PACCAR Inc.
PART I
ITEM 1. BUSINESS.
PACCAR Inc (the Company or PACCAR), incorporated under the laws of Delaware in 1971, is the successor to Pacific Car and Foundry Company which was incorporated in Washington in 1924. The Company traces its predecessors to Seattle Car Manufacturing Company formed in 1905.
Description of Business
PACCAR is a multinational company operating in three principal industry segments:
TRUCKS
PACCAR’s trucks are marketed under the Kenworth, Peterbilt and DAF nameplates. These trucks, which are built in three plants in the United States, three in Europe and one each in Australia, Brasil, Canada and Mexico, are used worldwide for over-the-road and off-highway hauling of commercial and consumer goods. The Company also designs and manufactures diesel engines, primarily for use in the Company’s trucks, at its facilities in Columbus, Mississippi; Eindhoven, the Netherlands and Ponta Grossa, Brasil. PACCAR competes in the North American Class 8 market, primarily with Kenworth and Peterbilt conventional models. These trucks are assembled at facilities in Chillicothe, Ohio; Denton, Texas; Renton, Washington; Mexicali, Mexico and Ste. Therese, Canada. PACCAR also competes in the North American Class 6 to 7 markets primarily with Kenworth and Peterbilt conventional models. These trucks are assembled at facilities in Ste. Therese, Canada; Chillicothe, Ohio; Denton, Texas and Mexicali, Mexico. PACCAR competes in the European light/medium market with DAF COE trucks assembled in the United Kingdom (U.K.) by Leyland, one of PACCAR’s wholly owned subsidiaries, and participates in the European heavy market with DAF COE trucks assembled in the Netherlands and the U.K. PACCAR competes in the Brazilian heavy truck market with DAF COE models assembled in Ponta Grossa in the state of Paraná, Brasil. PACCAR competes in the Australian medium and heavy truck markets with Kenworth conventional and COE models and certain DAF COE models assembled at its facility at Bayswater in the state of Victoria, Australia, and DAF COE models primarily assembled in the U.K. Commercial truck manufacturing comprises the largest segment of PACCAR’s business and accounted for 68% of total 2025 net sales and revenues.
Substantially all trucks are sold to independent dealers. The Kenworth and Peterbilt nameplates are marketed and distributed by separate divisions in the U.S. and a foreign subsidiary in Canada. The Kenworth nameplate is also marketed and distributed by foreign subsidiaries in Mexico and Australia. The DAF nameplate is marketed and distributed worldwide by a foreign subsidiary headquartered in the Netherlands and is also marketed and distributed by foreign subsidiaries in Brasil, Australia and Mexico. The decision to operate as a subsidiary or as a division is incidental to PACCAR’s Truck segment operations and reflects legal, tax and regulatory requirements in the various countries where PACCAR operates.
The Truck segment utilizes centrally managed purchasing, information technology, technical research and testing, treasury and finance functions. Some manufacturing plants in North America produce trucks for more than one nameplate, while other plants produce trucks for only one nameplate, depending on various factors. Best manufacturing practices within the Company are shared on a routine basis reflecting the similarity of the business models employed by each nameplate.
