Examining historical trends and fixed market limits reveals that optimistic sales forecasts from new truck technology companies frequently overlook basic economic realities and competitor displacement.
- Finite Market Size: The annual appetite for Class 8 trucks remains steady between 150,000 and 350,000 units, anchored strictly by freight demand and vehicle replacement needs rather than a bottomless customer pool.
- The Flaw of Omission: Safe harbor sales projections from emerging tech companies frequently fail to explain whether their anticipated volume comes from net-new growth or cannibalizing existing competitors.
- Slow Technology Adoption: NACFE adoption curves demonstrate that commercial vehicle technologies take years to scale, with few achieving widespread integration and many encountering sudden market barriers.
- Hard-Won Market Share: Major shifts in the truck manufacturing sector happen slowly; OEMs typically take years to move market share by even 1%, proving that gaining ground is far harder than losing it.
Safe harbor provisions allow companies to share ambitious corporate forecasts with the public, investors, competitors, and regulators. The market eventually decides whether those predictions were fantasy or sound.
Those predictions usually miss a key detail: They rarely explain where those new sales originate.
My favorite case study is Segway. The Segway factory produced its first unit in 2001 with an annual sales target of 40,000 two-wheel units, alongside hopes of reaching 50,000 to 100,000 units within the first two years. Actual sales after two years were approximately 6,000 units, and total sales as of 2007 stood at about 30,000.
What made Segway unique was that it was creating an entirely brand-new market, meaning it was not taking sales away from anyone else. Apple experienced similar unachieved sales volume learning cases with the Newton and Lisa in years past. More recently, I saw a Fisker Ocean electric car parked at a hardware store—another interesting case study in unachieved sales.
In trucking, we’ve recently seen Nikola, Ike, Starsky Robotics, TuSimple, Embark, Locomation, and many others stumble. Innovators take risks; sometimes they succeed, but other times they go bankrupt.
Each of those companies claimed future sales volumes. Taken together, all those optimistic sales projections combined greatly exceed the actual size of the truck market. One truck technology company recently estimated 30,000 new sales and another 50,000, as if the customer pool is bottomless, competitors do not matter, and a multitude of uncontrolled market factors have no potential impact.
The level of sales optimism is probably greatest just before production actually starts. I am sure the people at Segway felt they were geared up to make 50,000 units a year. Market reception, however, was significantly less than predicted.
The North American Council for Freight Efficiency (NACFE) has long published technology adoption curves for truck technologies as part of its Fleet Fuel Studies. This work has depended on critical input from fleets regarding what they are buying or avoiding. Past reports have detailed fleet adoption of approximately 90 technologies.
Some adoption curves follow the familiar S-curve shape, while others abruptly drop off cliffs. Some never take off, and few, if any, see 100% adoption. The curves demonstrate that new technology can take years to reach significant sales volumes—even those mandated by regulations.
There are far more existing trucks with long lifespans than there are new trucks entering the market each year. The annual appetite for buying Class 8 trucks varies between 150,000 and 350,000. Most of these trucks are built to order, unlike automotive production, where factories spew out millions of vehicles and hope customers buy them. Truck makers build what the market asks for, and no more.
Big-name OEMs largely dominate the truck market, though newcomers have entered more recently. The size of the potential sales market does not change based on the number of OEMs. Market size is tied to moving freight; whether there are 5, 10, or 20 truck makers, fleets really do not care.
The market does not care whether trucks come from the United States, Canada, Mexico, Europe, China, or Korea. Sales volumes are based on the demand for moving freight, the need to replace aging vehicles, the availability of capital, and other economic factors.
Each OEM's piece of the Class 8 truck market pie may change over time. We have seen major shifts between manufacturers as new technology captures market share, or as poor choices cause some OEMs to stumble and cede share to others. However, the size of the pie does not change.
When safe harbor estimates discuss capturing new annual sales on the order of 30,000 to 50,000 Class 8 trucks, where will those sales come from? Will another OEM lose market share, or is that market share simply cannibalizing an existing OEM's sales?
Competition is the basis of a free-market economy. In truck manufacturing, having winners ultimately means there are also losers. Investors gambling on the success of a new technology are also gambling on the failure of competing technologies.
Can a manufacturer quickly capture 10% to 25% of the market? Those heady numbers rarely have been achieved. OEMs often take years to move their market share by just 1%.
OEMs have found that it is easier to lose share than to gain it. A poor technology decision can quickly damage market share, but earning new share is much more challenging. Consider Caterpillar announcing its departure from the Class 8 market in 2008, or Navistar stumbling on engine technology in the late 2000s, contrasted with Kenworth launching the aerodynamic T600 in 1985.
When a company predicts new sales, wouldn’t you also like to see where it predicts those sales will come from? Under safe harbor rules, companies could easily provide that. Wouldn't it help their credibility? Why don't they?
I suppose it is acceptable under safe harbor rules for technology companies to have optimistic sales projections, but somehow unacceptable to be pessimistic about their competitors'.
