We expect that HDT deliveries will decline in 2024 and that global sales will stabilize at just above 1.95 million units in 2025 as demand normalizes.  This is after a significant increase in deliveries in 2023 due to pent-up demand resulting from the COVID-19 pandemic. For 2025, we anticipate only a moderate recovery of 0%-5% in global sales units (see chart 1). The expected decline in interest rates and an uptick in freight activity make it easier for fleet operators to invest in new vehicles.

Chart 1

We believe recovery is constrained in developed economies, especially in Europe.  This is due to the softer order intake that truck original equipment manufacturers (OEMs) reported throughout 2024. Therefore, we anticipate that deliveries will only accelerate in the second half of 2025 (see chart 2). Consequently, we expect volumes in the EU, Norway, Switzerland, and the U.K. will continue to contract by up to 5% in 2025, mostly because demand for new trucks remains materially constrained due to the fragile macroeconomic outlook. In North America, we anticipate a modest growth of up to 5%, mostly driven by vocational trucks, while the demand for long-haul trucks will continue to remain somewhat depressed.

Chart 2

Table 1

Global sales in 2025 will rise in APAC and stabilize in South America.  For APAC, we expect they will increase by up to 5% next year. Despite a persistent weakness in the property market, HDT demand in China will likely benefit from replacement needs and increasing infrastructure investments. In the case of India and Indonesia, we expect higher spending on infrastructure and construction projects post-election. For South America, we expect the rise in units sold will moderate to up to 5% in 2025, following a period of rapid growth of 7.5%-12.5% in 2024. This year's increase resulted from pent-up demand after the introduction of the P-8 standards--which limit exhaust gas, particulates, and noise--in Brazil in 2023.

In our view, global HDT sales will decline by 5%-10% to about 1.93 million units in 2024, from 2.07 million in 2023 (see chart 3).  This is due to a still restrictive monetary policy environment, subdued consumer confidence, and a relatively uncertain macroeconomic outlook. Fleet owners remained cautious and postponed investment decisions for new trucks, especially in North America and Europe. Data from S&P Global Mobility for the first nine months of 2024 show that global class 8 truck sales decreased by 7.1%, compared with the same period last year. The decline mainly resulted from a 12.4% correction in North America, after a particularly strong first half in 2023. The EU, Norway, Switzerland, and the U.K. recorded a 9.3% year-on-year decline in third-quarter 2024 due to the sluggish demand environment in some major economies, while volumes in APAC decreased by 6.6% over the same period. Demand in China moderated because purchases had been made in previous years due to policy incentives and because the existing fleet size in the country is already large. Presidential elections in India and Indonesia delayed infrastructure construction and hence HDT purchases.

Chart 3

Trends We're Watching

Anticipated tightening capacity and a rebound in freight rates will likely spur new truck purchases in the second half of 2025.  After road freight rates reached record levels due to a pandemic-induced boom in consumer spending, they declined and remained subdued for a prolonged period, during which softening demand led to low volumes and excess fleet capacity. Road freight transport prices continue to decline in Europe, with the International Road Transport Union's European Road Freight Spot Rate Benchmark Index decreasing by 3.4% to 122.4 points in third-quarter 2024, compared with second-quarter 2024. The spot market price in the U.S. has started to recover, with the general freight trucking producer price index rising 2.6% year over year in third-quarter 2024, according to data from the U.S. Bureau of Labor Statistics.

Aging truck fleets also sustain truck demand.  Over the past two years, many truck firms delayed investments in new vehicles due to high maintenance and insurance costs, along with increasing financial strain from inflation. As freight demand strengthens and fleet utilization improves, carriers will be increasingly compelled to upgrade their aging trucks and expand their fleets, particularly as interest rates decline.

We expect that anticipated interest rate cuts will result in a more favorable operating environment in 2025, with higher cargo volumes and capacity tightening.  We have updated our forecast for the European Central Bank's rate cuts and now project that the policy rate will return to 2.5% before summer 2025, compared with our previous expectation of September 2025. In the U.S., we forecast that the federal funds rate will reach 3.9% by the end of 2025, compared with an expected 5.1% at the end of 2024. This should support truck demand. We note, however, that overall growth may suffer from the ongoing need to manage high operational costs in a still uncertain global economic environment.

