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June 7, 2022 12:38 PM, EDT

For Paccar, Booming Parts Business Is Sign of the Times

Paccar Parts distribution centerA Paccar Parts distribution center in Las Vegas. (Paccar Parts)

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Truck maker Paccar Inc.’s parts business is booming as higher average fleet age and truck utilization rates are prompting rising parts sales industrywide.

For Paccar that meant its parts segment in the first quarter hit record quarterly pretax profit of $340 million on revenue of $1.39 billion.

“Q2 is starting even stronger,” said Paccar Parts General Manager Laura Bloch during an online presentation.

042622 Earnings Release by Transport Topics

“In the U.S. and Canada the total industry retail parts opportunity for Classes 6-8 commercial vehicles is estimated this year to be $30 billion spanning all vehicles in service up to 25 years old,” she said.

Original equipment manufacturers typically offer one- to five-year warranties and capture the bulk of the $7 billion market in the early life cycle. Independent parts retailers share in the $23 billion, five- to 25-year portion of the vehicles’ life cycle.

In 2021, Paccar Parts achieved U.S. and Canada parts sales of $3.3 billion across all of its product segments.

“There is a large portion of the market that we don’t yet have and that’s where we are positioned with our brands and portfolio to capture more,” Bloch said.

Laura Bloch, Kenworth assistant general manager for sales

Bloch

“The powertrain business is the fastest growing category for Paccar Parts, she added. “Over 10 years of Paccar MX engine installations in North America provide excellent parts sales opportunities today and into the future.”

Paccar Inc. is the parent company of truck makers Peterbilt Motors Co., Kenworth Truck Co. and DAF, its overseas brand. The MX is an advanced version of the power plant its European-based subsidiary had been producing for several years.

There are 285,000 Paccar MX diesel engines operating in North America, and engines go through different parts consumption phases based on age and mileage, she noted. The coming Environmental Protection Agency 24 and 27 emissions regulations will bring an increased mix of MX engines generating diesel engine parts sales “for many years to come.”

The 27,000 MX engines have been produced for EPA 21; 126,000 for EPA 17 use maintenance parts-only filters; 99,000 for EPA 13 consume more wear parts; and 32,000 for EPA 10 that need overhaul kits, consume the most parts and find a second life.

“By 2030, more than 725,000 Paccar powertrains will be in service across all stages of the product life cycle,” Bloch said.

Paccar also reported global fleet services revenue of $640 million in 2021, up 26%, across 2,400 fleets.

“The fleet services program provides a consistent parts experience across the dealer network, offering national parts pricing and one consolidated monthly invoice for all parts and services purchases,” Bloch said.

Another key element is its TRP brand of all-makes products.

TRP is Paccar Parts’ brand of aftermarket parts for all makes and models of trucks, trailers and buses. TRP has grown its network of dealer-owned stores to 253 from one in 2013, including 95 in North America, 10 in Europe, 32 in South America and 26 in Australia, Africa and the Association of Southeast Asian Nations.

She said 50% of the customers purchasing at TRP are new to the Paccar dealer network.

Meanwhile, Class 6 through Class 8 electric vehicles are coming in increasing numbers from Paccar’s truck brands. That bodes well for the profitability of its parts business.

“Overall, we believe the incremental parts benefit of an EV over an internal combustion [diesel] engine is $5,000-$10,000 [not including BEV chargers, but including the charger parts],” Bloch said.

John Rich, chief technical officer at Paccar, said today’s truck is a million-mile machine and Paccar’s business is set up to support the vehicle throughout its entire life.

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“While we lose a diesel drive line, we replace it with electric motors, transmissions, power electronics, a variety of pumps, compressors and heaters, and a whole lot of battery,” he said.

“These vehicles are complex and they are sophisticated and they will be laden with proprietary parts and software,” Rich said. “The total value of the system is greater than the diesel and they still need to be on the road for over a million miles.”

Bellevue, Wash.-based Paccar, founded in 1905, began as a railroad car maker.