3
The Company’s trucks have a reputation for high quality products, most of which are ordered by dealers according to customer specifications. Some units are ordered by dealers for stocking to meet the needs of certain customers who require immediate delivery or for customers that require the chassis to be fitted with specialized bodies. For a significant portion of the Company’s truck operations, major components, such as engines, transmissions and axles, as well as a substantial percentage of other components, are purchased from component manufacturers pursuant to PACCAR and customer specifications. DAF, which is more vertically integrated, manufactures PACCAR engines and axles and a higher percentage of other components for its heavy truck models. The Company also manufactures engines at its Columbus, Mississippi facility. In 2025, the Company installed PACCAR engines in approximately 29% of the Company’s Kenworth and Peterbilt heavy-duty trucks in the U.S. and Canada and substantially all of the DAF heavy-duty trucks sold throughout the world. Engines not manufactured by the Company are purchased from Cummins Inc. (Cummins). The Company purchased a significant portion of its transmissions from Eaton Corporation Plc. (Eaton) and ZF Friedrichshafen AG (ZF). The Company also purchased a significant portion of North America stampings used for cabs from Magna International Inc. (Magna). The Company has long-term agreements with Cummins, Eaton, ZF and Magna to provide for continuity of supply. A loss of supply from Cummins, Eaton, ZF or Magna, and the resulting interruption in the production of trucks, would have a material effect on the Company’s results. Purchased materials and parts include raw materials, partially processed materials, such as castings, and finished components manufactured by independent suppliers. The Company and its suppliers rely on semiconductors as an essential component in the production of its trucks and aftermarket parts. The Company and its suppliers source semiconductors from various suppliers. Raw materials, partially processed materials and finished components typically make up approximately 85% of the cost of new trucks. The value of finished truck components manufactured by independent suppliers is lower in Europe due to a higher level of vertical integration as compared to North America. In addition to materials, the Company’s cost of sales includes labor and factory overhead, vehicle delivery and warranty. Accordingly, except for certain factory overhead costs such as facilities depreciation, property taxes and utilities, the Company’s cost of sales are highly correlated to sales.
The Company’s DAF subsidiary purchases fully assembled cabs from a competitor, Renault V.I., for its European light-, medium-duty product line pursuant to a joint product development and long-term supply contract. Sales of trucks manufactured with these cabs amounted to approximately 2% of consolidated revenues in 2025. A short-term loss of supply, and the resulting interruption in the production of these trucks, would not have a material effect on the Company’s results of operations. However, a loss of supply for an extended period of time would require the Company to either contract for an alternative source of supply or to manufacture cabs itself.
Other than these components, the Company is not limited to any single source for any significant component, although the sudden inability of a supplier to deliver components could have a temporary adverse effect on production of certain products. Manufacturing inventory levels are based upon production schedules and orders are placed with suppliers accordingly.
Key factors affecting Truck segment earnings include the number of new trucks sold in the markets served and the margins realized on the sales. The Company’s sales of new trucks are dependent on the size of the truck markets served and the Company’s share of those markets. Truck segment sales and margins tend to be cyclical based on the level of overall economic activity, the availability of capital and the amount of freight being transported. The Company’s costs for trucks consist primarily of material costs, which are influenced by the price of commodities such as steel, copper, aluminum and petroleum. The Company utilizes long-term supply agreements to reduce the variability of the unit cost of purchased materials and finished components and engages in hedging activities for some commodities in certain geographical markets. The Company’s spending on research and development varies based on product development cycles and government requirements such as changes to diesel engine emissions and vehicle fuel efficiency standards in the various markets served. The Company maintains rigorous control of selling, general and administrative (SG&A) expenses and seeks to minimize such costs.
There are four principal competitors in the U.S. and Canada commercial truck market. The Company’s share of the U.S. and Canadian Class 8 market was 29.9% of retail sales in 2025, and the Company’s medium-duty market share was 15.9%. In Europe, there are six principal competitors in the commercial truck market, including parent companies to the four competitors of the Company in the U.S. In 2025, DAF had a 13.5% share of the European heavy-duty market and a 9.7% share of the light/medium-duty market. These markets are highly competitive in price, quality and service. PACCAR is not dependent on any single customer for its sales. There are no significant seasonal variations in sales.
The Peterbilt, Kenworth and DAF nameplates are recognized internationally and play an important role in the marketing of the Company’s truck products. The Company engages in a continuous program of trademark and trade name protection in all marketing areas of the world.
4
The Company’s truck products are subject to noise, emission and safety regulations. Competing manufacturers are subject to the same regulations. The Company believes the cost of complying with these regulations will not be detrimental to its business.
The Company had a total production backlog of $4.9 billion at the end of 2025. Within this backlog, orders scheduled for delivery within three months (90 days) are considered to be firm. The 90‑day backlog approximated $2.6 billion at December 31, 2025, $3.8 billion at December 31, 2024 and $7.6 billion at December 31, 2023. Production of the year-end 2025 backlog is expected to be substantially completed during 2026.
