Okay, good morning. My name is Ken Hastings, PACCAR's Director of Investor Relations. We would like to welcome those here today and those on the webcast to PACCAR's 2024 Investor Conference. The webcast playback and slides will be available at paccar.com shortly after the meeting through June 30th. On the screen now is our usual disclaimer about forward-looking statements. For the most recent information about PACCAR, please see our SEC filings on the investor relations page of paccar.com. Our first speaker will be Preston Feight, PACCAR's CEO, but first, a short video that provides a nice overview of PACCAR.
I love that video. I love that video so much because it really kind of gets to the heart of what we are. We'll spend a lot of time on numbers today, and the numbers matter, of course, but PACCAR really is about the people, the focus on excellence, the culture of excellence, and our ability to perform for just not today, but also the long term. I think that just emotionally comes through, and it does matter. With that, thank you for being here. Thanks for coming in this morning. Great to be with everybody that's here live with us. Also, for the people that are attending virtually, good to have you with us as well.
As I mentioned, we'll share information today on our strong financial performance, our industry-leading product portfolio, our technology plan, our strong growth in our parts business, our financial services businesses, and our robust strategy for an outstanding future. So with that, we'll kick into this. PACCAR has an excellent management team. Every day, we wake up thinking about trucks and transportation solutions, and how we can make our customers' businesses more successful.... Shown here in order of presentation are the seven members of the PACCAR exec team who are sharing information today. Kevin Baney is our Senior Vice President, responsible for Kenworth, Information Technology, and our Dynacraft division. Mike Dozier is our Executive Vice President, responsible for managing International Operations and Global Manufacturing. John Rich is our Senior Vice President and Chief Technology Officer. Laura Bloch is PACCAR Vice President, and she's responsible for PACCAR Parts around the world.
Todd Hubbard's the PACCAR Vice President and President of our Financial Services division, and Harrie Schippers is PACCAR's President and Chief Financial Officer, who has operational responsibility for DAF, as well as PACCAR Financial. So together, this group of people has over 200 years of industry experience. I think it's kind of an experienced management team, would be another way to say that, and I think you're gonna get to enjoy hearing from each of them. To boil it down, the way we think about it, PACCAR is developing trucks and transportation solutions that move the world to a better future. In order to do this most effectively, we focus on understanding our customers' needs and helping them deliver the essential items that support the communities in which we all live and work. That's the underlying premise of why we do business and how we do business.
As I mentioned, PACCAR is an exceptional company. I hope you come away today understanding that PACCAR has built a structurally stronger business that's positioned for future growth. I also hope that you'll recognize the uniqueness of PACCAR's differentiated, asset-light, high return on invested capital business. We enjoy telling the PACCAR story. Let's jump in with that. So our last Analyst Day was two years ago, and here's a few financial metrics from the then and the now. In 2021, PACCAR reported revenues of $23.5 billion and net income of $1.9 billion. That resulted in a return on revenues of 7.9% and a return on invested capital of 17.1%. These results were before the introduction of the newest product portfolio in the industry.
In 2023, PACCAR reported revenues of $35.1 billion and net income of $4.6 billion. Return on revenue was 13.1%, and return on invested capital was 37.8%. I think those are impressive changes. All three principal business segments have increased profitability since 2021. During that time, PACCAR Financial has grown from $438 million to $540 million. PACCAR Parts has grown profitability from $1 billion to $1.7 billion, and Trucks has grown from $800 million to $3.8 billion in pre-tax profit. The presentations today will explore the structural nature of those changes and how they position PACCAR for future growth. PACCAR has a unique culture of excellence. The video showed it.
I'm humbled to get to work with PACCAR's great global team of people. When you go to our factories and you see these people, they're simply outstanding, a cut above. Their focus is on creating premium trucks, effective transportation solutions, and expanding in markets that drive profitable growth for our customers, as well as for PACCAR and our shareholders. The foundational elements of the culture are the pursuit of quality, the implementation of commercially applicable technologies, and a drive for continuous innovation. Over the past five years, PACCAR has invested $4.7 billion in facilities and products. This money has been used to increase capacity at our truck and engine factories, build new parts distribution centers, invest in clean combustion engines, build new connected vehicle solutions, design an autonomous vehicle platform, and develop zero-emissions vehicles.
These investments have resulted in PACCAR having the world's most modern and most efficient lineup of trucks and powertrains, as well as world-class parts and financial services businesses. Our independent network of DAF, Kenworth, and Peterbilt dealers is one of our most valuable assets, yet they don't appear on our balance sheet. They're an important element of PACCAR's strength and support our customers throughout the life of the truck. Over the past 5 years, Kenworth, Peterbilt, and DAF dealers around the world have invested $2.6 billion in state-of-the-art facilities and capabilities to support our customers. PACCAR Parts is a high profitability, high growth business. In 2023, PACCAR Parts achieved record profits of $1.7 billion on revenues of $6.4 billion. Over the past 10 years, profits have grown at an average rate of 15% per year.
This growth is a result of our investments in technology-driven transportation solutions and state-of-the-art distribution centers that provide our customers with the right part, at the right place, at the right time. PACCAR Financial has demonstrated a ten-year compound annual growth rate of 5%, and in 2023, PACCAR Financial achieved excellent profits of $540 million. This performance is a result of our investments in used truck centers, excellent portfolio quality, and prudent financial management. PACCAR is an environmental leader. On the top left, PACCAR's committed to CO2 emissions reduction targets. In the top right, PACCAR is ranked in the top 16% of peer companies on ESG practices by S&P Global.
In the bottom left, PACCAR received an A-minus rating from CDP or Climate Disclosure Project, which places PACCAR in the top tier, top 6% of the more than 21,000 companies who are recognized in that analysis. In the bottom right, the DAF XF won the 2023 Green Truck Award in Europe for being the most fuel-efficient truck. As an environmental leader, PACCAR will continue to make the right decisions for our customers, for our shareholders, and for our communities. I'm proud to share that in 2023, many PACCAR divisions were recognized as top companies for women to work for by the Women In Trucking Association. And I'm also pleased to share that PACCAR has been named as one of America's Greatest Workplaces by Newsweek. So now, looking at the global truck markets.
The 2024 U.S. and Canadian market's expected to be in the range of 250,000-290,000 trucks, and then expand in 2025 and 2026 ahead of emissions pre-buy. In Europe, the market's expected to be in the range of 260,000-300,000 trucks, with modest growth in the coming years in advance of the European emissions changes, which will be implemented in 2029. In South America, the market's projected to be in the range of 105,000-115,000 trucks, with generally strong economic and truck market conditions expected for the coming years. Truck markets like these will be very good for PACCAR. Now, PACCAR is continuing to invest in new technologies and trucks for the future.
Our teams are developing new and innovative products in the areas of clean diesel and zero-emissions powertrains to meet regulations as well as customers' needs. Advanced new vehicle designs to drive aerodynamics and freight efficiency, global connected services that enhances our customers' operations and will provide incremental profit opportunities for PACCAR as well, and we are the OEM of choice for autonomous vehicle development. So since 2014, PACCAR's net income per truck produced has more than doubled. New models are driving higher pricing and per unit profitability. The parts business will continue to expand based on investments in convenience, technology-enabled transportation solutions, and additional proprietary content. Our rest of the world operations will drive meaningful increases in sales and profitability.
PACCAR Financial Services will continue to profitably support truck sales and grow profits as a result of investments in new businesses, such as used truck retail centers, as well as Trucks- as- a-S ervice. PACCAR's high margins, asset-light business model, and discipline in capital allocation produced a high return on invested capital. In 2023, PACCAR's ROIC was a record 37.8%. When compared to other companies in our peer group, PACCAR's performance is best in class. PACCAR is structurally stronger. We're delivering higher margins and profits, expanding geographically, and have implemented efficient and effective advanced manufacturing capabilities. We're poised for growth. We're making investments in excellent new products and technologies, as well as continuing to grow our financial services, as well as parts businesses. These are exciting times. We're really excited for today.
We're even more excited for the future and what it's going to bring. So thank you. I'd like to introduce Kevin Baney to present PACCAR's industry-leading truck programs and dealer network. Kevin, over to you.
Thank you, Preston. Good morning. I'm Kevin Baney, PACCAR Senior Vice President. PACCAR is a global technology company that provides premium transportation solutions with industry-leading trucks, powertrains, and support services that deliver outstanding performance and value to our customers. In the following slides, I will show you the new products that have launched since we were last together, as well as the comprehensive truck product lines for each of the truck brands, Peterbilt, Kenworth, and DAF. Kenworth celebrated their 100-year anniversary last year. In honor of the centennial, they released two special edition trucks: a W900L, shown on the left, and the T680, shown on the right. Customers purchased these two special edition trucks throughout the year, representing Kenworth's premium brand and 100-year heritage.
The truck lineup on this slide shows Kenworth's complete product line, with the heavy-duty truck shown along the bottom, medium-duty truck shown in the middle, and zero-emission truck shown on the top. Kenworth has the newest complete product line in the industry, and every truck model on this slide has been released since the beginning of 2021. In addition, Kenworth is a vocational segment market share leader. Last year, Peterbilt released the new 589, which is based on the newest cab platform, leveraging the latest in driver comfort and technology. The 589 represents Peterbilt's premium brand and the extreme customer loyalty in the traditional heavy-duty truck segment. The truck lineup on this slide shows Peterbilt's complete product line, with the heavy-duty truck shown along the bottom, medium-duty shown in the middle, and zero-emission truck shown on the top.
Similar to Kenworth, Peterbilt has the newest complete product line in the industry, and every truck model on this slide has been released since the beginning of 2021.... and Peterbilt is also the vocational segment market share leader. So how can Kenworth and Peterbilt both be the vocational market share leader? Well, both Kenworth and Peterbilt have the newest and most complete vocational product lines in the industry. Both have 20% market share for a combined 40%. It's like the old Doublemint Gum commercial: the only thing better than one market share leader is two market share leaders. Thought I'd get a laugh there. Last year, DAF released the medium-duty XB that shares the same styling theme as the rest of the DAF product line and includes the latest in driver comfort and technology.
The XB has been well-received across Europe and is the latest in a series of new product launches for DAF. The truck lineup on this slide shows DAF's complete product line, with the medium and heavy-duty on-highway trucks shown along the bottom and the vocational and zero-emission trucks shown on the top. DAF has the newest complete product line in Europe. DAF was the market share leader in five European countries and won the 2023 International Truck of the Year for the XD, after winning the same award for the 2022 International Truck of the Year for the XG series. Very impressive. These charts show the fuel economy improvement in Europe and the U.S. and Canada since 2010.
