Using data to navigate Canadian Trucking Industry’s Net Zero Transition

The trucking industry, crucial for transporting goods from manufacturers to consumers, particularly focuses on medium and heavy-duty trucks (Classes 4 to 8). In Canada, this industry moved 63.7 million shipments and generated 39.55 billion CAD in 2022. However, it faces significant challenges due to its substantial contribution to greenhouse gas emissions which conflicts with environmental sustainability efforts. Canada’s commitment to the net-zero strategy, in line with the Paris Agreement, aims to reduce emissions by enhancing energy efficiency and promoting renewable energy sources.

Executive Summary

In this project, we seek to support this transition by providing insights and recommendations for Original Equipment Manufacturers (OEMs) to adapt to net-zero goals. We will be using data from: 1) ACT (Americas Commercial Transportation) Research — a leading publisher of market data, industry analysis, and forecasting of the commercial transportation segment, and 2) a confidential metal manufacturer — builds electric trucks and parts according to blueprints provided by OEMs.

Through the research, it was found that the Original Equipment Manufacturers (OEM) still face challenges in transitioning to zero-emission trucks but can benefit from investments and partnerships.

Despite the current stable market, OEMs need to consider the forecasted rising demand to ensure they have proper inventory levels by working with manufacturers for optimum order levels, as well as anticipate disruptions when regulations come into effect.

As a key-player transitioning to supplying for net-zero emissions vehicles, it is recommended for the confidential metal manufacturer to improve its supply chain, prioritize investments in heavy trucks, and expand in USA and Mexico to further increase their revenue.

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Methodology

The research focuses on the question: “How can Original Equipment Manufacturers (OEM) adapt to Net Zero Strategy?”, with main stakeholders being OEMs and a confidential metal manufacturer. Data collection and data analysis concentrated on two points:

1) Investigating historical manufacturing activities and sales trends.

2) Researching opportunities for transitioning to electric vehicles (EVs).

Quantitative analysis used ACT Research’s comprehensive forecasting reports, which provided detailed analyses of the North American commercial vehicle market, including demand drivers, market activity, and unit forecasts for various vehicle types. Sales data from the confidential metal manufacturer were also used to identify purchasing behavior and sales trends. The data was cleaned, and all sensitive information such as names of customers and sales representatives were either masked or removed. These numbers were then plugged into a dashboard to analyze patterns and trends.

Additionally, qualitative research analyzed the websites of Navistar and PACCAR to explore EV transition opportunities, complementing the data from ACT Research.

Major Findings and Conclusions

Private Metal Manufacturer

· Based on order data from January 2023 to February 2024, 45.8% of orders were declined by the company before reaching the quotation stage, mainly due to high volume of parts deemed not valuable, impracticality, and product compatibility issues.

· The manufacturer offers two packages: “Tooling” for direct vehicle part purchases and “Sales” for part purchases with assembly services. Heavy Trucks dominate the market in both packages, contributing 85.88% of Sales revenue ($52 million) and 92.86% of Tooling revenue ($482 million).

· The company sees the highest order volume in January, February, and June.

· Despite being based in Canada, Canadian customers contribute the least to Sales (3%) and Tooling (15%) revenues. Mexico leads in Tooling revenue (48%, $2.5 million CAD), while the USA leads in Sales revenue (81%, $85.5 million CAD).

Market Findings

• Demand is expected to rise because of rising replacement levels and prebuying by private fleets. ACT forecasts indicate increased demand leading up to 2029, driven by rising replacement levels and prebuying activities by private fleets, expected to reach about 300,000 trucks by 2026.
• In the last 10 years, manufacturers are able to sufficiently meet OEM demand. From 2010 to 2024, manufacturers delivered over 90% of OEM orders, showing strong capacity to meet demand despite occasional challenges.
• Moreover, in the last 10 years, volume of trucks in inventory generally a good match to retail sales volume.

Proposed alternatives by the Market

The trucking industry sees Navistar investing in electric trucks to cut emissions, aiming for half of new truck sales to be electric by 2030 and all by 2040, having sold electric trucks and buses in 2022. Similarly, PACCAR is also into eco-friendly trucks, making electric ones since 2021 and reporting emissions data since 2014, aligning with global green standards, reflecting the industry’s shift toward electric trucks to fight pollution.

• Battery Electric Vehicles (BEVs): Navistar and PACCAR are investing in the advancement and manufacturing of battery electric trucks and buses, utilizing rechargeable batteries for emission-free operation and reduced operational expenses compared to diesel vehicles.
• Hydrogen Fuel Cell Vehicles: Both companies are researching and developing hydrogen fuel cell trucks, utilizing hydrogen gas to produce electricity and emitting only water vapor as a byproduct, contributing to zero-emission transportation.
• Charging Infrastructure Development: Navistar is focusing on developing charging stations along transportation routes and at fleet facilities to ensure adequate charging capacity for electric trucks and buses.
• Collaborations and Partnerships: Strategic partnerships with technology firms, suppliers, and governmental bodies are essential for expediting the transition to electric vehicles.
• Policy and Regulation: Governments drive electric vehicle adoption with incentives and regulations, opening doors for businesses in compliance, consulting, and advocacy for emission reduction and electric vehicle transition.

Conclusion and Recommendations

1. The commercial vehicle market’s stability is shaped by factors like consumer spending, economic growth, and supply chain dynamics, though challenges such as supply chain disruptions and economic uncertainties persist.
2. Despite the stable market, OEMs must anticipate future disruptions, particularly with impending regulatory changes.
3. Recommendations for private metal manufacturer sales enhancement:

• focus on optimizing the supply chain for consistent parts availability, addressing compatibility issues
• prioritize research and development in eco-friendly components for heavy trucks
• explore expansion opportunities in the USA and Mexico to potential growth markets and strengthen the company’s position in the industry’s sustainability transition

Implications for Business Analytics Managers

Through understanding market trends, identifying opportunities for expansion, and leveraging data analysis, analysts can assist OEMs in innovation, collaboration, and ultimately contributing to a cleaner and more sustainable future in the transportation sector.

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This project was done as a final capstone requirement for BAN240. Paper is written together with Wennie Chua, Maureen Eronico, Tiffany Padilla, Bangly Salomon, and Nadine Toribio.

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