PARTS
The Parts segment includes the distribution of aftermarket parts for trucks and related commercial vehicles to over 2,000 Kenworth, Peterbilt and DAF dealers and more than 350 TRP, PACCAR's aftermarket parts brand, stores in 99 countries around the world. Aftermarket truck parts are sold and delivered to the Company’s independent dealers through the Company’s 21 strategically located parts distribution centers (PDCs) in the U.S., Canada, Europe, Australia, Mexico and Central and South America. Parts are primarily purchased from various suppliers and also manufactured by the Company. Aftermarket parts inventory levels are determined largely by anticipated customer demand and the need for timely delivery. The Parts segment accounted for 24% of total 2025 net sales and revenues.
Key factors affecting Parts segment earnings include the aftermarket parts sold in the markets served and the margins realized on the sales. Aftermarket parts sales are influenced by the total number of the Company’s trucks in service and the average age and mileage of those trucks. To reflect the benefit the Parts segment receives from costs incurred by the Truck segment, certain factory overhead, research and development, engineering and SG&A expenses are allocated from the Truck segment to the Parts segment. The Company’s cost for parts sold consists primarily of material costs, which are influenced by the price of commodities such as steel, copper, aluminum and petroleum. The Company utilizes long-term supply agreements to reduce the variability of the cost of parts sold. The Company maintains rigorous control of SG&A expenses and seeks to minimize such costs.
FINANCIAL SERVICES
PACCAR Financial Services (PFS) operates in 26 countries in North America, Europe, Australia and South America through wholly owned finance companies operating under the PACCAR Financial trade name. PFS also conducts full-service leasing operations through operating divisions or wholly owned subsidiaries in North America, Germany and Australia under the PacLease trade name. Selected dealers in North America and Australia are franchised to provide full-service leasing. PFS provides its franchisees with equipment financing and administrative support. PFS also operates its own full-service lease outlets. PFS’s retail loan and lease customers consist of small, medium and large commercial trucking companies, independent owner/operators and other businesses and acquire their PACCAR trucks principally from independent PACCAR dealers. PFS accounted for 8% of total net sales and revenues and 51% of total assets in 2025.
PFS is primarily responsible for managing the sales of the Company’s used trucks. The Company’s Financial Services segment sells used trucks returned from matured operating leases in the ordinary course of business and trucks acquired from repossessions. PFS also obtains used trucks from the Truck segment in trades related to new truck sales and trucks returned from residual value guarantees (RVGs). Certain gains and losses from the sale of used trucks are shared with the Truck segment. The Company’s Financial Services segment records revenue on the sale of used trucks received in trade and RVG returns.
The Company’s finance receivables are classified as dealer wholesale, dealer retail and customer retail segments. The dealer wholesale segment consists of truck inventory financing to independent PACCAR dealers. The dealer retail segment consists of loans and leases to participating dealers and franchises, which use the proceeds to fund their customers’ acquisition of trucks and related equipment. The customer retail segment consists of loans and leases directly to customers for their acquisition of trucks and related equipment. Customer retail receivables are further segregated by fleet and owner/operator classes. The fleet class consists of customers operating five or more trucks. All others are considered owner/operators. Similar methods are employed to assess and monitor credit risk for each class.
Finance receivables are secured by the trucks and related equipment being financed or leased. The terms of loan and lease contracts generally range from three to five years depending on the type and use of equipment. Payment is required on dealer inventory financing when the floored truck is sold to a customer or upon maturity of the flooring loan, whichever comes first. Dealer inventory loans generally mature within one year.
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Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW:
PACCAR is a global technology company whose Truck segment includes the design and manufacture of high-quality light-, medium- and heavy-duty commercial trucks. In the U.S. and Canada, trucks are sold under the Kenworth and Peterbilt nameplates, in Europe, under the DAF nameplate and in Mexico, Australia and South America, under the Kenworth and DAF nameplates. The Parts segment includes the distribution of aftermarket parts for trucks and related commercial vehicles. The Company’s Financial Services segment derives its earnings primarily from financing or leasing PACCAR products in North America, Europe, Australia and South America.
