The global market for trucks above 16 tonnes reached approximately 2.4 million units in 2025, down modestly from 2.5 million in 2020, with significant geographic recomposition. China — the largest single market — contracted from 1.619 million units in 2020 to 1.145 million in 2025 as domestic overcapacity and regulatory shifts weighed on demand. Conversely, India surged from 94,000 to 270,000 units over the same period, Africa and the Middle East grew from 68,000 to 121,000, and South America expanded from 97,000 to 141,000, illustrating a structural migration of growth toward emerging economies. North America, PACCAR's core profit pool, rose from 235,000 units in 2020 to 258,000 in 2025. For 2026, management estimates U.S. and Canada Class 8 volumes in a range of 230,000 to 270,000 units, Europe's above-16-tonne segment at 280,000 to 320,000, and South America at 100,000 to 110,000.
U.S. trucks haul 72% of all freight — roughly ten billion tons a year across 38.9 million commercial vehicles — creating demand that's massive and structurally sticky. Euro VII mandates (50% NOx reduction by 2029, 28% GHG cut by 2030) are forcing manufacturers into zero-emission powertrains faster than the market alone would dictate, while autonomous trucking adds a longer-cycle catalyst: PACCAR pegs ecosystem value creation at ~$25 billion annually. The $70 billion global dealer parts market is a quieter but steadier profit pool, with PACCAR holding ~15% in North America and ~13% in Europe. Against that, Class 8 demand swings hard — North American production fell from 204,200 units at the 2023 peak to 144,200 by 2025.
Production peaked at 204,200 units in 2023 before declining sharply to 144,200 in 2025 — a 29% drop over two years — as the North American freight cycle normalized from its post-pandemic highs. Europe and the U.S. consistently represent the two largest production bases, together accounting for the bulk of output throughout the entire 2016–2025 period.
PACCAR's three segments - Trucks (68% of 2025 revenues, $19.4B), Parts (24%, $6.9B), and Financial Services (8%, $2.2B). The truck segment is built around proprietary powertrains: the MX-13 (12.9L, 510hp), MX-11 (10.8L, 445hp), TX-12 automated transmission, and DX-40 axle, with cumulative production now exceeding 776,000 engines in Europe and 362,000 in North America.
PACCAR Parts is the crown jewel: $6.9B in 2025 revenues, $1.7B in pretax profit, a 20-year sales CAGR of 8% and profit CAGR of 10%, served through 21 distribution centers across 10 countries, ~2,400 dealer locations, and 365 TRP all-makes stores (up from 76 in 2016). Financial Services financed 27% of all Kenworth, Peterbilt, and DAF sales in 2025, managing a $22.8B portfolio across 226,000 trucks and trailers at an A+/A1 rating.
SG&A runs at 2–3% of sales against a 7–12% peer range across Volvo, Daimler Truck, Traton, and Iveco. Inventory turns of ~10x are roughly double competitors', a product of the PACCAR Production System and Six Sigma discipline. ROIC of 33% in 2025 led every major industrial peer tracked, including Caterpillar. The competitive moat rests on four pillars: premium brand positioning — DAF XF and XD Electric won International Truck of the Year 2026, the brand's third such award since 2022 — powertrain vertical integration feeding a proprietary aftermarket, AV partnerships with Aurora, Stack, and Kodiak, and the PACCAR Connect platform offering Data-as-a-Service and over-the-air software updates. A local-for-local manufacturing footprint across Chillicothe, Denton, Kenworth Mexico, and Sainte-Thérèse has further reduced total tariff exposure by more than 50% under the current trade regime.
PACCAR trades at 19.2x 2026 earnings (P/E), falling to 13.4x by 2028 as volumes recover. EV/Revenue of 1.72x and EV/EBITDA of 14.4x in 2026 both decline steadily through 2028 (1.45x and 9.33x), and are further flattered by $8.6B in net cash while FCF yield of 6.45% rising to 8.51% by 2028 measures how much free cash the business throws off relative to its price. EPS recovers from $5.69 in 2026 to $8.17 by 2028, nearly back to the $8.76 peak in 2023, and with a PBR of 2.79x — price relative to book value — is modest for the returns PACCAR generates and fades to 2.35x by 2028.
The dividend runs $3.17 in 2026 rising to $3.82 by 2028 at a ~50% payout, yielding roughly 2.9-3.5%.
The margin-tariff interaction is the most immediate risk: truck gross margins at 7.0% in Q1 2026 leave little buffer if Section 232 extends to vehicles assembled in Canada and Mexico, hitting Kenworth Mexico and Sainte-Thérèse directly. Regulatory divergence compounds this — Euro VII's hard BEV timeline and U.S. EPA uncertainty force PACCAR's $450–500M R&D budget across four powertrain pathways simultaneously, limiting depth in any one. Credit quality is quietly deteriorating: the Q1 2026 loan loss provision was up 141% year-on-year as fleet operator stress surfaces in the Financial Services book. And autonomous remains a 'next several years' story — regulatory, financial, or safety setbacks at Aurora, Stack, or Kodiak would delay what the market is partly paying for.
PACCAR is one of those rare industrials where the trough is the better entry — the business exits down-cycles structurally stronger than it entered them, and the 2025 trough is no exception. The parts engine keeps compounding, the backlog is building, and truck margins have a long way to recover. Tariffs and credit quality bear watching, but neither changes what PACCAR is: a compounder that tends to reward patience.
