Cummins’ Market Share Slips As In-House Engine Use Rises

Cummins Inc. remained the top U.S. heavy-duty engine builder in the first half of this year, but its market share dropped by more than 6% from the comparable period of 2010 as truck manufacturers placed more of their in-house power plants in their new vehicles.

Although analysts were divided on the long-term implications of the data, Cummins did lose ground with truck makers that recently introduced their own engines, notably Navistar Inc. and Paccar Inc.

Cummins’ engines were put into 39,699 of the 116,284 Class 8 trucks assembled in North America in the first six months of 2011, or 34% of the total.

WardsAuto.com reported Aug. 11. Last year, Cummins had a 42.6% Class 8 market share in the first six months.

“What’s basically happening is that vertical integration is definitely hurting Cummins, no doubt about it,” Chris Brady, president of Commercial Motor Vehicle Consulting, Manhasset, N.Y., told Transport Topics. “The truck makers have focused their own engines in the most common 13-liter size, and that could increasingly make Cummins a niche choice for big-bore engines or baby-eights.”

Jonathan Starks, director of transportation analysis at consulting firm FTR Associates, Nashville, Ind., told TT that it was “still too early” to tell whether truck buyers have permanently shifted to proprietary engines. “It’ll take a year, to a year and a half, before we can make any definitive judgments about how vertical integration is doing.”

Detroit Diesel, a subsidiary of Daimler Trucks North America, was the second-biggest engine supplier with 30,180 engines, or just under 30%, Wards said. Detroit Diesel engines were put into 14,362 trucks — Freightliners and Western Stars — during the first half of 2010, or 21.6% of the total, Wards said.

Navistar Inc.’s MaxxForce engines came in third at 18,466 units. Navistar, builder of International trucks, installed 7,902 of its own engines in the first half of 2010, along with 9,178 Cummins units built in 2009. Navistar added a 15-liter MaxxForce this summer, which it said it expected to help lift sales in the latter half of 2011.

Paccar Inc., which builds Kenworth and Peterbilt trucks, introduced its MX heavy-duty engine in late 2009. During the first six months of 2010, just 130 MX engines were installed, compared with 7,752 units in the first six months of this year, Ward’s said.

Some dealers said most customers were firm about engine choice before ordering, while another said some customers sought dealer advice on power plants.

“Most of our customers already have an engine in mind and in fact, in even more cases than ever, the engine sells the truck today,” Kyle Treadway, president of Kenworth Sales Co., West Valley City, Utah, told TT.

“Each of the engine companies has a dedicated sales force out there pounding the pavement and generating sales for their product,” Treadway said.

He said it was “rare customer” who changed his mind about which brand engine when the customer came in to place an order.

Justin Hopkins, general manager of three locations of Truck Centers Inc., a Freightliner and Western Star dealer in Illinois and Missouri, said he had two types of customers.

“We have some who already know what engines they want based on previous experience, and some take guidance from us,” Hopkins told TT.

He said that his salesmen didn’t try to steer customers to either engine.

“We have two very strong engine manufacturers . . . and we’re definitely here for the long haul, and to create value for our customers,” Hopkins said.

“At the end of the day, it comes down to customer preference,” Hopkins added. “We have customers running strongly to both manufacturers. For some, it’s because their headquarters are very close to a Cummins dealer, and they want access to good Cummins technicians.”

A Daimler executive indicated the company’s relationship with Cummins would continue, despite its heavy use of in-house Detroit Diesels.

“The ultimate decision is that of the customer, and the numbers highlight that Freightliner and Western Star offer two highly attractive engine brands which represent over 60% of the engine market share,” David Hames, DTNA general manager for marketing and strategy, told TT.

One Volvo dealer gave an idea of how vertical integration could present difficulties for an independent engine maker in the future.

“In last two years, we have sold nearly 100% Volvo engines, and probably 85% to 95% of them with the I-shift transmission,” Ronald Remp, owner of Wheeling Truck Center, Wheeling, W.Va., told TT. The I-Shift is Volvo’s proprietary automated manual transmission.

“The I-shift offers definite fuel economy savings, but the only way to get an I-Shift is to order a Volvo engine,” Remp explained. “Volvo synchronized the I-shift to run only with the Volvo engine.”

Still, 2,555 Cummins engines were put into Volvo trucks in 2011, compared with 7,991 Volvo engines.

Mack, which offers only its own brand of engines, put 9,642 units in new trucks in the first six months of this year, Wards said.

Cummins did not respond directly to questions about the Ward’s data. In July, Cummins President Tom Linebarger, shortly after being named to become the company’s next chairman and CEO Jan. 1, told TT that he was confident Cummins would continue to thrive as an independent engine maker (7-25, p. 4).