First Quarter Financial Highlights:
Kenworth recently unveiled the new Kenworth C580 truck in the heavy-duty vocational segment. The C580 is designed to meet the most demanding vocational applications, such as mining and off-highway petroleum field work. DAF Trucks expanded its range of battery-electric trucks to include multiple axle tractor and rigid models for specific vocational applications such as construction. The new chassis models are available for the XD and XF Electric, which recently won the International Truck of the Year 2026, and for the larger XG and XG+ Electric, which feature the most spacious cabs in the European truck market.
The PACCAR Financial Services (PFS) group of companies has operations covering four continents and 26 countries. The global breadth of PFS and its rigorous credit application process support a portfolio of loans and leases with total assets of $22.35 billion. PFS issued $400.0 million in medium-term notes during the first three months of 2026 to support new business volume and market share growth and repay maturing debt.
Truck Outlook
Truck industry heavy-duty retail sales in the U.S. and Canada in 2026 are expected to be 230,000 to 270,000 units compared to 232,800 in 2025. In Europe, the 2026 truck industry registrations for over 16-tonne vehicles are expected to be 280,000 to 320,000 units compared to 297,000 in 2025. In South America, heavy-duty truck industry registrations in 2026 are projected to be 100,000 to 110,000 units compared to 115,000 in 2025.
The Company has taken mitigating actions to reduce the impact from import tariffs on truck order intake. The Company's North American truck factories are optimally located to operate under the new Section 232 truck tariffs that began in November 2025. The Company’s tariff exposure is minimized by producing trucks locally for the United States, Canada and Mexico. The Company manufactures its trucks for U.S. customers in its Ohio, Texas, and Washington state factories. Further on February 20, 2026, the United States Supreme Court issued a decision invalidating tariffs imposed under the International Emergency Economic Powers Act (IEEPA). This decision may provide tariff relief and the potential recovery of amounts previously paid.
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The U.S. Environmental Protection Agency announcement reaffirmed the EPA27 NOx limit. It could make
changes to extended warranty requirements, useful life requirements or other modifications to new emissions systems.
The Company's results could be impacted by further changes in tariff policy, geopolitical uncertainty, emissions regulations and improving freight fundamentals.
Parts Outlook
In 2026, PACCAR Parts sales are expected to increase 3-6% compared to 2025, depending on the economic conditions.
Financial Services Outlook
In 2026, average earning assets are expected to be comparable to 2025. The used truck market has begun improving. If freight transportation conditions decline due to a weaker economy, then past due accounts, truck repossessions and credit losses would likely increase from the current levels and new business volume and average earning assets would likely decline.
Capital Investments and R&D Outlook
Capital investments in 2026 are expected to be $725 to $775 million and R&D is expected to be $450 to $500 million. PACCAR is increasing its investment in next generation internal combustion, hybrid and battery-electric powertrains, integrated connected vehicle services, advanced manufacturing capabilities, and the Company's autonomous vehicle platform.
In addition to the capital and R&D investments, the Company expects to continue investing in its U.S.-based battery joint venture, Amplify Cell Technologies. During the first quarter, expectations on electric vehicle demand in the commercial vehicle market continued to change. As a result, the Company and its joint venture partners agreed to finish building out the facility, and adjust the timing for installing the manufacturing capacity. As a result of these changes the production start date will be extended. See discussion in Note A.
See the Forward-Looking Statements section of Management’s Discussion and Analysis for factors that may affect these outlooks.
RESULTS OF OPERATIONS:
The Company’s results of operations for the three months ended March 31, 2026 and 2025 are presented below.
