While the chip shortage and other constraints have affected Daimler Trucks North America as they have other vehicle manufacturers, the company’s still number one in Class 6-8 market share and plans to stay there as it pushes forward with zero-emissions, autonomous, and connected-vehicle technologies.
As Daimler Truck prepares for its spinoff and its stock market listing Dec. 10, it hosted a Capital Market Day for investors and analysts, including an update from John O‘Leary, president and CEO of Daimler Trucks North America, who also spoke to a handful of trucking journalists via video call afterward.
DTNA sold some 204,000 vehicles in 2019, but the pandemic and supply-chain issues dropped that to 139,000 last year and 115,000 as of year to date September for 2021.
Although the company doesn’t use the term “red-tagged” to describe trucks that are mostly built but waiting for a crucial part before they can be delivered, it’s definitely happening, O’Leary acknowledged.
“It’s been tough, no doubt about it,” he told trucking reporters. “Our teams conduct yeoman efforts to secure chips all around the globe… looking for little caches of chips here and there. We’ve had good weeks and bad weeks.”
He explained that yes, DTNA has been building vehicles it can’t necessarily deliver. By building them except for the critical missing chip or other part, he said, “When we get one or two chips, which is all most of them are missing, we can immediately turn them over into a sold status and get them to the customers. We feel it’s the best thing we can do to have it ready to go so when we get that chip we can get it into their hands.”
Without those constraints, he said, “the underlying demand in the industry is tremendous right now.”
He does foresee the situation improving at some point, but not until sometime in 2022. “We’ve engineered around a couple of chips, and some of those fixes will come online in February and March,” he said.
He also said pricing has been a big issue — unlike chips, the company is able to obtain many raw materials and components, “but only at a significantly higher price.” DTNA already has announced a price increase for next year to help cover those increased costs, he said.
While DTNA is already a standout among the Daimler Truck brands when it comes to profitability, the company has a goal to improve on that for a 12% return on sales by 2025. It was at 11.5% in 2019, so the company is well on its way.
O’Leary outlined six main “levers” the company will pull to reach that goal:
- Maintain strict cost discipline
- Capture vocational growth while defending its on-highway lead
- Further developing aftermarket capabilities
- Strengthen connected vehicle services
- Be a leader in autonomous trucking
- Drive the conversion to zero-emission commercial vehicles.
“Even though we’d always had offerings in the vocational space, we had pretty much had our lunch handed to us by the competition,” O’Leary told trucking reporters. DTNA wanted to change that. “We wanted a product every bit as good as we have in the on-highway space.”
As he explained during the Market Day presentation, “we made a deliberate, and I believe a prescient, investment of $380 million for a complete refresh of our vocational lineup.”
The result was the Western Star 49X DTNA unveiled last year, the first of its new X-Series vocational trucks. It recently added the 47X to the mix. A third X-Series truck will be unveiled in 2022. More than 1,200 X-Series trucks have been built this year, and 15,000-plus are expected to be built in 2022.
DTNA sees a significant opportunity to capture market share in this area from its competitors, getting a bigger piece of the pie, while the pie itself is expected to expand due to the infrastructure funding deal recently reached. In fact, he said, customers are already talking to dealers about the availability of vocational trucks if they get construction contracts they’re bidding on.
Meanwhile, the company will continue to defend its number-one spot in the on-highway market, he said, noting that DTNA has sold more than 807,000 Freightliner Cascadias since the model was introduced in 2007, while improving its fuel efficiency by 34%.
In addition, he said, the company will continue to add to its ability to help keep those trucks on the road, adding to the more than 9,000 service bays currently in its dealer network and expanding its reach for aftermarket parts, including through e-commerce.
But the Daimler plan, including DTNA, is very forward-looking, with vast amounts of research and development money being invested by the global company in areas such as connected vehicles, autonomous, and zero-emissions, “that we’re not just dipping out toe in anymore but really putting significant effort behind,” he told trucking reporters.
The spin-off will help drive this advancement. “The customer won’t notice anything different in a negative sense,” O’Leary said of the move for Daimler Truck to become independent. “What they will notice going forward are things we’re doing on global scale, such as battery-electric vehicles, fuel-cell-electric vehicles, and other technology we’re working on, will be assembled and developed at a much higher level, and with our own expertise and using the cost base of our global manufacturing output.” As a result, eventually, he said, customers “will see better technology at a lower price.”
Connected and Autonomous Vehicles
DTNA has 300,000 connected trucks in operation and expects to see that double in the next 18 months. Detroit Connect already monitors vehicle health and offers real-time alerts and over-the-air updates.
Digital vehicle solutions will come straight from the factory, eliminating the need to install aftermarket telematics hardware and services. Its latest example was the announcement of Virtual Vehicle in conjunction with Platform Science, an in-cab digital platform built right into the dashboard.
