Those looking for ringing endorsements of how quickly autonomous vehicle technologies might take over trucking probably shouldn’t call Paccar Inc. CEO Preston Feight.
Speaking to analysts and investors on the heels of Paccar’s third-quarter earnings report Oct. 26, Feight discussed the company’s pilot project with Aurora and FedEx in Texas. There, Paccar trucks have been configured with Aurora’s autonomous driver system to carry FedEx loads between Dallas and Houston. Asked about lessons learned since mid-September’s launch of the project, Feight said one stood out.
“The drivers will be around for a long time,” he said. “This is not something that will step in in three years and replace drivers.”
Another key lesson learned, Feight added, is that the support systems required for autonomous vehicles are rather large. To function effectively, they’ll need good dealer and repair networks as well as trained team members who can see what’s happening onboard and make sure the trucks are operating well.
Paccar is pumping money into those resources and platforms, which Feight called “a great opportunity for Paccar to grow in the world.” The company’s research and development spending will grow next year to a range of $350 million to $400 million versus an expected $325 million this year. But Feight also is realistic about the maturation and adoption rates of AV systems.
“Making a prediction for how quick that market will develop is going to depend on how robust the technology becomes. That’s what we’re learning about right now,” he said. “I think we should be patient to see how quickly that develops and when it’s really ready to scale.”
Along with their third-quarter results—which showed net income of $378 million on sales of more than $4.7 billion, a drop of 2% and growth of 4%, respectively, from the same period of 2020—Feight and CFO Harrie Schippers said the company during the quarter started production of its Peterbilt 579 and Kenworth T680 trucks—which are 7% more fuel efficient than their predecessors—and this month began cranking out in Europe a new series of DAF trucks that has generated more than 10,000 orders since June. Getting those projects off the ground contributed to the quarter’s drop in profits.
With those production launches—part of more than $7 billion Paccar has spent in the past decade on new plants, products and technologies—the company will spend less on major projects: Feight and Schippers have trimmed their 2021 capex forecast to a range of $525 million to $550 million from $550 million to $600 million this summer. For 2022, they expect capex will be between $425 million and $475 million.
The Paccar executives also said they have been able to offset increases in input costs with price hikes that averaged 4% during the quarter, a pace they expect to continue and maybe even lift in 2022. The company’s parts division, which posted record revenues and pre-tax profits in the third quarter, has been able to hike prices by about 5% of late. Feight also told the investment community Paccar has seen various supply chain problems ease slightly of late—Larry Culp, his counterpart at General Electric, earlier on Oct. 26 said his team isn’t yet noticing any letups on that front—and is expecting gradual and steady improvements that will take a lot of 2022 to unfold.
