Truck Talk: Inside Earnings Edition

The earnings season is typically about top and bottom lines: revenue, income, and that EBITDA acronym that looks at income as a percentage of sales. But there's more. We looked for insights from a few transcripts of Q3 analyst calls. Also, there is another industry shortage as acute as the much-publicized paucity of truck drivers.

Future Fuel Injection?

Cummins Inc. hasn't said much about its plans to make a hydrogen-fueled internal combustion engine. But we know a little more following this week's call. 

J.P. Morgan analyst Ann Duignan quizzed Cummins CEO Tom Linebarger and Jennifer Rumsey,  president and COO, about using the recently announced 15-liter natural gas-powered internal combustion engine coming in 2024 as the basis for the hydrogen ICE. Why not just skip the expense of developing hydrogen-powered fuel cells, Duignan asked.

Hydrogen combustion is a good answer, Linebarger said. It's just less efficient than a fuel cell. The efficiency increase would matter for the long-haul, where the cost of fuel is a big factor. Hydrogen ICE is probably better suited to shorter ranges or vocational trucks.

"Our view is there's a place for both, but if you want to think what's going to really drive the transportation economy 20 years — [or] 15 years from now — you're going to need the efficiency that a fuel cell, especially with an electric system, is going to provide," Linebarger said.

Rumsey cast hydrogen ICE as a bridge to fuel cells. And other drop-in fuels could work, too.

"Of course, the calibration and control of the engine is different based on the fuel, but we're able to leverage some of that manufacturing and engineering investment in a common platform," Rumsey said.

Regardless of which approach is pursued, there is still the matter of producing or acquiring CO2-neutral green hydrogen as fuel. Cummins CMI has multiple efforts in hydrogen production, and it is sticking by its forecast of booking $400 million in revenue from hydrogen fuel in 2025. Maybe more, Cummins New Power President Amy Davis told me recently.

Slow Your (Autonomous) Roll

Paccar Inc. sees great potential for Class 8 autonomous trucks. In fact, the majority of test units across the handful of self-driving trucking startups are Peterbilt 579 models. Paccar is financially invested in the newly public Aurora Innovation.

It is part of a commercial line-haul pilot of autonomous vehicles with FedEx in Texas. The Paccar PCAR trucks are operating autonomously with a backup driver for safety covering a 500-mile route between Dallas and Houston.

So, why did CEO Preston Feight seem a bit hesitant when asked about the ramp of driverless trucks by Steve Fisher of UBS during Paccar's earnings call Oct. 26?

"I think that making a prediction for how quick that market is going to develop is going to depend on how robust the technology becomes, and that's what we're learning about right now," Feight said. "So, I think we should be patient to see how quickly it develops and when it's really ready to scale."

Joel Tiss of BMO Capital Markets pressed Feight for more.

"The technology is incredibly involved. And so if you think about the edge cases that exist, that's what's being sorted out right now," Feight said. "Most of the operation can be done running down the highway. But now it's about the edge cases. We're working through those."

Asked by Tiss about profit margins over the next three to five years from electric and autonomous vehicles, Feight brightened.

"I absolutely believe that the new products, the autonomy, connected [vehicles], the electrification, those efforts that we have will drive our margins to very, very high levels. And there [are] other opportunities incremental to that. So, the future looks very good."

Hydrogen Production Tax Credits

Like any clean energy company, Nikola Corp. NKLA  is watching carefully what happens with the $1.75 trillion budget reconciliation bill in Congress. The electric truck startup has a growing list of investments in producing and distributing hydrogen for its fuel cell Class 8 trucks scheduled for production in 2023. 

If the 10-year hydrogen production tax credit survives, it could lower the production cost of the H2 at qualified clean hydrogen production facilities. And the spiff is significant, calling for as much as a $3-per-kilogram base rate multiplied by the percentage reduction in life cycle greenhouse gas emissions compared to steam methane reforming.

"The H2 production tax credits could be substantial for Nikola," CEO Mark Russell told analysts.  "It would lower our cost of hydrogen production, and we anticipate it could create significant shareholder value."

Who's Going to Fix These Trucks?

The oft-discussed driver shortage is accompanied by a similar dearth of technicians for both today's diesel and tomorrow's electric trucks.

Kenworth this week launched an EV technician training and certification program to help get its dealerships ready to service a growing number of electric trucks beyond the dozens already ordered.

Initial certification follows online and classroom completion of a seven-course curriculum. Courses run from two to four days.

Technicians are selected by Kenworth dealer service managers, typically based on the technician's track record and growth potential. The manufacturer is requiring two trained EV techs per dealership, which pays for the training. There is no upper limit.

Startup last-mile delivery van maker Arrival on Friday took a different take on the training issue, announcing a service network program that will use the company's digital service platform to train and certify any technician to service its vehicles. 

The service platform uses the data from Arrival's ARVL vehicles and proprietary algorithms to enable existing service providers to repair and maintain its electric vans and buses.

The yawning gap in techs makes any approach worth considering.

In its 2021 Transportation Technician Supply & Demand Report, the TechForce Foundation found that demand for automotive technicians nearly doubled in the past year — from 136,503 in 2020 to 258,000 in 2021. Current demand is 5:1, up from 3:1 in 2020.

The foundation does not break out heavy-duty demand numbers.

Best of the Rest

Freightliner Custom Chassis Corp. is joining the Daimler Trucks North America electric truck parade. FCCC is introducing the MT50e, an all-electric Class 5 walk-in van for last-mile delivery. … Navistar has opened five more of its all-makes Fleetrite truck parts locations, bringing the total of retail locations to 16 in the U.S. and Canada. …  Mack Trucks has hired David Galbraith, former Volkswagen of America director of experience and brand partnership marketing, as its vice president of global brand and marketing.

Finally, two nuggets from autonomous driving startup Embark Trucks, which is expected to complete its  SPAC business combination with Northern Genesis Acquisition Corp. next week. 

First, it revealed DHL Supply Chain, the North American contract logistics operation within Deutsche Post, as being among its 14,200 nonbinding reservations for the Embark Universal Interface autonomous software. The delivery service joins UPS, which works with TuSimple, and FedEx, which is testing with Aurora (above item) in merging logistics with autonomy.

Also, Embark joined the growing list of customers for Luminar's long-range light detecting and ranging (lidar) software.

That's it for this week. Thanks for reading. Click here to receive Truck Talk via email on Fridays.

Alan