Shown on the left, fuel economy in the U.S. and Canada has improved by 40%, with a forecast to improve by around 50% by the end of the decade. Shown on the right, fuel economy in Europe has improved just over 30%, with a forecast to also improve by 50% by the end of the decade. These significant improvements are the result of PACCAR's investment in new truck models and powertrains since 2010. There are two major benefits from these fuel economy improvements. First, every percent improvement in fuel economy is a percent reduction in CO2. 50% reduction in CO2 is a major accomplishment. Second, better fuel economy creates value for customers, and PACCAR can participate in that value creation. John will talk more about regulations, their impact on CO2, and the value creation for our customers and PACCAR.
In addition to investing in the newest product lines around the world, PACCAR has invested in production capacity. Shown on the top row, we've upgraded and increased the capacity in our major truck factories in the U.S. and Canada. On the bottom row, PACCAR has invested in capacity for zero-emission trucks in Europe. We also continue to invest in new clean diesel engine capacity at our factory in Mississippi, as well as adding engine remanufacturing on the same campus. As Preston said earlier, PACCAR has invested over $4 billion in new technology, new products, and production capacity. As a result of these investments, PACCAR has and will continue to grow profitable market share. This slide shows PACCAR's heavy-duty market share in Europe on the left and the U.S. and Canada on the right.
We're showing market share as a four-year average at the beginning of each of the last three decades to show the trend and smooth out the volatility from individual years. PACCAR's share in Europe increased from an average of 11% in 2000 to an average of 15.5% in 2010, and 16.3% for the last four years. The goal for the midterm is to grow share up to 20%. PACCAR's combined share in the U.S. and Canada increased from an average of 21.8% in 2000 to an average of 26.8% in 2010, and 29.7% for the last four years. The goal for the midterm is to grow share up to 35%. PACCAR's approach to market share is to pursue profitable growth.
We achieve this by providing our customers the best trucks, outstanding after-sales support, and industry-leading financial services, all supported by the best dealer network in the industry. Let's take a look at the segments of the truck market in the U.S. and Canada. The on-highway market is made up of the truckload and less-than-truckload markets. The truckload market makes up about 50% of the overall annual truck sales and is soft this year, but is expected to strengthen either later this year or early next year. The less-than-truckload market is about 25% of annual sales and is healthy, and our customers continue to order trucks. The vocational market is a remaining 25% of annual sales and is quite strong, and is in fact, still limited by supplier components. The medium-duty market, in the lighter color, is still very healthy, with a strong backlog, truck sales, and margins.
All in all, we're expecting another excellent year. Looking at the PACCAR product portfolio from a segmentation standpoint, the on-highway segment includes both the truckload and less-than-truckload, and is represented by the trucks on this slide. These Peterbilt, Kenworth, and DAF trucks further strengthen PACCAR's position in the market through performance-based technologies, including the latest ADAS in safety and vehicle connectivity systems. The result is class-leading safety, efficiency, and driver comfort that deliver excellent resale value and the lowest total cost of ownership or TCO. Fleets track TCO, and the main components include initial cost of asset, drivers, fuel, insurance, and residual value. We measure our TCO performance by the growing PACCAR share in this segment. In the vocational segment, the respective Peterbilt, Kenworth, and DAF trucks are shown along the top.
PACCAR is the market share leader in the U.S. and Canada because these trucks deliver outstanding reliability and durability. Every vocational truck is ordered in a customer-specific custom configuration. As a result, PACCAR vocational trucks provide an extensive range of application coverage. DAF is growing share in this segment for the same reasons. PACCAR's vocational trucks deliver segment-leading performance. PACCAR's medium-duty product portfolio includes a full range of Class 5 through 7 trucks, as shown for Peterbilt, Kenworth, and DAF along the top. These trucks provide class-leading driver comfort and performance, extensive application coverage, and integration with bodybuilders, making it easy for customers to order medium-duty trucks to fit their needs. PACCAR is a leader in developing zero-emission trucks. We're selling eight different battery electric truck models in the heavy and medium-duty markets.
On the bottom right is a rendering of PACCAR's joint venture commercial truck battery factory that will begin construction this month. These products reinforce PACCAR's environmental leadership and investment in the future. When we look at PACCAR's flagship trucks for Kenworth, DAF, and Peterbilt, first thing that comes to mind is world-class styling. You might also say great aerodynamics, visibility, and excellent fit and finish. But there's another key element that isn't quite as visible, and that's the electronics. Earlier this year, we formed PACCAR Electronics to address the growing importance of electronics within PACCAR's product development. With every new truck program, there's been an increasing list of electronic system implementations, ranging from new vehicle architecture, safety systems, vehicle controls and switches, and connectivity.
Several of these systems are highlighted in the interior picture on the right, and another good example is the controller for the engine shown on the left. Today, our trucks typically have up to 100 control systems with up to 100 million lines of code. The point of showing this is to highlight that connected trucks are sophisticated and run by software, requiring ongoing investments to remain best in class. This is not an easy thing to replicate and creates a strong PACCAR advantage. Also increases proprietary content and service within the dealer network. Connected services is a key strategy for PACCAR. Our proprietary integrated hardware and new digital display will make PACCAR an integral part of the connected ecosystem. Through an industry partnership, we are launching an operating system that will make integrating OEM and third-party apps effective and profitable.
That will enable PACCAR to sell proprietary apps that use truck data to perform diagnostics and prognostics. The PACCAR Global Connect system makes integrating aftermarket systems such as cameras, tire pressure monitoring, trailer connections, and other safety systems easier than ever. And we'll be a data service provider to suppliers, dealers, and customers, which will secure and increase our value in the connected space. Now I'm gonna show one of the many uses of connected truck data across PACCAR. Every Kenworth and Peterbilt trucks are connected for five years. This map shows the traffic pattern for Kenworth and Peterbilt trucks in the U.S. and Canada during daily peak operation. So how is this data being used? If we overlay all Kenworth and Peterbilt dealership locations on the connected traffic data, we quickly confirm dealership locations strongly correlate to traffic patterns.
This information is used by our dealers to make informed investment decisions on new locations, adding service bays, mobile service trucks, technicians, and hours of service. As a result, total dealership locations has grown to 910, with 11,000 service bays. This is a great example of using connected truck data. Now showing all the DAF dealership locations in Europe. The same connected truck data shown in red is also used in Europe by dealers shown by the orange dots to make similar investment decisions. As a result, total dealership locations have grown to 850, with 8,700 service bays. PACCAR's dealer network is an extension of PACCAR and the strongest network in the world.
Over the last five years, Kenworth, Peterbilt, and DAF dealers in the U.S., Canada, and Europe invested $2.3 billion in expanding existing facilities or adding new locations. The dealerships shown on this slide represent eight of the newest locations within PACCAR's dealer network, adding additional service bays to take care of customers and provide them the highest level of service. I also thought it'd be worth showing the key elements of a typical dealership to highlight the level of investment dealers make to provide excellent customer service. Starting in the upper left, going clockwise, the typical PACCAR dealer has visible brand signage on the exterior of the dealership, space for customer truck parking, inviting lobby and driver seating, plenty of parts retail space, and parts storage and service bays to take care of customers and provide them the highest level of service.
I'll end on reinforcing our position that PACCAR is structurally strong. Whether it's the diesel powertrain truck shown along the top or the complete line of zero-emission trucks on, along the bottom, PACCAR has the most comprehensive portfolio of industry-leading trucks. We have made investments in production capacity and have the strongest dealer network to continue growing profitable market share. Thank you, and I'll turn it over to Mike Dozier.
Thank you, Kevin, and good morning. I'm Mike Dozier, PACCAR Executive Vice President, and it's a pleasure to be with you this morning to provide an overview of PACCAR's rest of world operations outside of the U.S., Canada, and Europe. Highlighted in green on this map are the more than 35 countries where PACCAR sells DAF and Kenworth trucks, aftermarket parts, and in selected countries, financial services. The countries highlighted in light green are where we sell trucks and parts, with those noted in bright green, where we have manufacturing operations and/or parts distribution centers. The table illustrates PACCAR's approach to geographic expansion, with most of PACCAR's investment focused on the markets where just over 85% of global profits in the greater than 16-ton truck market are generated. That is North America, Europe, South America, and Australia.
We continuously assess potential new market opportunities with a focus on factors such as the competitive landscape, government influence on the market, and long-term profit potential. Looking at the five-year growth in PACCAR's rest-of-world truck volumes, the chart on the left summarizes the growth from 20,000 trucks in 2018 to 32,000 trucks last year, a 65% increase. Rest-of-world five-year revenue growth is shown on the right, with revenues increasing 95% from $2.64 billion in 2018 to $5.16 billion last year. This excellent growth highlights the quality, performance, and total cost of ownership benefits that PACCAR products provide our customers in all our global markets. PACCAR's rest-of-world product strategy leverages our core market, DAF and Kenworth vehicle platforms.
A key element of this strategy is the localized design and development engineering that tailors the final product configurations to the unique customer and durability requirements of each market. Taking a closer look at our primary rest-of-world operations, PACCAR Mexico, which is located in Mexicali, has been market leader for 20 years. This leadership continued in 2023, with PACCAR Mexico achieving 36% market share, supported by the production of 18,600 trucks. In support of ongoing growth in the market, the DAF brand was officially launched in Mexico in October of last year, complementing the industry-leading Kenworth product portfolio. In 2023, DAF Brazil celebrated its 10th anniversary and achieved 10.2% market share for the full year. This outstanding result was supported by the delivery of a record 8,600 trucks and growth of the dealer network to 61 locations.
Beyond the domestic market, DAF Brazil recently began exporting trucks to Colombia, Peru, and Chile. Now, here's a short video that highlights DAF Brazil's 10th anniversary celebration last year in São Paulo. A fantastic celebration for an even more fantastic accomplishment. Moving a little bit further west, PACCAR Australia has maintained market share leadership for 22 consecutive years, achieving combined Kenworth and DAF share of 25.5% last year.... Located in the Melbourne suburb of Bayswater, PACCAR Australia delivered a record 5,300 trucks in Australia, New Zealand, and other Asia-Pacific markets last year. A critical element of our success to date and the continued growth of our rest of the world business is the ongoing investments in products, manufacturing operations, and parts distribution centers throughout the global business cycles. Starting in the upper left, PACCAR continues to invest in new product configurations for all global markets.
As exemplified by the Mexicali, Mexico plant in the upper right, we continue to invest in increased capacity and efficiency throughout our truck assembly operations. In the lower right, advanced manufacturing technology investments deliver increased safety, quality, and efficiency. Shown here is the robotic cab build cell in Australia. As noted in the lower left, the continued growth of our parts distribution network is highlighted by the distribution center in Ponta Grossa, Brazil. We continue to assess what is needed to deliver the next level of growth and performance and invest, invest accordingly. Shown here in blue are the DAF XF and CF trucks that represent the foundation of the DAF product portfolio in many of our rest of world markets. Both products have developed an outstanding reputation for quality, durability, and total cost of ownership.