Supply chain issues have eased but hiccups persist, increasingly influenced by broader political and trade tensions.  Truck OEMs are no longer experiencing the widespread component shortages that characterized the pandemic era, with most now reporting normalizing lead times. We continue to expect more predictable and stable supply chain conditions over 2024-2025. Nonetheless, intensifying U.S.-China trade tensions, the extent of the implementation of Mr. Trump's proposed trade tariffs, and the regional wars in Europe pose significant risks to global supply chain conditions. We anticipate that ongoing trade tensions will drive more strategic collaborations, joint ventures, and co-investments that aim to develop alternative supply chains but are to the detriment of resilient balance sheets as investment needs may increase. The development of alternative supply chains to mitigate rising costs and ensure a stable supply is particularly relevant in the case of electric trucks, which currently rely heavily on battery-grade lithium, nickel, graphite, and cobalt from China.

Pre-buying activity ahead of the transition to stricter emissions regulations could contribute to increasing demand and hence volatility in the truck market, with potential peaks in the U.S. in 2026 and in Europe in 2027.  Over the coming years, new emission legislation and the energy transition to zero-emission powertrains will play a crucial role in the demand for internal combustion engines (ICEs) and electric trucks. We expect the most important regulatory developments will be the transition to Euro VII standards--the EU's new vehicle emissions standard--which are expected to come into effect from May 2028 for all new types of N2 and N3 category vehicles. These are the primary categories that refer to HDTs, according to the European vehicle classification system. From May 2029, compliance with Euro VII will become mandatory for all new vehicles that fall into one of those categories. In the U.S., the pre-buying effect ahead of the U.S. Environmental Protection Agency's 2027 heavy-duty vehicle emission standards--which set stricter limits on nitrogen oxides and greenhouse gas emissions for HDTs and ICEs--may not occur as Mr. Trump has indicated that he might roll back fuel-efficiency requirements and emission standards.

Regional Forecasts

Europe

Despite strong deliveries in 2023, order books have gradually normalized in 2024. Truck demand in European countries has cooled during the year due to slower economic activity, softening freight rates, and the high cost of capital, which is deferring fleet replacement decisions. Overall, we project a decline in deliveries of 10%-15% in the EU, Norway, Switzerland, and the U.K. at year-end 2024, compared with 2023, as truck capacity rebalances.

In 2025, we expect that the European truck market will experience another decline in units sold of up to 5%, affected by weaker order intakes during 2024. Amid rated truck manufacturers, AB Volvo's net order intake for heavy and medium-duty trucks in Europe declined by 6% in the first nine months of 2024, compared with the same period last year. While Daimler Truck Holding AG's total incoming orders were down 8% in the first nine months of 2024, incoming orders for the Mercedez-Benz segment--which is more exposed to the EU market and, in particular, Germany--had declined by 18%. For TRATON SE, incoming truck orders in Europe declined by 19% to 52,618 units over the first nine months of 2024, compared with the same period last year.

Additionally, we expect GDP growth in Germany, which is one of the key European markets for rated truck manufacturers, will reach 0.9% in 2025, which is below the expected eurozone average of 1.2%. Nonetheless, we anticipate the contraction in 2024 will be less severe than in 2025, given that the macroeconomic environment should improve with lower interest rates, which should provide some relief for fleet operators.

We anticipate a unit decline on the European continent due to a sharp drop in Chinese exports to Russia. In the first nine months of 2024, units sold in Russia declined by 17.7% versus the corresponding period last year. This follows a boom in volume growth of 80.3% in 2023 as Chinese OEMs quickly stepped in to fill the withdrawal of Western countries' operations from Russia in the wake of the Russia-Ukraine war. This was also visible in the rebalancing of market shares in Russia: Of all OEMs, Chinese OEMs gained the largest market share over 2021-2023, with CNHTC, Weichai Power, and FAW ranking among the top three.

Over the long run, the transition to battery electric trucks could increase the likelihood of Chinese players extending their market penetration beyond Russia to other European countries. This is because Chinese truck OEMs' cost per truck could be attractive for the most price-sensitive customers. That said, we consider the near-term risk is low as the EU market poses significant barriers to entry for Chinese OEMs, including regulatory barriers, trade restrictions, high quality standards, and competitors with well-established repair and maintenance networks.

North America

We expect class 8 vehicle sales in North America will decline by 10%-15% in 2024, after a strong 2023. That said, truck sales in 2023 benefited from pent-up demand arising during the pandemic. With supply chains normalizing, manufacturers were able to deliver more trucks and to curb the high backlog they had accumulated. We view a decline in volumes in 2024 as inevitable, not least due to the normalization of truck production in the second half of the year and because of the ongoing freight recession.

