler Trucks North America became the most installed in trucks leaving North American factories for the first half of 2016, surpassing those from longtime industry leader Cummins Inc.

The results were based on a recent report by WardsAuto.com.

DTNA’s heavy-duty engines, which include the Detroit Diesel and Mercedes-Benz brands, posted the highest share at 33.4%, or 41,996 units, out of a total 125,715 engines in the period, according to Ward’s. That was up from 27.7% out of 165,810 total engines a year earlier.

DTNA, based in Portland, Oregon, is a unit of Daimler AG, with headquarters in Stuttgart, Germany. Its heavy-duty brands include Freightliner Trucks, the market leader in sales, and Western Star, the smallest truck maker.

“Daimler Trucks North America is delighted with our customer acceptance of the full range of Detroit products we offer. This is evident in the current market share of the proprietary HD Detroit engines,” Kelly Gedert, DTNA’S manager of powertrain and components marketing, said in a statement to Transport Topics.

Cummins, the nation’s only independent commercial vehicle engine manufacturer, slipped to the second spot with a 32.6% market share, or 40,999 engines. Its share a year earlier was 36.7%.

“One data point does not make a trend, but there is no denying the rise [in proprietary engines],” said Molly MacKay Zacker, vice president of operations at research firm MacKay & Co.

“We continue to experience challenging economic conditions … and we expect these to continue, and this has contributed to some decline in market share,” said Mario Sanchez-Lara, director of on-highway marketing communications at Cummins, with headquarters in Columbus, Indiana. “However, we continue to maintain a strong availability across [truck manufacturers] and market position.”

Cummins’ heavy-duty share has been trending down from its 2009 peak of 46.9%, analyst Ann Duignan of J.P. Morgan Securities wrote in a recent note to investors, but the manufacturer’s six-month share was above its guidance for 27% to 30% in 2016, which was reduced from 30% to 33% in early May.

Cummins has held the top spot for Class 8 engines with 10 liters and larger since 2007, Ward’s analyst Sarah Petit said. “In 2006, and at least a few years prior, Caterpillar Inc. held the title.” Caterpillar is based in Peoria, Illinois.

For Class 8 engines smaller than 10 liters, or ‘Baby 8s’, Cummins remains the leader dating to June 2011 and prior to that, Navistar had more engines, Petit said.

Such dual-engine strategies among truck makers will continue, said Neil Frohnapple, an analyst with Longbow Research, particularly at Paccar Inc. and Navistar International Corp.

Paccar, based in Bellevue, Washington, is the parent company of Kenworth Truck Co. and Peterbilt Motors Co. Navistar, in Lisle, Illinois, makes the International Trucks brand.

“I think they will always utilize Cummins’ 15-liter engines,” Frohnapple said, “just because those manufacturers don’t have a 15-liter option and it would be very expensive to develop their own.”

But Cummins would still lose share to those two truck manufacturers “on their 13-liter offerings,” he said.

Steve Gilligan, Navistar’s vice president of product and vocational marketing, said Navistar will have its fully updated N13 engine available in its trucks in April. “We are going to start taking orders for that engine in the December or January timeframe.”

He said the goal with the N13 engine was to provide improved fuel economy comparable to 15-liter engines.

International Trucks’ market share declined to 4.2% from 4.9% as volume fell to 14,230 compared with 21,213 in the year-earlier period.

Paccar’s overall share of total engines rose in the 2016 period to 12.4% from 11.3% a year earlier, and it was the only truck maker besides DTNA to see a gain, according to Ward’s.

“We always take a look at enhancing our proprietary content of our vehicles and obviously, with the increasing mix of [its own] MX engines … in North America, that’s going to enhance our margin opportunity over time with respect to engine parts,” Paccar CEO Ron Armstrong said during the company’s recent earnings conference call.

Subsequently, Cummins said weak orders and high dealer inventories led it to trim its forecast for full-year heavy-duty production to 200,000 units, down from its prior forecast of 210,000.

ACT Research Co., however, forecasts Cummins and all other engine makers will have the chance to add engines even amid changing market shares.

“Truck and engine volumes begin increasing in 2018 through 2020. We are currently forecasting a downturn in 2021, but the main point is that despite losing share, [Cummins] engine volumes are forecast to increase when the market is increasing,” said Steve Tam, ACT’s vice president of the commercial vehicle sector.

Volvo Group’s share through its two North American subsidiaries, Mack Trucks and Volvo Trucks North America, also was 17.3%, down from 19.5% a year earlier.

“The drop in Cummins- powered units is a result of the slowdown in the industry, especially in the longhaul segment,” said John Moore, VTNA product marketing manager for powertrains, but Volvo would continue using them.

Scott Barraclough, Mack’s technology product manager, said Mack uses Cummins’ natural gas-powered engines and a 9-liter engine for its Granite MHD model.

“The decrease in Mack’s use of Cummins engines through the first half of 2016 is due to lower demand for natural gas-powered trucks,” he said.