The transition to the new DAF product range, comprised of the DAF XD, XF, XG, and XG+ trucks shown in yellow, is now underway and planned for completion in all our global markets over the next few years. The superior aerodynamics, fuel efficiency, and driver comfort of the new DAF product that it delivers will further enhance the benefits we provide our customers outside of Europe. As with all markets in which we operate, the PACCAR dealer network plays a strategically important role in our success and continued growth. Looking more closely at the rest of world markets, the orange and blue dots shown here represent the 450 dealer locations that provide outstanding localized support for our customers. The yellow dots highlight 6 of PACCAR's 19 distribution centers, strategically located in Mexico, Panama, Colombia, Brazil, and Australia.
These PDCs provide direct support for our larger rest of world markets. Additional customer support in these markets is also provided as needed out of our U.S., Canadian, and European distribution centers. This slide highlights a few examples of the outstanding investments PACCAR's independent dealers continue to make. From Mexico to Australia, Colombia to Taiwan, over the last five years, PACCAR dealers in our rest of world markets have invested more than $280 million in world-class facilities like these that set the benchmark for quality and continue to raise the bar on the level of support we provide our customers. The quality of PACCAR's worldwide dealer network is an important competitive advantage for PACCAR.
In closing, PACCAR's rest of world operations continue to refine operating strategies and investments that will drive further enhancements to safety, quality, and efficiency of our operations, as well as the level of product performance and aftermarket support we provide our customers. As a result, PACCAR is well-positioned to continue our historic level of growth in our rest of world markets. Thank you, and now I'd like to introduce John Rich.
Thanks, Mike, and good morning. I'm John Rich, PACCAR's Senior Vice President and Chief Technology Officer. We're gonna talk about regulations and technology strategy, and our choices here will impact our capital allocation decisions as well as our return on investments. So let's get started. This slide provides a summary of global emissions and fuel economy requirements in our primary markets. Across the top half of the timeline is Europe. Over the next decade, we see a 43% reduction in greenhouse gas, which is a proxy for fuel economy. This regulation has steps in 2025 and 2030, and our engines must meet Euro 7 NOx emissions in 2029. North America is covered in the lower section. With EPA Greenhouse Gas phase III now finalized, we see a nationwide 39% reduction in greenhouse gas, taken in four steps.
The EPA has put forward an aggressive national NOx limit for 2027, a very aggressive national NOx limit. Both regions have finalized legislation this year and are now remarkably similar in both standards and approaches. And in both cases, greenhouse gas limitations start to dominate the discussion, requiring an increasing mix of electrification and other zero-emissions solutions. However, new regulations present challenges to our markets. The biggest hurdle is infrastructure, by far. Things like chargers and power generation capacity, which are simply not adequate today. But operational trade-offs, like range and payload capacity and total cost of ownership, are also important considerations. PACCAR's strategy is to develop a technology roadmap and portfolio of products designed to help our customers with these challenges....
Diving a little deeper into that powertrain, into the powertrain strategy, our first principle is that it starts and ends with the customer's job to be done. We will offer a superior powertrain portfolio to let the customer choose the solution that best fits their application. That starts at the top of the circle by offering the cleanest and most efficient diesel trucks in the market. We'll bring a portfolio of battery electric trucks that are optimized for short and medium-range applications. And our new diesel engines are designed to be adapted to carbon-free fuels, such as hydrogen. And we will offer a hydrogen fuel cell on heavy-duty applications. We will also bring a range of hybrid solutions as a significantly lower greenhouse gas without operational trade-offs. This is our global view of how we expect zero emissions adoption to play out across our markets over the next decade.
We believe this transition will be shaped by regulations, infrastructure, and cost of ownership. Adoption rates will differ by region, and uncertainty increases over time. But as we approach 2030, we start to see zero emissions vehicle take a meaningful share of our business, and over the next decade, we could see as much as half of our production be zero emissions. Even then, there will still be strong demand for the traditional diesel engine. So let's dive a little deeper into the different components of our strategy, starting with clean diesel. As you know, diesel moves the world today, and we believe it will continue to have an important place in the heavy-duty market. Engines are a PACCAR core competency, and while future emissions regulations are very challenging, we do know how to meet them. This slide shows our two proprietary engine platforms, the MX...
On the left, the MX-11, and on the right, the MX-13. We are very proud of the new MX-13 for 2024 California. When we launch later this year, it will be the only diesel engine in the market to fully meet California's new ultra-low NOx standard without the use of credits. We're investing in proprietary, state-of-the-art, large diesel engines that are ever cleaner and more efficient. These engines are foundational to our business, especially in heavy, heavier, and longer distance applications. But the internal, the internal combustion engine story does not end with diesel. In addition to improving base engine efficiency and reducing emissions, we will make further efficiency gains with hybridization. Hybridization is not dependent upon infrastructure and allows our customers to make the best use of their existing assets and training.
Where zero CO2 becomes an imperative, hydrogen combustion becomes a great alternative in our next generation of engines. All of these solutions maintain the freight efficiency of today's transportation ecosystem while driving increased PACCAR content and revenue. Going a little deeper on hydrogen and hydrogen propulsion, our customers who want hydrogen will have a couple of great choices. On the left, we have hydrogen combustion, which is considered a zero CO2 technology. As discussed, this is an in-house adaptation of our proprietary diesel engine and is made in the same factories. The driveline is the same as a conventional truck, which our customers greatly appreciate. On the right is a hydrogen fuel cell electric truck that we are developing in a deep partnership with Toyota. Here, the fuel cell generates electricity, which powers an electric drivetrain. Now, this is considered a zero-emissions vehicle.
Shifting to pure battery electric trucks, we are now three years into production and customer delivery of battery electric vehicles. We are delivering eight different models globally across Classes 6 through 8. With the trucks, we offer 11 different integrated charging solutions. These are tailored to the development needs of our customer, and they are delivered turnkey. Batteries. Batteries are an especially important consideration in commercial EVs. They are the most expensive part of the electric truck, sometimes approaching half the cost of the vehicle, and they are key, they, they are key to strong performance over the truck's lifetime. We are investing to build PACCAR proprietary packs, as shown on the top, from proprietary cells, as shown on the bottom. Our pack strategy has three very simple goals: cost leadership, supply security, and very importantly, differentiated systems that are engineered for commercial vehicle applications.
Nothing here is shared with the car world. To achieve these goals, we've pursued a very unique partnership for battery cell production. You may have seen yesterday's announcement on the incorporation of Amplify Cell Technologies. Together with Daimler, Accelera by Cummins, and EVE Power, we are building a highly scaled battery plant that is focused only on commercial vehicle lithium iron phosphate batteries. LFP chemistries possess a unique combination of durability, low cost, and safety that make the right choice for heavy truck applications. And when it comes online in 2027, this will be the largest LFP plant in the United States. Beyond pure battery electric vehicles. Our affordable commercial-grade batteries will be used in a range of solutions, including fuel cells, hybrid applications, and in stationary storage. Batteries play an important role in almost any future portfolio, and we have the right solution.
PACCAR's business model has been tested over multiple technology transitions. We have succeeded by letting the needs of our customers drive our technology direction, maintaining flexibility, and knowing when to build, buy, or partner for solutions. Our customers will always determine our path forward. PACCAR's development model is unique in the industry and very well-suited for an uncertain operating environment. We build or commit more resources once there is high volume, technology stability, and a compelling proprietary business opportunity. We partner selectively in new technologies with uncertain volumes and high development costs, and we buy where it makes sense to leverage supplier volumes, R&D scale, or there is a high degree of regulatory uncertainty. The result is a focus on premium products with deep customer integration, while maintaining low expense ratios and very high capital efficiency.
With this approach, technology shifts, like the one we see today, generally serve to strengthen the quality of our business. Moving to the aftermarket aspects of our different powertrain options. Today's truck is a 1 million miles machine, where the internal combustion powertrain represents about 45% of the value of the truck. Our business goes well beyond the initial transaction, supporting the vehicle throughout its entire life, generating ongoing aftermarket revenue on engine, aftertreatment, transmission, and axle parts. With a battery electric powertrain, we replace the diesel engine with a large variety of other systems. These include electric motors and gearing, power electronics, a variety of pumps, compressors and heaters, and a lot of battery. Large batteries need fast chargers and charge management services.
Unlike a passenger car, these systems will stay on the road for 1 million miles, generating $5,000-$10,000 of incremental parts revenue versus a traditional diesel truck. So just like today's vehicle, the relationship only begins with the vehicle transaction, and we see substantial content growth with any path to regulatory compliance. All right, changing gears on you, shifting from propulsion to talk about autonomy and the PACCAR autonomous vehicle platform. PACCAR has a very clear Level 4 strategy, autonomous strategy. We engineer and build the digitally controlled truck, including advanced powertrain controls to optimize efficiency, proprietary and cyber-secure embedded software to actuate all vehicle functions, redundant steering and braking, and high-reliability power supply systems. We deliver a proprietary and scaled autonomous vehicle platform. In this model, we are very clearly not the AI driver or the driver service.
Rather, we work with autonomous vehicle developers to integrate their AI driver with our platform. In the process, we significantly increase the value of the PACCAR truck. Our approach to autonomy aligns with how we add value across the transportation system today. We engineer and manufacture the digitally controlled truck, we repair and service a vehicle in the field, we provide all the parts support, and we continuously monitor the connected truck and service. The autonomous vehicle business model leverages our traditional strengths and could provide significant new recurring revenue and profit opportunities for PACCAR. So PACCAR is investing in new technologies and trucks for the future. These include clean diesel and zero-emission powertrains to meet regulations and customer needs, advanced new vehicle designs to drive aerodynamics and freight efficiency, global connected services that enhance our customers' operations, and we are the OEM of choice for autonomous truck development.
I'll end by reminding that all of these initiatives represent incremental profit opportunities for PACCAR. Thank you, and we'll now transition to a short break, 20 minutes, starting again at 10:15 A.M.
Welcome to go next door for refreshments. The restrooms are down the hallway along this side here, or you can stay where you are.
Good morning! PACCAR Parts provides convenient aftermarket transportation solutions for heavy-duty and medium-duty trucks, trailers, buses, and engines. 2023 included many noteworthy accomplishments. Revenue of $6.4 billion was up 11%. Profit of $1.7 billion was an increase of 18%. Key programs that engage with current and new customers helped deliver our record results. Fleet Services, e-commerce, and TRP stores all grew significantly and helped fuel our growth. We expect another excellent year in 2024. Over the last 10 years, PACCAR Parts' revenue has increased by over $3 billion, reflecting 9% annual growth. Since 2014, PACCAR Parts' profit has grown 15% annually. PACCAR Parts has a successful strategy that will continue to deliver results. It starts with ease of doing business, conveniently ensuring parts are available when and where they are needed.
By offering a full range of proprietary and all makes part products, we provide complete part coverage to support customers. Expanding our markets and moving into new locations, we find new customers and grow share. A hallmark of PACCAR Parts' success is our global network. We support over 2,300 dealer locations around the world, shown by the green dots. This profitable, independent dealer network is recognized as a leader in the commercial vehicle industry, delivering superior customer service. The red circles on this map designate PACCAR Parts' 19 global distribution centers, strategically located to provide expeditious delivery to those dealer locations. We consistently invest in our distribution network. These are four of our recent expansions. The new Louisville PDC opened in 2022, adding 260,000 sq ft. We recently began shipping from our new location in Bogotá, Colombia.
