A digest of some of the top insights that I’ve gathered from this week’s earnings calls. Full notes can be found here.
North America Heavy duty truck market better than initial guidance
“we are raising our full year outlook for most on-highway markets. Shipments to the North American heavy-duty truck market exceeded 22,000 units in the first quarter, an increase of 18% from 2013 levels. First quarter market share was 40%. We now expect the full year market size to increase by 12%, up from our previous forecast of an 8% increase. We still expect our full year market share to be at 38%, unchanged from our previous guidance.”
Chinese enforcing a move to newer emissions standards
“Last week, the Ministry for Industry and Information Technology, MIIT, published a directive that sales of NS3-compliant vehicles must cease by the end of this year. This is a positive development and clear plans for strict enforcement of regulations have not been shared. With the deadline for sales of NS3-compliant vehicles now set it would be logical to assume the demand for NS3 vehicles will remain strong for the remainder of this year. But with OEMs already having shifted a significant proportion of production to NS4 vehicles, it’s not yet clear how overall industry demand and OEM production will play out in the second half of the year.”
Raising China guidance
“full year revenues in China including joint ventures are now expected to grow 15% for the year, up from our previous guidance of growth of 11%.’
Indian economy remains very weak
“revenues in India, including joint ventures were $385 million, down 25% year-over-year due to weaker demand across most end markets as the economy remains very weak.’
Too early to call the bottom in India
“I would just say that it’s way too early to call the turnaround in India. We obviously have a bullish medium to long-term outlook on India. We think there’s a lot of positive trends in the country about developing middle-class and all the other things we have talked about before at our Investor Day. But short term the economy is in pretty bad shape. They have got budget deficits. They have got a divided government. The elections aren’t even complete. I don’t think they finish for another couple of weeks, counting of the votes. There is still quite a bit of turmoil.
So there’s no direct action from the government to resolve some of the critical issues. Road building’s slowed to a halt. A lot of the things that were going well have really slowed down over last year, not to mention, just the basic macroeconomic effect. So our view is it’s too early to call, and as you mentioned, our results are pointing out that things have definitely not turned around. If anything, we should see some stabilizing and given the comparisons in the second half, we will see some improvement I think, but that’s just because the second half comparisons are so much weaker.”
Expecting a big shutdown in production in Brazil in 2Q
“We are seeing OEMs planning significant shutdowns into the second quarter. I think without commenting specifically on our numbers in April we are expecting a big cut in industry wide production in the second quarter. Then the outlook for the third quarter somewhat uncertain we will keep going on other than how much commercial activity there is going to be. Typically Q3 is seasonally the highest quarter in the year, but it’s hard to see that right now. So I think clear move down, not clear what the catalyst for improvement in the short term”
There aren’t many good markets now
“Andy, you know, I’m the CWO, the chief worrying officer. So, I do quite a bit of worrying about markets, and as I mentioned a little bit earlier, there aren’t that many good markets now. There’s markets that aren’t a disaster and there’s markets that are doing better. I mean, the North American truck market is the one market I can say it’s actually getting pretty good. Still not a boomer yet; if we were discussing but it’s maybe on its way to one; but really, most of the other markets, are not very good. So, again, we’ll see what happens from here, but I do believe that if we get some turnaround and just the basic economic growth rates across the world and I think Europe is doing a little better than we thought and U.S. is definitely picking up. If we get some of these other emerging markets to get going, we’ll see very, very good growth and then I could comment much better about where we see the end of 2015.”
Still lacking visibility
“I think it’s pretty uncertain about what 2014’s going to finish out like and how that sends us into 2015. So, I guess, while I’d love to give you more or less confidence, I’d just right now, I don’t feel like I have any more visibility than I did three months ago or six months ago.”
Infrastructure development in China has definitely slowed
“a couple of things to think about China. One is that the infrastructure growth rates in China have definitely slowed down. And that’s why you see construction markets, Power Gen markets start slowing. That has happened and it is definitely happening. You can see it almost everywhere, just number of claims deployed, definitely slowed down. And we really haven’t seen significant improvement there. They’ve still got a very robust economy. Right GDP growth rates are still going, very large urban populations that are making products and buying products and things like that. And so that’s driving trucking. Trucking is still going and they have a lot of big road infrastructure. They have gigantic logistics costs in the country that they’re trying to reduce. So trucking well it is not unrelated.
Trucking growth rate can continue even if infrastructure growth rates, things like build out of cities, new factories, et cetera, airport slowdown and that’s exactly what we’re seeing now.”
The Chinese economy is still significantly weaker than a couple of years ago
“I would just tell you that from our perspective, the Chinese economy is still significantly weaker than it was just a couple of years ago, and that’s really at these infrastructure things.”