($ in millions, except per share amounts) |
|
|
||||
Three Months Ended March 31, |
2026 |
|
2025 |
|
||
Net sales and revenues: |
|
|
|
|
||
Truck |
$ |
4,526.5 |
|
$ |
5,225.8 |
|
Parts |
|
1,710.1 |
|
|
1,689.9 |
|
Other |
|
(2.3 |
) |
|
(2.0 |
) |
Truck, Parts and Other |
|
6,234.3 |
|
|
6,913.7 |
|
Financial Services |
|
542.2 |
|
|
528.0 |
|
|
$ |
6,776.5 |
|
$ |
7,441.7 |
|
Income before income taxes: |
|
|
|
|
||
Truck |
$ |
176.2 |
|
$ |
364.9 |
|
Parts |
|
402.3 |
|
|
426.5 |
|
Other* |
|
1.9 |
|
|
(353.2 |
) |
Truck, Parts and Other |
|
580.4 |
|
|
438.2 |
|
Financial Services |
|
115.5 |
|
|
121.1 |
|
Investment income |
|
80.4 |
|
|
83.8 |
|
Income taxes |
|
(171.0 |
) |
|
(138.0 |
) |
Net income |
$ |
605.3 |
|
$ |
505.1 |
|
Diluted earnings per share |
$ |
1.15 |
|
$ |
.96 |
|
After-tax return on revenues |
|
8.9 |
% |
|
6.8 |
% |
* In 2025, Other includes a $350.0 million charge related to civil litigation in Europe (EC-related claims).
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The following provides an analysis of the results of operations for the Company’s three reportable segments - Truck, Parts and Financial Services. Where possible, the Company has quantified the impact of factors identified in the following discussion and analysis. In cases where it is not possible to quantify the impact of factors, the Company lists them in estimated order of importance. Factors for which the Company is unable to specifically quantify the impact include market demand and impact from tariffs, fuel prices, geopolitical events, freight tonnage and economic conditions affecting the Company’s results of operations.
2026 Compared to 2025:
Truck
The Company’s Truck segment accounted for 67% of revenues in the first quarter of 2026 compared to 70% in the first quarter of 2025.
The Company’s new truck deliveries are summarized below:
Three Months Ended March 31, |
2026 |
2025 |
% CHANGE |
|
|
U.S. and Canada |
17,800 |
22,200 |
|
(20 |
) |
Europe |
11,200 |
10,400 |
|
8 |
|
Mexico, South America, Australia and other |
4,100 |
7,500 |
|
(45 |
) |
Total units |
33,100 |
40,100 |
|
(17 |
) |
Worldwide new truck deliveries decreased in the first quarter of 2026 compared to the same period of 2025, reflecting lower retail demand in all major markets except Europe.
Market share data discussed below is provided by third-party sources and is measured by either retail sales or registrations for the Company’s dealer network as a percentage of total retail sales or registrations depending on the geographic market. In the U.S. and Canada, market share is based on retail sales. In Europe, market share is based primarily on registrations.
In the first three months of 2026, industry retail sales in the heavy-duty market in the U.S. and Canada was 44,900 units compared to 56,600 units in the same period of 2025. The Company’s heavy-duty truck retail market share was 29.4% in the first three months of 2026 compared to 29.1% in the first three months of 2025. The medium-duty market was 22,500 units in the first three months of 2026 compared to 26,000 units in the same period of 2025. The Company’s medium-duty market share was 12.8% in the first three months of 2026 compared to 14.5% in the first three months of 2025.
The over 16‑tonne truck market in Europe in the first three months of 2026 was 79,800 units compared to 72,000 units in the first three months of 2025. DAF over 16‑tonne market share was 13.1% in the first three months of 2026 compared to 14.0% in the same period of 2025. The 6 to 16‑tonne market in the first three months of 2026 was 8,800 units compared to 9,700 units in the same period of 2025. DAF market share in the 6 to 16-tonne market in the first three months of 2026 was 9.6% compared to 10.7% in the same period of 2025.
The over 16-tonne truck market in Brasil in the first three months of 2026 was 16,900 units compared to 21,500 units in the same period of 2025. DAF Brasil market share for the first three months of 2026 was 9.2% compared to 9.6% in the same period in 2025.