This fall, we'll open a new location in Massbach, Germany, and by the end of the year, we will complete an expansion of our Bayswater PDC in Australia. These investments support the convenience of doing business with PACCAR. PACCAR Parts has a robust product segmentation strategy with the right part for the right market. This broad portfolio drives volume, increasing customer loyalty and margin as purchases move up through the tiers. Vendor brands are widely available and known in the market and available from us. PACCAR's TRP brand of all makes products enables a retail touch point for customers that are new to PACCAR. TRP has a strong value proposition, high-quality parts for all makes and for owners of older PACCAR vehicles. PACCAR proprietary parts provide customers the assurance that their parts are identical to those used in production.
They allow customers to maintain industry-leading performance and equipment resale value. Electric vehicle parts will drive further sales in this segment. PACCAR MX Engines launched in North America in 2010. Since launch, a cumulative 370,000 engines have entered service. By 2023, PACCAR MX Engines parts sales had reached nearly $1 billion worldwide, with an incremental $500 million to North America revenue. Growing PACCAR MX Engine installations provides excellent part sales opportunities today and into the future. To date, in North America, there are 370,000 PACCAR MX engines. As shown on the chart, engines go through different parts consumption phases based on age and mileage. There are 135,000 engines in maintenance phase. Parts consumption for maintenance parts, such as oil and filters, occurs in years one through four.
In years five through eight, engines enter the service phase and consume more wear parts, as shown in green. In years nine through 12, engines become candidates for overhaul kits and consume the most parts, the darkest green sections. Finally, older engines enter a second life phase with second life parts consumption. By 2033, 800,000 PACCAR engines will have been produced. We'll take advantage of engines across all stages of the product life cycle. In particular, the number of trucks in the largest parts consumption categories, overhaul and second life, will have grown substantially to 145,000 and 280,000 trucks. Serving all of these vehicles across the product life cycle will generate significant revenue for many years to come. As electric vehicles enter the marketplace, PACCAR Parts will gain incremental share and revenue.
PACCAR EV infrastructure represents a new revenue stream. The chargers are designed to work with all makes of vehicles, providing excellent options for customers. Furthermore, with uncertainty about the power grid capacity, battery energy storage solutions are a new sales opportunity. EV vehicle parts, such as electric axles and electric accessories, batteries and charge management systems, are significant to electric vehicle aftermarket revenue. As John mentioned, the transition to new energy will change component costs. The PACCAR powertrain will become a more substantial portion of the vehicle's overall cost. Increasing content will drive customers to PACCAR dealerships and enhance margins. Overall, the incremental benefit of an electric truck over an internal combustion engine vehicle will range between $5,000 and $10,000 per truck. Connected technology enables all PACCAR trucks to be connected, creating new after-sales opportunities.
Connected trucks increase the speed to help customers optimize their fleet by enabling proactive service alerts based on prognostics. With connected services, we increase customer satisfaction by providing drivers with updates, leading to timely service and optimal parts delivery. This creates a seamless service experience and drives strong customer loyalty. PACCAR Parts drives retail sales with easy-to-use programs to facilitate customer purchases, creating loyalty. PACCAR Parts Fleet Services provides centralized fleet billing with national parts pricing and one consolidated monthly invoice. Our modern e-commerce platform gives customers an easy, 24/7 place to shop for all of their parts needs. Repair and maintenance contracts give customers peace of mind with a single monthly cost. As mentioned on the previous slide, connected services will prompt sales to connected customers. This year, we celebrate 30 years of TRP. The TRP brand is growing with our network of TRP stores.
TRP stores enable us to reach a wider customer base, 50% of whom are new to PACCAR. The first TRP store was opened in 2013, and we finished 2023 with 300 stores in 45 countries and retail sales growth of 28%. Mature stores bought an average of $1 million in wholesale purchases from us last year. We intend to double our store count rapidly over the next several years. PACCAR Parts is passionate about having the right part in the right place at the right time. We have a broad understanding of the market and use AI to optimize inventory in our warehouses. This ensures that we have the right parts with over 98% order fill. Our dealers trust us to manage their inventory. Our algorithms proactively suggest parts our dealers should order, and their systems automatically accept these suggestions.
Combined with greater than 99.9% accuracy out of our distribution centers, the parts are in the right place. Dedicated delivery from the PDCs to dealerships ensures that parts arrive at the right time. We deliver 70% of all shipments within 24 hours. This ensures uptime for our customers and creates loyalty. PACCAR Parts is well-positioned for strong growth in the years to come, fueled by innovative aftermarket transportation solutions. Thank you. I'd like to introduce Todd Hubbard, Vice President of PACCAR Financial Services.
Good morning, everyone. I'm Todd Hubbard, PACCAR Vice President, with responsibility for Global Financial Services. PACCAR Financial Services is an industry-leading financial services provider that includes the worldwide operations of PACCAR Financial and PacLease. Our mission is to profitably support the sale of Kenworth, Peterbilt, and DAF trucks. We operate in 26 countries on four continents, as shown in green on this slide. We have 1,000 employees working out of 24 locations. The primary ones are shown on the map. Experience has shown us that having captive financing available improves PACCAR truck market share by providing customers tailored financing solutions and being there for those customers that require a one-stop truck purchase and financing package. We support the growth of our dealer network by providing inventory financing and business expansion loans.
PacLease gives our dealers access to the important full-service leasing segment of the truck market. Ongoing contact with customers throughout the term of their contract gives us advanced knowledge of repurchase timing and supports high customer retention for PACCAR. Providing financing and full-service leasing allows us to bundle financing parts and service with the truck sale, thus enhancing the total PACCAR value. PACCAR Financial Services consists of a finance company, PACCAR Financial, and a leasing company, PacLease, because each company offers financing solutions for different segments of the truck market. Finance company customers are generally over-the-road transport companies or common carriers. Their business is trucking. They generate revenue by using their trucks to move freight for other companies. They often maintain their own service shops and provide the maintenance for their trucks. These customers generally don't want to own their trucks at the end of the finance period.
Full-service leasing represents roughly 20% of the U.S. truck market. This is where PacLease primarily operates. Leasing company customers are private fleets. These are companies whose primary business is not trucks, but they need trucks to move their own products around. Trucks represent an expense of doing business for them, and they use full-service leasing so they can essentially fix their cost of transport. The customer provides the driver and pays for the fuel. All other costs associated with the trucks are covered by the lease payment. Maintenance is provided through the PacLease dealer franchise network, and at the end of the lease term, the customer returns the truck to the leasing company.
PACCAR Financial Services financed 24% of PACCAR trucks sold worldwide in 2023, generating a record $7.2 billion in new business volume, as shown in the top left graph. The strong new business volume resulted in total financial services assets of $20.9 billion last year. As shown in the lower left, financial services delivered very good pre-tax profits of $540 million in 2023, the second best in company history. Over the last 3 years, PACCAR Financial Services has reached a new level of profitability, up 70% from 2018, reflecting solid portfolio performance, expansion into the Brazilian market, and continued portfolio growth in other core markets.
Moving to the lower right, strict adherence to our underwriting standards and the use of data analytics to enhance our credit scorecards has enabled the worldwide portfolio to perform very well, and past dues have remained at low levels over the past decade. PACCAR Financial Services consistently delivers superior return on assets when compared to peer companies. Over the past 5 years, PACCAR Financial, shown in green, has outperformed the peer group every year with an average return on assets of 2.6%. Last year, our return on assets was 2.8%, reflecting lower gain on the sale of used trucks. 2023, PACCAR's return on assets was 75% higher than the peer group average. Our advantage over the peer group represented an additional $215 million to PACCAR's pre-tax profit last year.
PACCAR Financial Services offers a full range of finance products that meet the needs of our customers. Banks generally do not offer operating or full-service leases. We have excellent access to customers through close relationships with the truck divisions and dealers. Banks rely more on a direct lending approach that depends on existing banking relationships and cross-selling. Our online services platform is considered best in class, and our industry-leading eContract and eSignature functionality differentiates PACCAR Financial from the competition and has further improved the ease of doing business with us. PACCAR's excellent credit rating and strong balance sheet allows us to offer competitive interest rates to customers. However, the rates offered by banks are typically lower to their accountholders due to their access to very inexpensive sources of funding. Our network of used truck retail centers in the U.S. and Europe enables us to maximize resale values.
Banks outsource their used truck sales to auctions and, as a result, receive lower prices for their equipment. In addition to offering great financial products, we also provide industry-leading technology that streamlines the entire truck purchase and financing experience for our customers. We've upgraded our operating system platforms in all major markets to support future growth initiatives. Our online services platform allows customers and dealers to make payments, payoffs, and see real-time account information 24/7 on any mobile device. Today in the U.S., 100% of contracts are funded utilizing eContract and eSignature, and we're expanding this functionality worldwide. PacLease has recently launched its first-ever franchise portal, featuring valuable fleet management reporting tools, including AI-driven prognostics data that alerts customers to proactively schedule service, which delivers increased customer uptime and lower overall cost of ownership.
PACCAR Financial Services is leveraging data from PACCAR Connect, along with the PACCAR cloud and advanced analytical tools, to grow revenue by using algorithms to identify predictive sales leads to generate incremental volume and dynamic pricing for each customer transaction, using real-time data to enhance loan and lease spread and used truck resale values. To enhance decision-making by maintaining market-specific credit scorecards to accurately assess customer creditworthiness at loan inception, and utilizing artificial intelligence to identify customers who qualify for automated credit approvals to capture incremental, high-quality business. To mitigate risk by leveraging an early warning system that will alert us to a decrease in miles driven, so we can proactively implement collection strategies. Leveraging connected truck data reports showing real-time performance by chassis, including idle time and average fuel consumption. PACCAR Financial is one of the leading sellers of premium used trucks in the world.
Last year, we sold 12,500 pre-owned PACCAR-built trucks worldwide by leveraging our extensive remarketing network of 12 used truck centers, shown by the red dots on the map. These centers provide us the opportunity to sell used trucks at retail prices, which deliver a significant premium compared to wholesale pricing. We increased our mix of retail sales worldwide to 40% last year, as shown in the lower left graph. We recently enhanced our used truck website in the U.S. and Canada to include search engine optimization, side-by-side truck comparisons, and Buy Now automated online bidding capability. Coupled with our high quality and lowest overall cost of ownership, Kenworth, Peterbilt, and DAF vehicles command the highest resale value in the industry. PacLease is a leading full-service lease and rental provider.
