Commercial truck makers in North America will be challenged by an uncertain tariff environment in the short-term but will be able to benefit from increased aftermarket parts sales and services as fleets extend equipment life.
And strong underlying consumer demand will require fleets to begin replacing their existing trucks…eventually.
That’s a key finding Umesh Goel, partner at McKinsey & Company, global co-leader of commercial trucks, off-highway and specialty vehicles, shared with trucknews.com after researching how tariffs are affecting the commercial vehicle industry.
Ultimately, said Goel, OEMs will see demand for new trucks gradually return as trucking companies submit to the uncertainty and rising maintenance costs and begin replacing their existing fleet.
“I would describe the current period as a bit of a period of uncertainty,” Goel said in an interview with trucknews.com. “And the period of uncertainty is from two different aspects – one is regulation and the second is tariff.”
Goel is referring to the GHG Phase 3 or EPA27 NOx regulations, which were expected to add significant cost to price of a Class 8 truck, driving a pre-buy in 2025 and 2026 as fleets pulled forward equipment investments to get ahead of those price increase.
The U.S. Trump administration has paused that regulation, killing any expectation for a pre-buy.
“There are a lot of challenges that are happening on the regulation side, which is making it uncertain,” Goel explained. “And hence, the fleet owners don’t know whether they should buy right now or just hold on. And in those situations, people just stick to the status quo.”
That sentiment has significantly weighed on new truck orders, causing OEMs to curtail truck production and pull back their forecasts.
Then there’s the uncertainty caused by U.S. tariffs on steel, aluminum and some components.
“Nobody knows what is the real impact of tariffs on a particular model or in a particular geography or for a particular segment,” Goel said, “because the tariff is not settled yet. That’s also very much an uncertain situation. So, in that uncertainty, people are basically taking the stance of, let’s pause and think about it.”
Early forecasts of a robust North American Class 8 market this year of 340,000 units have since been pulled back to about 270,000, according to an analysis from McKinsey & Company.
The 15-20% reduction in Class 8 market forecasts McKinsey has observed reflect geopolitical dynamics that are more volatile than ever, Goel acknowledged. And it could remain that way for the near future.
“We think it’s kind of the operating model you need to live in,” Goel said. “Of course, this is a glass half full and glass half empty story. When you look at the glass half full story, the consumer demand is there. Consumer demand is solid, which is the foundation of the industry.”
And as fleets put more miles on their existing equipment, they will have to increase their maintenance, repair and overhaul spend, “which means OEMs and their dealers need to deliver on their uptime and customer experience in order to engage with the customer where they should be engaged,” he added.
OEMs will have to adapt, Goel said, and “innovate their playbook.” They’ll also have to position themselves to capitalize on a recovery, which could come relatively soon.
There will also be winners and losers among truck makers when it comes to tariffs, and how that plays out remains to be seen.
“Tariffs definitely do not impact all OEMs equally,” Goel told trucknews.com. “Sometimes you find it counterintuitive. Just because you are [producing] in the U.S. and somebody else is [producing] in Mexico, doesn’t make you more preferred. You have to do a component-by-component, model-by-model analysis to see where you end up.”
He said OEMs will be looking to optimize their supply base, and potentially change suppliers, to minimize the impact of tariffs.
“All the OEMs are trying to minimize those tariff implications,” he said. “But the short answer to your question is, it does not have the same effect on every single OEM, and even within the OEM, every single model. It varies quite a bit model by model and I’m certain all OEMs are trying to mitigate the impact as much as possible.”
Unfortunately, prospective buyers will likely have to wait a little longer to discover just how much U.S. tariffs will add to the cost of a new truck.
“It’s not easy to project at this point,” Goel said. “First of all, the tariff rates are still in flux and the timing is not clear. I think the only time you’ll really figure out what is the tariff cost on a new particular truck, is when the truck goes out the production line.”