The Company’s worldwide truck net sales and revenues are summarized below:
($ in millions) |
|
|
|||||||
Three Months Ended March 31, |
|
2026 |
|
|
2025 |
|
% CHANGE |
|
|
Truck net sales and revenues: |
|
|
|
|
|
|
|||
U.S. and Canada |
$ |
2,674.1 |
|
$ |
3,195.7 |
|
|
(16 |
) |
Europe |
|
1,269.1 |
|
|
1,099.3 |
|
|
15 |
|
Mexico, South America, Australia and other |
|
583.3 |
|
|
930.8 |
|
|
(37 |
) |
|
$ |
4,526.5 |
|
$ |
5,225.8 |
|
|
(13 |
) |
Truck income before income taxes |
$ |
176.2 |
|
$ |
364.9 |
|
|
(52 |
) |
Pre-tax return on revenues |
|
3.9 |
% |
|
7.0 |
% |
|
|
|
- 34 -
The Company’s worldwide truck net sales and revenues in the first quarter decreased to $4.53 billion in 2026 from $5.23 billion in 2025, primarily due to lower unit truck deliveries from lower retail demand.
In the first quarter of 2026, Truck segment income before income taxes and pre-tax return on revenues decreased primarily due to lower truck unit deliveries from lower retail demand, reflecting economic conditions as well as higher tariff costs resulting from current trade policies, primarily in the U.S.
The major factors for the Truck segment changes in net sales and revenues, cost of sales and revenues and gross margin between the three months ended March 31, 2026 and 2025 are as follows:
|
NET |
|
COST OF |
|
|
|
|||
|
SALES AND |
|
SALES AND |
|
GROSS |
|
|||
($ in millions) |
REVENUES |
|
REVENUES |
|
MARGIN |
|
|||
Three Months Ended March 31, 2025 |
$ |
5,225.8 |
|
$ |
4,716.5 |
|
$ |
509.3 |
|
(Decrease) increase |
|
|
|
|
|
|
|||
Truck sales volume |
|
(972.0 |
) |
|
(826.6 |
) |
|
(145.4 |
) |
Average truck sales prices |
|
104.9 |
|
|
|
|
104.9 |
|
|
Average material, labor and other direct costs |
|
|
|
162.3 |
|
|
(162.3 |
) |
|
Factory overhead and other indirect costs |
|
|
|
(7.2 |
) |
|
7.2 |
|
|
Extended warranties, operating leases and other |
|
12.9 |
|
|
1.8 |
|
|
11.1 |
|
Currency translation |
|
154.9 |
|
|
162.0 |
|
|
(7.1 |
) |
Total decrease |
|
(699.3 | |||||||
Next expected filings
- ~2026-07-31 10-Q expected by 2026-08-09 (in 46 days)
- ~2026-10-30 10-Q expected by 2026-11-08 (in 137 days)
- ~2027-02-17 10-K expected by 2027-03-26 (in 247 days)
- ~2027-04-29 10-Q expected by 2027-05-08 (in 318 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-05-01 8-K Officer/Director Change; Shareholder Vote Results
- 2026-04-29 10-Q Quarterly Report
- 2026-04-28 8-K Earnings Release; Financial Statements and Exhibits
- 2026-02-18 10-K Annual Report
- 2026-01-27 8-K Earnings Release; Financial Statements and Exhibits
- 2026-01-16 8-K Officer/Director Change; Other Events
- 2025-12-12 8-K Officer/Director Change; Other Events
- 2025-10-30 10-Q Quarterly Report
- 2025-10-21 8-K Earnings Release; Financial Statements and Exhibits
- 2025-09-05 8-K Officer/Director Change; Other Events
- 2025-07-31 10-Q Quarterly Report
- 2025-07-22 8-K Earnings Release; Financial Statements and Exhibits
- 2025-05-02 8-K Officer/Director Change; Shareholder Vote Results
- 2025-05-01 10-Q Quarterly Report
- 2025-04-29 8-K Earnings Release; Financial Statements and Exhibits