Our 39,400 truck fleet generates valuable contributions to PACCAR through truck purchases and parts consumption. Over the last five years, PacLease has purchased an average of 8,950 new Kenworth, Peterbilt, and DAF trucks, making PacLease the largest fleet customer for PACCAR. PacLease accounts for 4% of PACCAR's worldwide sales. PacLease has 3,700 full-service lease customers being serviced through a worldwide network of 632 locations, and this wide coverage ensures efficient and effective service for our customers. We previously covered the current services and offerings PacLease provides, as shown on the left. To expand these services, we have recently launched our Customized Fleet Services program, an unbundled service for companies who do not lease but are looking for a comprehensive maintenance solution.
PacLease coordinates and manages all the customer's maintenance needs, utilizing fleet reporting and analytics generated from the PACCAR Connect system. PacLease is also supporting PACCAR's EV rollout with full-service lease and rental offerings, including both the truck and the battery charger. The combination of these current and expanded services uniquely position PacLease to evolve our product offerings into a Trucks-as-a-Service model, which allows a customer to access trucks on demand, paying only for what they use, either by mile or kilowatt hour.
Customer's payment is inclusive of vehicle cost, battery charging, dedicated parking, and maintenance, all in one combined monthly payment. In summary, PACCAR Financial Services worldwide operations profitably support the sale of Kenworth, Peterbilt and DAF trucks, utilizing an industry-leading technology platform with excellent used truck remarketing capabilities and a leading full-service and rental provider in Pac Lease, positioning us to successfully deliver innovative transportation solutions to drive future growth. Thank you, and I'd now like to introduce Harrie Schippers, PACCAR President and Chief Financial Officer.
Thank you, Todd. Good morning. PACCAR's consistent profitability reflects its industry-leading product quality, financial discipline, and continuous innovation. In its 119-year history, PACCAR has achieved 85 consecutive years of net profit and 83 consecutive years of paying a dividend. Our strong financial performance continued in the first quarter, with revenues of $8.7 billion, net income of $1.2 billion, and 48,000 truck deliveries. PACCAR has increased its regular quarterly dividend by 7% per year on average over the last 10 years. PACCAR's balance sheet matches the premium quality of our trucks. The company has no manufacturing debt and a healthy cash balance that supports our excellent A1/ A+ credit ratings. Financial services assets of $21 billion were approximately 52% of the balance sheet total. Summarized here are PACCAR's second quarter and full year 2024 outlook.
Quarter two deliveries are expected to be around 48,000 trucks, with gross margins in the 18%-18.5% range. Our guidance for the second quarter and for the full year has not changed since the first quarter earnings call. These charts summarize PACCAR truck parts and other profit and margins. Profits are the green bars, and margin percentages are the yellow lines. Gross and operating profit and margin performance have increased over the period shown. Gross margins were an excellent 19% in the first quarter, and operating margins were 15.9%. PACCAR's profitability is benefiting from investments in new truck models, good global performance, especially in Brazil, and PACCAR Parts' continued growth. PACCAR has more than doubled the annual investments in capital projects, innovative products, and new technologies in the last 10 years.
For 2024, total R&D and capital investments are projected to be $1.2 billion, reflecting investments in next-generation clean diesel and electric powertrains, and increased manufacturing capacity to support higher markets and higher market shares. These investments will support future growth. PACCAR generates excellent cash flow from operations. Operating cash flow has grown at an annual average of 9% over the last 20 years to $4.2 billion in 2023. PACCAR's net profit as a percent of revenues, shown in green, has been best-in-class during the 10-year period shown. This is driven by the premium value of our products and our exceptional operating efficiency. PACCAR achieved an industry-leading after-tax return on revenues of 13.7% in the first quarter of this year.
This reflects the strong performance of PACCAR Parts and margin improvements from the new truck models launched in recent years. PACCAR's SG&A as a percent of revenues has ranged from 1.8% to 2.8% over the last decade and is significantly lower than our peers. This is a testament to PACCAR's lean and efficient organization, strong financial discipline, and fully independent dealer network. Due to PACCAR's premium price position and high profitability, effective capital allocation, commitment to lean operations, and a fully independent dealer network, PACCAR led the peer group with a 37.8% return on invested capital in 2023 and a five-year average of 24%. And I know Preston already showed some of this slide, but I think it's worthwhile showing it twice. PACCAR has a very effective capital allocation strategy.
We make capital investments in the business to drive future growth, following a disciplined process requiring a minimum ROI of 30%. The PACCAR Board of Directors has a preference to return capital as dividends rather than share repurchases. The company pays a regular quarterly dividend and an annual dividend, with a goal to return about 50% of net income each year in total dividends. PACCAR continuously evaluates strategic mergers and acquisition opportunities, and is highly disciplined in its approach to screening and valuing potential targets. Finally, the company has a fully funded pension plan. PACCAR's regular quarterly dividends, shown in green, have been increased steadily over the last 10 years to a record $1.04 per share in 2023. The quarterly dividend was increased again in April to $0.30 per share.
PACCAR has also paid an annual dividend in each of the past 10 years. Total dividends declared were $4.24 per share, or $2.2 billion last year. Over the past 10 years, on average, PACCAR has increased its total dividend 14% per year. PACCAR has delivered market-beating returns to shareholders years. As of year-end 2023, PACCAR's total return to shareholders beat the S&P 500 over the 1-, 3-, 5-, 10-, and 20-year periods. PACCAR is not the same business it was 5 years ago. It is structurally stronger now, operating at a new level and positioned for future growth. PACCAR's new heavy- and medium-duty truck models, introduced a few years ago, are game changers for customers' performance and for PACCAR's profitability.
We see a bright future for PACCAR Parts due to its winning strategy centered on convenience for customers and proprietary components and parts. PACCAR has very strong opportunities outside of North America and Europe. Brazil, in particular, is rapidly growing its profitability and market share, with plenty of room to grow further. And finally, technology like zero emissions, autonomy, and connectivity will provide excellent future revenue and profit opportunities for PACCAR. We'll now take a short break, return at 11:00, and we'll take questions from all the people in this room. Thank you.
Test.
I think you got it figured out.
Okay, we'll now begin the question and answer session. We'll do up to roughly 45 minutes of questions. Uli and I will be with microphones on the side. We'll get to everybody, so just raise your hand and we'll get you a microphone. Jerry had his hand up before there was a question. I think you-
You have to go over the broadcast?
Yeah, it's not on, I don't think.
Oh, thank you. Yeah.
Thank you very much for coming to New York. I wanted to ask on the battery electric outlook for parts and aftermarket demand.
Yeah.
Thank you, again. Jerry Revich, Goldman Sachs. I want to ask really constructive outlook on incremental demand in a zero emissions world, and I'm wondering if you could just expand on the source of that incremental content. You know, Ryder just put out a white paper saying maintenance costs are 20% lower based on their field studies, and so it sounds like you have a broader opportunity than just the truck, but maybe you can expand on the source of the incremental opportunity for you folks.
Yeah, look, I think there's been a lot of reports across the industry that give varied results from fleets that run Tesla cars that really had a very bad experience. The Ryder report suggesting, you know, certain elements have lower maintenance costs. You have to look over the totality of the life of the truck. Again, we keep our trucks on the road 1 million miles. Our batteries are designed to go that distance if you keep them on the road. The trucks have a lot of other systems that traditional vehicles don't have, traditional electric vehicles don't have. Compressors and pumps and other things that frankly, over that life, need service, need support, need to be kept on.
So it is a very different model, and again, I think I'd encourage you to look over the whole life of the truck, as we service the whole life of that vehicle.
... Maybe to add there, Jerry, I think during the first three or four years, first couple years, you'll see lower maintenance on an electric truck because there's no oil changes, no filter replacements. But like John was saying, over the life of the truck, we think there's a significant opportunity for more parts sales.
Think, think about Laura's chart that she showed, where the utilization of parts over the time span of 20 years, and that's where what Harrie is talking about shows up. So maybe in the maintenance interval, in that first part, no, but in the mid-span, yes. And then that's still, that's the powertrain component of the truck. Still, trucks are being operated in busy environments. There's fenders, there's bumpers, all the traditional stuff still is existent, which is different than consumer, different than a car. So I think that also should factor into the way you think about it.
Can I add one last piece? One other thing to think about is the product complexity means they're gonna—it's gonna drive that business into the dealerships at a higher rate and for longer, which also means, well, that we'll capture it more, so.
Another parts question, you folks have been able to compound margin expansion and top-line growth, and I'm wondering, based on the proprietary SKU counts on the new trucks that you've introduced since 2021, is there a runway for continued level of growth, similar to the CAGRs that you laid out for both top line and profits? How much visibility do you have on that level of growth continuing? Thank you.
As far as growth is concerned, we, my leadership team, we talk about, there's really nothing but upside. We're nowhere near saturation in terms of market share. We think there's tons of opportunity out there for us to gain, and we'll get leverage out of the assets we have and out of our dealer network.
The other thing you could add into that, and I think both John and Kevin talked a little bit about it, is connectivity and what that brings to what Laura's talking about in upside. I mean, that's one of the elements that as all the trucks are connected, Kevin showed the slide on that, and you look at a connected platform and what that means for relationship to the customer, it's just stronger. So the opportunity to provide value to them grows significantly in that case. So we're going to be able to provide a greater value through our dealerships, through Laura's business, through Todd's business, and that's going to just help PACCAR, I think, as we move forward.
Then I think the other line is, you know, if you looked at TRP in its 30-year anniversary and the store growth that we're seeing, it's parts, but it's a different element of the, of the business that has great growth opportunity.
David?
Hi. Just a question on gross margins. The framework you laid out through 2026 implies industry volumes growth from 2020, 2024. Just curious, you obviously described a lot of features of parts and so forth that could help the margins expand, but we all know pricing historically in this industry is a little debatable when volumes are a little bit softer. But again, you're implying volumes up the next two years. So can you give us any sense of how you view your gross margins over the next couple of years in that industry backdrop you laid out? And of course, any color you want to give us on the rest of the year gross margins, I think we would appreciate as well.
David, how long have you been following PACCAR?
Two weeks.
You know, I think what we see is exactly what we outlined in all of our presentations, is that we feel that we have a structurally stronger business with great growth. That doesn't infer just to top line. We think that infers well to the bottom line and through all our metrics, right? That's how we're building the business. So I, I think that that was our message today. I think you kind of heard that storyline, that we think that we've done a good job, the team has done a good job. We're providing extra value to our customers, and that's going to help us in terms of our, our overall performance of margin for the coming years. So you're right, we showed you that we think that the markets look pretty healthy, and healthy markets are good for us as well.
Just a quick follow-up. I mean, I know it was a graph-
Sure
... with a nice arrow, but at least it implies 2026 deliveries for you, if you're in line with the industry, let's say. I, I know you're thinking of taking share, that your volumes would be higher in 2026 than 2023. In 2023, your gross margins were, I think, 19.3%, if I remember correctly. Are you implying that higher volumes in 2026 begets higher margins in 2026 than 2023?