Excess capacity for truckload freight is affecting truck utilization rates, which translates into fewer miles driven, and contributes to a delay in replacement needs. Additionally, the low rate environment is weakening profits, with operators opting to prolong the useful life via maintenance as a lower-cost alternative, despite the efficiencies newer trucks offer.

We forecast that the number of truck units sold will increase by up to 5% in 2025. This is based on our expectation that the market will gradually stabilize, mostly due to moderately improving consumer spending and gradually declining interest rates. Trucking spot rates remain weak but are normalizing and even improving moderately in 2025. This leads to a slight increase in the demand for replacements, driven by large fleet operators, which typically have healthier balance sheets and stronger liquidity profiles. Due to the weak freight environment, many carriers went out of business, which could increase the supply of used trucks that compete with new trucks. However, newer trucks' fuel efficiency is better and their maintenance costs are lower, meaning some operators could decide to replace their fleets sooner than later.

APAC

We expect retail sales volumes of HDTs in APAC will decline by 2.5%-7.5% in 2024, given the softer demand in China and India. Sales in China will likely decrease by mid-single digits this year, after a significant increase of 28% in 2023. The continued downturn of the real estate sector and weak consumption sentiment will constrain logistics demand and hence the purchase of HDTs in 2024. The high truck fleet size also indicates that demand for trucking will be unlikely to increase meaningfully over the next one to two years.

That said, the government stimulus designed to encourage truck replacements should support monthly sales and lead to a slight recovery over November and December this year. For India, we also expect a slight sales decline in 2024, after the high base last year. Softer GDP growth, higher HDT prices, and the presidential election constrained an increase in demand during the year.

In 2025, we expect HDT sales will recover by up to 5% in APAC. Increasing infrastructure investments, accelerating electrification, and demand for replacements could lead to a moderate increase in retail HDT sales next year. In India, we expect sales volume will also recover mildly in 2025, with the new government's infrastructure investments likely to drive up HDT demand.

ZEV Sales Will Become Increasingly Important By 2030

Despite the expected slowdown of truck sales in 2024, truck OEMs remain focused on the transition to ZEVs.  Investments in battery-electric and hydrogen-fuel-cell technologies, as well as biofuels, are rising. The upcoming Euro VII emissions standards in the EU and EPA 2027 in the U.S. are also shaping industry strategies as OEMs face higher regulatory costs and pressure to prioritize electrification, for example by developing cleaner diesel or gasoline engines to meet the new standard.

We anticipate that the penetration of ZEVs will be gradual and uneven across countries worldwide.  Currently, China has the largest share of electric medium and heavy commercial vehicles, but we expect EU countries will catch up toward 2030. The timing of the transition to electric trucks in the U.S. has become unclear and the transition will likely be prolonged, given Mr. Trump's potential policies. Key barriers to electric trucks' fast penetration of the market are the current lack of charging infrastructure and the purchase price of electric trucks, which is considerably higher than that of ICE trucks. In the absence of significant subsidies, this often puts electric trucks at a disadvantage from a total cost of ownership perspective but is offset by several factors that benefit the growth of ZEVs, including customers' decarbonization strategies and government subsidies.

Many EU member states have incentive schemes to accelerate the adoption of zero-emission commercial vehicles, including trucks and buses.  However, fiscal support tends to be skewed toward commercial vehicle acquisitions rather than infrastructure. Over 2024-2025, we anticipate that the share of electric trucks sold will remain marginal, albeit growing. For example, unit sales of Daimler Truck's zero-emission trucks and buses totaled 2,127 units in the first nine months of 2024, up from 1,161 units in the first nine months of 2023, representing 0.6% of total deliveries.

We expect demand for ZEVs, including fuel cell trucks, will increase over 2025-2030.  This is due to further cost reductions for battery cells, higher energy densities, an expanding charging infrastructure, and increasing demand for emission-free transport. In this context, Daimler Truck aims to offer only new vehicles that are carbon dioxide-neutral in driving operation (tank-to-wheel) in Europe, Japan, and North America by 2039. TRATON targets that 50% of its long-haul trucks will be carbon dioxide-neutral by 2030, while AB Volvo as a group aims that 100% of new vehicles sold will be fossil fuel-free by 2040. PACCAR Inc. has publicly committed to reducing scope 1 and 2 emissions by 35% and scope 3 emissions by 25% by 2030.

Related Research

• AB Volvo, Dec. 9, 2024
• Tear Sheet: PACCAR Inc., Nov. 12, 2024
• Tear Sheet: TRATON SE, Oct. 29, 2024
• Tear Sheet: Daimler Truck Holding AG, Aug. 7, 2024