According to a report from ResearchAndMarkets, led by North America and Europe, the global medium and heavy truck market has experienced high capacity utilization and profitability driving momentum for fleet renewal and expansion activities.

The North American Class 6-8 truck market has been on a strong upswing since the dismal demand contraction of 2016, with the U.S. economy gaining growth momentum and supply side constraints shooting freight rates up as strong and sustained freight demand is met by capacity shortfalls. The overall macroeconomic environment has been favorable as well, with robust utilization and profitability across operators boosting fleet renewals and expansions at an accelerated pace.

North America has traditionally been one of the biggest markets globally, along with Europe, for medium and heavy duty trucks, classified under Class 6-8. The North American Class 6-8 truck market had strong footing in 2017 and the projections for the rest of 2018 point towards a robust double digit growth rate with a buoyant economy, strong housing starts and growth as well as positive developments in e-commerce and construction activity. Further, the proposed infrastructure development bill, outlining massive planned investments worth $1.5 trillion towards infrastructure repair and rebuilding, are likely to have tremendous potential for the industry over the medium term once modalities are thoroughly fine-tuned and if it gets the green light from Congressional leaders.

Industry OEMs are busy ramping up production rates to meet robust demand levels across most markets while fine tuning their supply chains to operate efficiently in top gear. OEMs are also renewing their product portfolios in alignment with market upturn through new product introductions incorporating cutting edge technologies and features focused on enhanced performance as well as productivity while optimizing the total cost of ownership. The focus on services business growth and portfolio expansion has also been growing across OEMs as soaring fleet utilization levels spur demand for maintenance, repair and overhaul activities.

The trucking industry continues to be at the forefront of a technology-led transformation phase marked by confounding uncertainties and disruptions which are likely to be sustained over the medium term. The focus on CASE (Connected, Autonomous, Shared & Services and Electric) technologies continues to be at the core of this trend with OEMs continuing to integrate an array of sensors, equipment and technologies on-board truck models with digitalization forming the backbone of this technology-led trucking revolution. The battle for electric trucks is getting fierce with the world’s two largest truck manufacturers, Daimler and Volvo, lining up electric versions of their flagship truck models to take on recent industry incumbents and start-ups. The duo are currently planning the start of commercial, full scale production of electric trucks for 2021. Daimler unveiled the electric version of its existing market leader in the Class 8 segment, eCascadia. Volvo has rapidly unveiled its contenders for the electric medium duty truck segment, with the new electric FL and FE models for Europe.

The industry supply chain has been gearing up for the electric bandwagon as well, with suppliers outlining and fine tuning their business strategies for EVs and setting up new units to execute them. Electrification in commercial vehicles is reaching the inflexion point now.

While progress is being made, there are challenges and pitfalls ahead. Rising crude oil prices, which have crossed the $70 per barrel mark as of-late, translate clearly into an increase in operating costs and direct impact on profitability for fleet operators, which is also likely to provide further impetus to the electrification trend. The pressure on oil prices is likely to remain over the near term with exports from Iran likely to dip after the nuclear deal fallout with the Trump administration and despite the recent supply side easing signals by the OPEC. Rising oil prices along with higher input costs in a tightening monetary policy environment with a potential trade war brewing may create some difficulties for the industry going forward.

The breakout of a U.S. initiated trade war marked by imposition of import tariffs, strained trade and political relations with traditional NATO allies and Donald Trump’s likely exit from NAFTA could completely derail the ongoing global economic recovery over the near term, the signs of which are being reflected in the movements of global financial and foreign exchange markets and the onset of a weakness in manufacturing sentiment across key markets with growing environmental uncertainty and instability on the policy front.