I think knowing you as well as I do, that you know how sophisticated the world is, it's more than two variables deep. So I would suggest that it's a pretty deep variable analysis in terms of what margins will be in 2026, which is why we don't forecast them.
I appreciate that. Thank you.
Okay. Jamie?
All right, I'll try to ask the question slightly differently. You know, if you look at this cycle, your incremental margins have been above average, right? You've, you've produced above average incremental margins relative to history. You've had, like, you know, high teens to 20% incremental margin. Some of that was price, some of that was value, but, like, do you still think over the next two years, assuming that your forecast is right for 2025 and 2026 growth, does PACCAR still have the ability to produce out, you know, above-average incremental margins? And then my second question, Todd, I think it's for you. You talked about, you know, AI and getting better data from your customers, et cetera. I think there's a lot of people trying to understand, the TL market, right? It's, it's weak.
Capacity really hasn't come out of the market as much as people would have expected. I guess I'm just interested if you're seeing any color based on the data that you have, that you could sort of help us understand what's going on there, if more capacity is going to come out, when it's going to come out, what you're seeing in terms of reduced mileage or delinquencies, like, any color there specifically on the TL market. Thank you.
Okay, starting with the margin question again. Is it on?
Yeah.
So for the next few years, I think we'll benefit from the new products that we just launched. So the new DAF, new medium-duty trucks, Brazil, get us to structurally higher margin levels. We'll benefit from that in the future as well. And content for trucks, in general, is a good thing, if it especially if it improves fuel economy. I think Kevin nicely showed that with all the greenhouse gas legislation that's coming up, will improve fuel efficiency for our trucks. So that's something that customers really like and allows us to participate in that value creation. And anytime there's content added to truck, it also means more parts opportunity, whether it's electric or emissions or autonomous, all those things will provide future profit opportunities. The AI question, Todd?
Yeah. In regards to the AI piece, you know, we look at that data for customers that are showing some signs of falling past due on their payments.
Okay.
And then we check to see if the trucks are running. We check to see how many miles they're running, to see if it is off the normal course and inhibiting their ability to make their payments on time. So we don't use it right now as a predictive on where the truckload segment is going. But clearly, as we all know, the truckload segment is off a little bit as we speak. And, you know, we just keep a close eye on particular customers who show a declining mileage and usage. And then we proactively set collection strategies to get out in front of that, to reduce delinquency, to find a solution to maybe get them some payment relief, if it's just a short-term thing, so we can save a loss. So that's what we're using it for right now.
But I see that expanding quite a bit, as we go on, you know, more and more trucks become connected, and it's gonna be a very powerful tool for us.
Yeah, I think Todd did it, hit it on the head. I mean, it's perfect. The way this data capability coming off the trucks is just super helpful. One, from a prediction standpoint, kind of where you're going, is can you see the future a little bit? I think the answer is, well, we can certainly do a better job of modeling the future, so that gives us an ability to react sooner or react in time, I would say. But it's also this idea of data is so helpful in terms of value creation for the customer. Let's start with them, 'cause that's what matters, that the data has value to the customers. Huge data, huge value, and that feeds into us, right? So that's why Kevin and John talk about this stream of growth for us.
We spent a lot of time on parts. I think that there's this other element coming towards us now that maybe has been visioned out for a decade or so, that is really hitting stride, and the opportunity of finding ways to do things for the customers that are good for PACCAR is coming to roost now.
Hi, Rob Wertheimer, Melius Research. I have, I guess, two questions. One is on engine strategy and internal engine penetration. You guys had a ton of success in sort of launching the North American, we're going back a decade now, engine, and I know, Laura, that the, the parts opportunity from that or the service opportunity from that is still kind of rising for, for some time. There's a bit of a plateau there. I'm wondering, you know, there's used to be a debate on the 15 L versus the 13 L, et cetera, et cetera. I'm wondering how much that plateau is intentional on capacity and rational investment. I'm wondering what your goals are on internal engine penetration in North America. Just, you know, is there more growth there that'll kind of add a second wave in parts in the future?
Yeah, I can take that.
Sounds like it's all over, I guess, but it's all...
Yeah, so for the engine penetration, you know, I go back to, you know, John's message about we provide solutions to meet customers' needs. And if we think about, you know, you mentioned the word plateau as—we view it as we provide a great 13 L engine. We've got a great partnership with Cummins. You know, we're in a period where the market is really strong vocational, so it favors the 15 L. And so, you know, I think we look at each market, each cycle, see the opportunity. We've got great engine platform, and so we really leverage, you know, the right solutions for the customers. We definitely see opportunity for continued growth as we add, you know, new powertrain solutions and the decision of the make-buy partnership as we move forward with that, whether it's proprietary or through partnerships.
I think, you know, as long as we keep the end customer in mind, provide them the right solutions, we've got great growth opportunities.
Were you capacity-constrained on engines in 2023 and, you know, and, I don't know, going back to 2019 or whatever?
Yeah, so in Europe, when, you know, one of the benefits that we've had over the last few years is all markets for PACCAR have been strong. And so, you know, as we evaluated the capacity with Europe and North America, yeah, there were some opportunities last year. And so that's, again, leveraging the great partnership with Cummins, is we have those options.
Yep. The only thing I'd add is also, we obviously feel bullish about it for the future because, you know, we're continuing to invest in that capacity in terms of our Mississippi plant. We announced a year ago, $200 million of investment. We're building also a reman center, so we pick up a different portion of business. So we still see strong growth in terms of that. And again, Kevin said, John said, make-or-buy partner, active part of our powertrain solution, do it where it makes sense.
May I ask another one, or?
Yeah.
This is for Laura. You mentioned your team, and you sort of see a lot of opportunity for growth ahead. You haven't saturated the market in probably store count or otherwise. Could you just talk a little bit about some of the drivers of those new customers coming into TRP, the new customers that you're getting? Are you taking share from, you know, very small, kind of fragmented, you know, other solutions from other large truck partners? Just what is the market that's still coming to you? And I'll stop there.
... Let's see how to answer that. So TRP is definitely one of the avenues, and those, as we measure, we see about 50% of the customers who come into a TRP store are new to us, which means they're either all makes, so coming from a different OE and have a different OE's truck coming in and now buying parts from our TRP store, or they're owners of older vehicles that maybe wouldn't come in, hadn't come into the dealer, second or third owners, but now come into this TRP location that gives them a new way to buy parts from us.
That's a very great opportunity for us to keep growing, and of course, there's also the piece that is market share and truck market share, and making as that grows, so does our opportunity with first owner, truck owners.
I'll just add, you know, Preston made the comment about leveraging the connected truck data. As Laura's mentioned, it's when those trucks in the past had gone to the second owner and tend to go to other sources than dealers; now we give the dealers and ourselves the ability to reach out to those customers and pull them in, and whether it's through the dealers or through TRP, that's where Laura said earlier, it's tremendous growth, just knowing where all the trucks are.
Thank you. Steve Fisher, UBS. So, you cited the, the number of structural, the drivers of structural improvement in your margins that are gonna drive the margins over the next couple of years. As we think about a few years from now, you know, whenever we have the next one of these investor meetings, what's the message around structural change gonna be, and improvement gonna be that time? Is it gonna be we're just built more on these existing structural drivers that we've had the last few years? Are there more structural changes? Are they different drivers of structural change to, to come?
Well, I really glad you got the theme for today. I don't think the theme changes probably in a couple of years in terms of growing. I think the focus areas will change. Kevin just mentioned connectivity again. Mike did a great job, I think, of outlining the geographic opportunities that we have in front of us. Laura's talked about the parts. Those aren't things that I expect in two years we'll have put in a rearview mirror and don't have as part of our discussion. I think that one of the things about PACCAR is we have a consistent, steady growth model, which tries to improve structurally, not just for a moment, so that we're not constantly whipsawing the story around.
I think that that's what you'd expect to see, continued strong performance in terms of all of the segments, a continued focus on lean operation, bringing advanced technology to the market when it's ready, in a profitable way, versus posturing technology that might be costly for us or our customers, and I think a continued focus on delivering high ROIC to us as a business. So I think that's where it sits.
Yeah, the other thing that I would like to emphasize is the nice alignment we have for the, let's say, coming decade between emission legislation and what our customers want. I think both John and Kevin showed greenhouse gas reductions scheduled for, what is it? 2024, 2027, 2030, 2032, 20%, 30%, 40%. Now, some of that will come out of the traditional engines, and to the extent that fuel economy improves by 10%, 20%, yeah, that will provide a lot more value for our customers and will give us continued strong margin opportunities.
Thank you. Just a follow-up. You had in your last Investor Day deck, the historical progression of dealer locations over time, and it's a nice, steady, upward trend. How should we think about that going forward? Do you have a particular influence on that number, a particular strategy, and any particular targets? Is it gonna kinda continue to be up into the right, 'cause clearly, those would have some influence on market share and parts sales as well?
Yeah, I'll start with North America and Europe. You know, traditionally, we talked about that because dealers would use registration data to make decisions on investments, and now with having the connected truck data, not only do we talk about locations, but I added things like mobile service, right, is just as important. So we've in addition to locations, and yes, they still have a trajectory. You could still. You know, if you spent time looking at those maps, still some opportunities for dealer location growth, but it's more about adding capacity in terms of more bays, mobile service, hours of service, trained technicians, and that's, I think, the beauty of having the power of that data, is to is when we do those business reviews with them, is to really get at the heart of what's the smartest investments versus just locations.
Yes, there is, and that's why I added the bay count on there as well. It's really about providing the right level of capacity in whatever form, whether it's permanent locations or mobile, across all of our regions.
Yeah, and I'll add the, when we think about evolution versus a larger opportunity, I think South America is where we'll see the larger opportunity. You know, I've noted we're 61 dealer locations, a lot of opportunity there to continue to grow it. While we directionally lay out, you know, call it a number of, it's more going back to the customer, where do we need coverage? In what kind? Whether it's a TRP store with service, whether it's a full dealer location. And then beyond Brazil, in South America, I think it, having a growing manufacturing base, you know, not to oversimplify an entire continent, but I think the opportunity it brings in the Andean region for growth is similar. And I think it puts it, you know, kind of at the top of the list on opportunities for larger scale growth. So-
... So, and just to clarify, Steve, that, that slide with dealer locations in North America, that's still in our investor presentation if you go online.
Thanks. It's Scott Group from Wolfe, and here in the back. So you had the slide about market growth in 2025. I'm wondering, is that a view of the underlying market, or is there some pre-buy assumption within there? And then I just, you know, when you think that pre-buy, you know, actually starts and sort of the types of customers it starts with. So that's the first question. And then secondly, you know, when the price cost disclosure that you guys give, it's just been such a remarkable tailwind for you guys. Got a little bit worse in Q1. Just any thoughts on how to think about price cost the next, you know, few quarters?