In addition, the data coming from connected vehicles will allow customers to structure lease agreements based on actual truck usage.
Beyond connected vehicles, of course, is autonomous technology. “We have a vision for accident-free driving, and we’re firmly on that journey with the development and deployment of autonomous trucks and services,” O’Leary told analysts, noting that it currently has at least a dozen customer collaborations in this area.
“Designing and releasing a truck that follows the commands of an autonomous system requires a paradigm shift,” O’Leary said. “We basically have to reinvent the truck. Our mission is to safely deploy the first-ever scalable and redundant autonomous truck. Our dual strategy of partnering with both Waymo and Torc offers us multiple routes to commercialization and customers choice of which system works best for their businesses.”
As DTNA’s partnership with autonomous-tech company Torc enters its third year, the company is co-creating hub-to-hub use cases with customers. In addition, the company not long ago delivered the first fully redundant level-4 autonomous Cascadia to Waymo, ready for integration of the Waymo Driver.
Daimler Truck said it is accelerating its timing for the transition to zero-emission vehicles, while acknowledging there’s a high potential for variability in timing. The company anticipates total cost of ownership to reach parity with traditional diesel vehicles by 2025 for battery-electric vehicles and 2027 for fuel-cell electric. By 2030, it projects as much as 60% of its sales to be zero-emissions vehicles, with that hitting 100% by 2039.
In North America, DTNA opened the order books earlier this year for its eCascadia and eM2 battery-electric vehicles, and it already has 700 orders on the books for when the truck goes into production in 2022.
When asked about the acceleration of zero-emissions transition, O’Leary said the topic has become of much greater interest to the North American trucking industry in the past couple of years.
“Five years ago, it was not much of a topic for anyone in the U.S.,” he said. “Now I think everybody is getting it. A lot of customers have ESG (environmental and social governance) mandates from their boards. A lot of consumer-facing customers want to demonstrate to Joe Q. Public that they’re taking an active role in helping [slow] climate change.”
Noting that there are already 40 BEV Freightliners in operation, ahead of production scheduled for late next year, as well as about 100 Jouley electric school buses from its Thomas Built Bus division, “it’s clearly accelerated as an important topics with customers and society as a whole.”
Meeting with customers during the American Trucking Associations Management Conference & Exhibition in Nashville last month, he said, DTNA met with many CEOs of the big fleets, “and they were all asking about battery-electric and hydrogen.”
By the end of the decade, O’Leary said, we can expect a significant number of fuel-cell-electric trucks on the road.
Hydrogen fuel cell vehicles have been discussed more frequently in relation to trucks in Europe, where Daimler Truck has been busy developing and testing its Mercedes-Benz GenH2 Truck.
Daimler also is working with Volvo in developing the fuel-cell technology in their Cellcentric joint venture.
“The big benefit for us is we don’t have to spend billions of dollars alone developing a fuel cell,” O’Leary explained. “We get to share that with Volvo. The basic R&D will be shared, but ultimately each company has its own fuel cell products and trucks to sell. We’re still staunch competitors once the fuel cell leaves the factory.”
Whether it’s hydrogen fuel cells or autonomous technology, he said, the cost to develop these new technologies is huge. “Companies like us and others are saying, ‘Let’s find a way to share some of this, because any one of us alone can’t afford to develop all the new technology that’s going to be required.”
Asked about FCEV adoption in the U.S., O’Leary said, “the U.S. is probably 18 to 24 months behind in terms of the conversation and awareness of [hydrogen-fuel-cell trucks].” It’s generally acknowledged that battery-electric trucks are not well-suited for long-haul, coast-to-coast trucking, he said, and hydrogen will be necessary for that segment to transition to zero emissions.
While Daimler touted its efforts and partnerships to develop public charging and hydrogen-fueling infrastructure in Europe, O’Leary told reporters an announcement will be forthcoming regarding DTNA’s efforts in electric-charging infrastructure here.
“To really move the needle in this segment, we need a network of publicly accessible charging stations. We’re prepared to be part of the solution in this regard and will have more details to share on this front soon.”
And what’s the future of diesel engines? The Daimler Truck presentation outlined how the company is pulling back R&D into internal-combustion engines so it can put that money into ZEVs and autonomous tech. It already had a partnership with Cummins to build its medium-duty engines and said it’s looking for a heavy-duty partnership.
By 2039, O’Leary said, at least in markets such as Europe, Canada, Japan and the U.S., “you won’t be selling diesels there because they will typically be outlawed by the governments. But 2039 is a long time away. Between now and then we’re going to continue to build diesel engines… a lot of people try to make it an either/or thing, but it’s not.”
CORRECTED 11/12/21 4:40 p.m. EST. Due to a typographical error, we originally reported that more than 12,000 X-Series trucks have been built this year. The correct number is 1,200. We apologize for the error.