So the market growth, I would say, is, again, we focus in on truckload, because it's the biggest sector. But in looking at 2025, you'd say, well, a lot of people got into the market with spot rates at a peak. Those people are probably trimming out, so you're going to have some normalization at some point. I'm not able to tell any more than any other expert about when that time is going to be, but let's just say it's within quarters, right? That's probably a fair enough way to articulate it. You still have a strong vocational market, you still have a strong LTL market, and you still have a strong, healthy medium-duty market. So with those things all flowing, that kind of points to the arrows we provided.
That's how kind of we look at things going up in direction that way. In terms of what's going to happen, price cost balances, right? We're in that spot where we said it could be quarters before things improve, so I think there's always going to be price cost consideration in there. But I think what we're showing right now is a delivery of good margin realization in a more challenged environment than it was a year ago, right? We lived in a constrained, supply-based market a year or two ago. I think if memory serves me right, there was a lot of questions around like, "Well, what's going to happen when it's not constrained?" Well, it's not constrained now, and you can see what we delivered and kind of see where we're sitting.
Helpful. And then actually, just last one, a ny color or thoughts on, on the used market and, and how that should flow through to financial services? Thank you.
Used market, obviously, we've come off the peak that we were at over the last two years back to a more normalized used truck pricing market. I think what you'll see is going into the back half of 2025 into 2026, when new truck capacity gets a little tighter due to high demand on a pre-buy, you're going to see the used truck market do extremely well once again. As customers, when they need a truck, they need a truck and to haul freight. So we're expecting... We're back down to a normal used truck market now, and I see that rebounding over the next couple of years.
Oh! He's talking.
Hi, thank you so much. This... Is it on? Tami Zakaria from JP Morgan. Could you help us understand the timeline for the 35% market share target for U.S., Canada? I think last time, back in 2022, it was 32%. So what would drive this? Is it tech leadership, cost leadership, is it more capacity, or something else that I'm missing? And also, will it be driven by certain truck types, like vocational, or do you expect that across types?
I could almost just say yes, Tami, to all of those. I do think it's all of those things. I mean, one, as we said, you know, we invested a lot of money in the past five years, so that has given us confidence that we have the best products that are out there. That's a, that's a starting point. We think of a best transportation solutions business with Laura and Todd, providing value that helps us to grow share. I think that we're focused on cost control also, which is opportunistic, and then we have invested a lot of money in capacity, both powertrain capacity and truck capacity in our factories through advanced manufacturing capabilities will allow us to see our share grow. So obviously, we got to provide the value. We have to live in a competitive world, but we feel optimistic for the future.
When you say medium term, is it 5 years, 3 years?
It's medium term.
Okay, fair enough. My second question is, I think I saw a press release this morning, you launched MX-13, that's CARB compliant. So just curious to know what the incremental pricing would look like, as we think about potential pre-buys ahead. So any color on the incremental hardware versus warranty costs that you expect, in this MX-13?
Look, stepping into the MX-13 CARB solution, which is a 0.05 ultra-low NOx, fully compliant solution, I think we'll see pricing in the call it $10,000-$15,000 range as we introduce later this year. Obviously, that is a precursor for ultra-low NOx levels that we'll see in 2027 across the board in 50 states. I probably won't go beyond that in predicting pricing, but that's where we'll be this year.
Hand it to Jeff.
Awesome. I have a short-term, non-strategic question that won't end in: What is your margin forecast for the next 2, 3 years? I, I'd love to know what you're seeing so far with your customers that are more CARB sensitive. You know, the read we're getting is people are kind of holding back, whether they're waiting on the waiver, or they're waiting for something in the market. But I, I kind of think if you're running a marathon and you're a little slow to start, eventually you've got to make that up. So I'm just kind of curious, since, you know, CARB's the first shot across the bow... what your dealers are seeing, what they're positioning for, what your customers are talking to you about, as those will eventually be enforced more stringently?
You want to go, I'll go.
I'll start.
Starting point that John filled in details, and I'd say, like, yeah, it's a slow start. I think it'd be, anybody paying attention to California right now can see that. And I think that's not uncommon. I think when there's tech change or regulatory change, that people want to see what's happening. So I think that's exactly what happened. John already articulated the CARB-compliant, fully CARB-compliant engine, not using credits is $10,000-$15,000 on cost to it. Well, yeah, that, that's going to give people a pause. And I think that the curiosity of what California is going to do, what other states are going to do is, is giving everybody that, that moment right now. So eventually, I think they'll have to get over the moment, but I think that's where we're at right now. I don't know if John or Kevin can add.
I'll add to that. It's CARB is complicated by an interplay between Omnibus, NOx, and ACT coming in simultaneously, and the ACF is a very confusing moment in the ACF formula as well.
Wait on the waiver.
Can you spell out those acronyms?
Yeah, sorry. Advanced Clean Truck, that tells us that we have to have a, you know, a set of offerings that are that incrementally increase over time, and the Advanced Clean Fleet, which says that fleet operators have to buy a certain amount of these, over, again, increasing over time. And then Omnibus NOx is the 0.05 ultra-low NOx and a series of credit, of qualification and credit requirements that allow you to sell legacy engines and ultra-low NOx engines and combinations. That, it's proving to be very, very... Just describing it here sounds confusing. It's proving to be very confusing for customers, and, I think you just watched the market stall. And again, the legacy engines, which are qualified with credits, are also very expensive.
So it's a moment for California, I think.
But at the end of the day, the noose tightens in California, and you got anywhere between 7-20 states, depending on ACF or ACT, that are going to be adopting this in the next few years. Are you getting any feedback from your dealers on, "How do you help me solve this issue for my customers?
Yeah, I'll go back to California. I think both well said is that, you know, whether dealer or customer is, they're in a mode of kind of holding because, you know, we know what the regulations are as published, but when they make that buy cycle, it is for that cycle. And so I think it's part of it is not only know the reg, but do they anticipate any changes? And so that's why I think they're in this holding pattern. So every other state, I think, is also looking to see what's going on in California, whether it be state or customers and dealers. And so, you know, I think the best path forward is we just spend a lot of time, you know, talking with our dealers and customers.
You know, we have dealer councils, and so we triangulate with customers, triangulate with our dealers. And so, you know, I think, you know, goes back to John's presentation, is we continue to develop a multitude of solutions. That's the nice thing about EPA and the Greenhouse Gas phase III, is it's a CO2 reduction, so it allows us to develop a suite of technologies that's good for the customer and provides us the solution as wherever the regulations go, we'll be ready for it.
You know, I think the thing that makes it, that makes California the unique case is when it's EPA and it, when it's 49 states or 50 states, then it's understandable how a customer's going to react a little bit. There's not this movement around of trucks and how people are going to make their buying patterns for multi-state operators. Right now, California makes it confusing by being out of phase. I mean, I feel like it'd be much better for the industry to have 50-state regs, as Kevin said, will be coming in 2027. Getting that would be helpful. It'll be helpful to everybody, and that's why this is a moment of uncertainty for people, because you have this significant difference sitting out there.
Okay.
Brian Sponheimer with Gabelli Funds. The slide decks were incredible in that not only did you show where you're going, but how you're going to get there, particularly as it relates to engines and parts and in the next five years. But you're going to throw off an extraordinary amount of cash. The last time anything inorganic was done in a meaningful way was 1996 with DAF. You know, when you think about who you are five years from now, are there any pieces that you feel that with this cash you're going to generate, you're going to be able to opportunistically come in and... You know, what's the wish list there, if any?
Well, my wish list is to provide great shareholder return. That's also, which I think one of the things we've been able to demonstrate doing in the 1-, 5-, 10-, 20-year time frame. So the strategy that we've employed has been good for our shareholders, and so we'll continue to wish for that and aim for that, more than wish for that, which we conform to that. And yes, I agree that we have a significant amount of cash, and we have good cash flow feature, but I think that we're always evaluating where the opportunities are and are very open to whatever the right opportunity is. We recognize that not everything that glitters is gold, and so we'd like to make sure that we apply PACCAR discipline to places where we would be into a merger acquisition or build-out approach.
We demonstrated successfully organic growth with money, let's say, in Brazil. So instead of buying somebody, which would have been an option that might have fit the, fit a model of, oh, yeah, PACCAR made a big acquisition, we didn't do it that way. We said, "Let's take our money, let's employ it, let's build a factory, let's build out a dealer network. Let's be patient." Wasn't great from a cash flow standpoint in the first years, and now has done a fantastic job. Right. The team there just nailed it. So I think that-... standpoint, obviously, it's not going to build itself until 2027. We talked about rates of adoption being over a decade, so it's a patient approach it allows us to take, right?
We can make strategically good decisions, deploy the resources early enough to be ready when the growth happens, and it doesn't have to look like a big bang as an acquisition. Still open to those, but want to make sure they're good for everyone.
And then at the same time, we still pay a very nice dividend to shareholders, as you know.
Hi, it's Chad Dillard from Bernstein. So my question's about the phase III Greenhouse Gas emissions. Just trying to get a sense for how you guys think about the change in powertrain diversity, you know, when that eventually happens and what your customers are saying about that. Would like to understand how you're thinking about investing ahead of that. And then finally, is this a candidate for another pre-buy?
John, do you want to-
I'll start. Thanks for the question, Chad. I love anybody who asks questions about Greenhouse Gas phase III. The Greenhouse Gas phase III obviously finalized in the last few months. EPA put a lot of careful thought and consideration into how that was formulated, basically trying to get more of a 50-state solution rather than a California federal. It did change our mix and our approach a little bit, not radically, but it opened the door to more hybridization, and that's the major difference you see from the last presentation we gave two years ago to this, is that we're seeing in the heavy and long-distance space, really an opportunity for deployment of hybridization that we talked about in the presentation.
Yeah, and I'll just refer back to John's slide, where we showed, you know, the different technologies and, you know, the benefit of the greenhouse gas is. I'll go back to the statement I made earlier. It's the CO2 reduction versus the ACT that John referred to, where it was zero emissions. And so a CO2 reduction allows us to, whether it's clean diesel, get a focus on, you know, what's the best solution and technology for the customer in terms of: is it still clean diesel? Is it hydrogen ICE? Is it hybridization? Is it fuel cell, battery electric? As we get to develop those in, in the slide of the make versus buy partnership, is then it allows us to, you know, decide what we're going to have proprietary versus the right partnerships and, and buy.
I view it as the EPA Greenhouse Gas really opens us up to develop, you know, multiple technologies for the customer.
I'll actually add a little to that, and the reason I like talking about Greenhouse Gas phase III is it changes the dialogue from quotas on types of vehicles to finding the best solution for the customer, moving, moving CO2 down. And it's very, very similar to the European approach, and it's something that we can manage.
Yeah, great. My, my second question, I guess, is, is not at the end of the decade, a little bit more near term. So it sounds like the, the private fleets have been more resilient, over this, this cycle. And, you know, just thinking about your views on 2025, I'd just love to get a sense for at least, like, what your dealers are saying, as they talk to the customers about whether that's going to be a resilient part of the market next year.
Yeah, if I understood your question right, you know, it goes back to we monitor truckload because that's the 50% and, you know, one of the things is, you know, the fleets tend to maintain a consistent buy. So as we look at the soft market this year, you know, and coming out of an allocated market, is to work with them to maintain that consistency as much as possible, and so that's why we think going into next year, and as Preston said, we monitor it by quarters, is we think that going into next year, if they stay on that consistent buy cycle, is it'll start next year, pick up in truckload while we're maintaining a strong leasing truckload, vocational, and medium duty market.
That's what drives our forecast.
You referenced it a little bit, saying that the dealers, customers' vantage point of it, right? And you speak to them as well as we do. We speak a lot to them, right? They can read the regulation. They have the concern over what the regulation could mean, and so they are thinking, as Kevin just said, "How do I make sure I time my buys, so I don't find myself stacked up in 2026?" For sure, that's on their equation. In the truckload sector, just because that gets a lot of weight, they're also trying to figure out, like, it's a tough environment right now.
So if it's tough for them right now, how long can I wait, and to deploy capital on purchasing trucks, trying to be in the right phase of the market, have the right age of trucks as we get to 2027? What are my used truck values? It's going to be all the normal stuff that obviously they're a lot better at thinking through than we are, but that's the way the conversation's working in their mind, if that's helpful.
Thank you.
Hi. Thanks. Brendan Shea from Morgan Stanley. So you've mentioned this, several times here, making significant investments in capacity. Could you just help frame out, sort of related to truck manufacturing capacity, how much you've added in the past five years versus sort of what's currently, under construction to be added in the near future? And then sort of just your general thoughts on industry capacity and industry discipline, given that several other OEMs have announced their own plans to, increase capacity.
I can start.
Go for it.
Yeah, so without giving specifics on numbers, you know, the market share slide that I showed—you know, I think there was a question earlier of up to 35%, up to 20% Europe, and the time frame is, you know, when we look back over, let's say, the last 5-7 years as we were bringing capacity online. One of it is to handle, you know, bigger market sizes and incremental share, but also is to handle it within cycles, right? If you look at, you know, quarter-over-quarter, there's peaks and valleys in each year. And so we wanted to make sure that as we target, you know, the future in our market share growth, is not only can we handle it on an annual basis, but we can handle it when the opportunity is there for the peak cycles.
I think that slide was fairly telling. You know, two years ago, we showed it up to 32% North America. We've increased that, and that's reflective of what we feel confident that we can get market share gains in our, you know, in those markets. So we feel like we can handle those cycles.
Yeah, so I mean, if you just use that, you say 15%-20% kind of capacity ±. Obviously, we can add shifts, so it tends not to be a truck capacity limitation to the world, but some of the capacity increases are the build-outs we experience in Brazil. In Mexico, we're adding capacity. We did that with the new product when we introduced it in Europe. So we've kinda... It's been fairly everywhere, and it's not just like capacity, it's also the application of efficient capacity and technology so that you can get a reduction in truck hours to produce things, higher quality capabilities. So capacity, efficiency, and technology all fit into that camp.
Thank you.
This is gonna be a quick, yes or no. The idea of bundling orders for fleets as they think through their needs the next three years can be a way to sustain pricing, right? People are concerned what pricing may do. Is that what's occurring with these conversations that, "Hey, we can get you on the order books for the next three years for your needs," but that's a way of sustaining current market pricing with some sense of, I won't say guarantee, but a range of pricing you'll provide for 2026? It's just a way to sustain pricing now with teasing, "We'll promise you volume over the next three years for your pre-buy needs.
Yes or no.
I know. That's. I was gonna say, it's just killing me to not answer yes or no when you give me that opportunity, David. But I would say that we do have that conversation, exactly as you outlined it, with the customers like: how do you wanna think about it? Now, I would say it's got to be symbiotically good, right? So it can't just be a PACCAR benefit, it's got to be good for them, too. And so they're thinking about that stabilization of purchases. We're thinking about the stabilization also of build, and I think that is a conversation we try to have in a way that's mutually beneficial, right? It's not one-sided. Thank you.
Hi, Rob Wertheimer, Melius Research again. I have two, actually. One is on, carbon reduction, 2030 or whatever. You guys have a pretty cool SuperT ruck. I think you showed a slide of it at the latest iteration. I don't know how far that gets you there, and the question is really around the risk of achieving that target. I think you said it was achievable. I don't know if you sort of see all the engineering pathways and know you can get there, and, you know, risk versus reward on that is my first question.
Yeah, look, what EPA put out for Greenhouse Gas phase III is very detailed, and there's a lot in there, and there are several paths through it. But we do view it as achievable if the market can support it, and when I say that, I mean infrastructure. And I think that will be the variable on it, but what is put forward there is achievable, technically. Again, the challenge is the ability for the market to support it with infrastructure and fleets to get converted over to it.
You know, the thing that's interesting about it, Rob, is trying to think through, yes, as John said, we can do the technology. Is society willing to incur the cost of that? And that's a bigger conversation than us on the stage or, you know, this audience, really, but I think we all have to decide what the impact of goods are going to be for the benefit we're getting in terms of the reduction. So we have great CO2 reduction, that's good. Obviously, that's a good thing, right? We get lower NOx, that's a good thing, but at the cost to society, where does that balance come in? And how do we make sure that as the regulatory agencies with us, with the customers, and just general society tolerate that, and is it really the best answer?
I think that well-to-wheel equation, total societal equation, is starting to pick up, and it picks up more and more because as we look at energy transitions to electrification, then you have to have it. You can't draw the boundary diagram around the truck. You have to draw the boundary diagram around society and creating infrastructure for power if we're gonna use electricity or hydrogen, if we're gonna use hydrogen. So I think that is gonna play heavily into adoption curves and what it looks like for the cost of technology.
Thank you. If I may, the second was you had advanced manufacturing investment on the slides in there somewhere, and I'm actually just purely curious, what is the nature of that? You know, I assume as your 30% ROIC hurdle, you know, crosses that bar. Could you just talk about some of the investments you've made, when you made them, you know, how it positions you versus competition? Thank you.
A couple of key areas, you know, outside of the traditional, just continuing to drive efficiency gains as kind of day-to-day activity. But if we think about under the tagline of Industry 4.0, a lot of connectivity. That drives back into primarily efficiency, primarily uptime of all our facilities. You know, more prognostic versus diagnostic after the problem. And that's in every facility we have. So that's one area. What will come into that, outside of just collecting the data, understanding the triggers that say we have an issue, you know, is then, you know, really the AI element that's early in the adoption or early in the development, but that will continue to go up. Automation's another area. Automated guided vehicles, as an example, versus, you know, monuments we put in the floor.
You know, giving ourselves the flexibility, so when we think about traditional powertrains versus zero-emission powertrains, the ability to reconfigure quickly, nimble, because, you know, that technology in itself has seen, you know, rapid advances, it's very cost-effective now, and just gives you a level of flexibility in essentially any type of manufacturing operation you have. So that would be two examples.
We have time for a couple of more. You know, just to Rob's question, I think that Mike said it exactly right, and I think it's underweighted in terms of what this means for the future, is the ability to have manufacturing plants that are not linear, like chain-driven, not the 100-year-old philosophy, but to have the ability to build products that are customized, like something we've done for a long time. But we also see the investments that he and his team, and the team all over PACCAR are making, of flexible manufacturing, so you can use the same factory to build many different configurations. And with AGVs, automated guided vehicles, that he mentioned, the ability to be running it down a line and say, "You know what? There's 6 different operations I want to perform, so I gotta do them." The truck can move laterally, right?
Have those operations performed, come back into a sequence flow, where you have monuments like paint still sitting in there. That. It's really, it's really fun to watch in the factories, and you can see the efficiency gain you get out of it and where it leads us to in flexibility, without being too overly capitally committed to it.
Jerry Revich, Goldman Sachs. I wonder if you could just expand on the PACCAR operating system and how you folks are philosophically thinking about it. You're gonna have a really big connected field population, so should we think about PACCAR is gonna have a premium feature of $15 a month per truck that customers are gonna have? Is this gonna be a profit stream, or is this a retention stream? And, you know, what's the business model for third-party developers? Or is PACCAR gonna keep, you know, a third of the revenue, as is the standard? Can we just talk about philosophically, how you're thinking about that?
Yeah, I can, I can start, and others can add. So when I showed the connected slide earlier and the alliance that we're forming is, you know, the way we think about it is really leveraging the connected data that's coming off the truck, but really about how does that create value for the customer? How do they traditionally pay for that service today through the third-party telematics providers? And so part of that alliance is really partnering with them to leverage the value they already provide to the customers. Our value add is to be able to take that data, enrich it, and that's where we, when we talked about the enriching, improving the diagnostics and towards prognostics, is how do we create that uptime for the, improve the uptime for the customer, really around the prognostic and doing preventative maintenance.
We think that adds value. So we think bundling that through that alliance gives us that opportunity to, again, what's that value creation for the customer, and then what's the piece for us, and then, and, and also in the partnership with the current providers that are out, out there today. Anybody wants to...
And can I ask separately, on the path towards autonomous vehicles, what sort of interest are you seeing in Level 2, Level 3? What do you expect take rates to look like? And since you've made the investment in the platform, is it fair to think as we get some level of adoption of those more advanced technologies, it's gonna be ASP and margin accretive for you folks as you get leverage on that investment?
Yeah, I wanna separate Level 4 autonomy and the autonomous platform, which is a really dedicated piece, and Level 2 plus autonomy. Level 2 plus autonomy, if they are, you know, demonstrable improvements for safety, really have a high demand in the market, and we have great customer willingness to pay. You know, going beyond safety-enhancing features to features that actually operate the truck, it's a space that we're not terribly anxious to be in. Now, moving into a Level 4, again, we are developing a very separate platform for that, with higher levels of redundancy, high levels of redundancy and other safety features and cybersecurity features that are unique to that space.
Any other questions? You know, the thing I'd add on that AVP or the autonomy is Level 2. John covers, it's good value. Level 4, eventually, no timeline to it, but eventually, that's gonna be very good for us, right? That is a disruptive state, kind of a technology that'll be good for PACCAR because there's gonna be a sharing of benefit from the person that provides the driver, if you will, the automated driver. The customer should benefit from that also, right? They have to get some win in that, and then PACCAR gets win in that because we're providing a sophisticated system that's got a bunch of software on it and runs through the dealer network and parts network, and then really tied into the PACCAR proprietary content then. So with that eventual state, you know, what are we talking about?
Years out, that'll be one of them. Anyone else? All right. Well, that's awesome. Thank you all so much. So much more fun to do this in person than through the earnings calls only. But it's really great to spend the time with you, and now we get to go have some lunch, and then we'll go, what, look at some vehicles after lunch?
Yes.
Right? Ken will give us the detail.
This is the webcast portion of it. We'll have a bite to eat next door, and then there are trucks in Times Square, and we'll go down there and have a look at them around 12:40 P.M.
Thank you all very much.