Traton eyes higher margin on electric trucks, US expansion

Traton SE is targeting slightly higher returns in the coming five years by expanding in North America and selling more higher-priced electric trucks.

The Volkswagen AG unit is projecting an adjusted operating margin of between 9% and 11% in 2029, up from 8.6% last year. Revenue is to rise as much as 40% during that period, the company said Tuesday as part of an investor event.

Europe’s truckmakers are under pressure to cut costs as demand for big rigs slows in key markets, with Daimler Truck Holding AG and Volvo AB trimming forecasts on softening sales in Europe and Asia.

Traton, which owns the Scania and MAN brands, is setting up its first factory in China to better serve the Asian market. Its International Motors brand will try to win more customers in North America by offering more services including maintenance, financing and charging solutions.

“The more successful we become in services, the more resilient we become,” Traton Chief Executive Officer Christian Levin said during a presentation to investors. Service revenues are better protected from cyclical demand swings, he said.

The industry faces high investments to shift to cleaner forms of transport, with sales of electric trucks in Europe still minimal amid spotty charging infrastructure. Still, electric rigs are generally more costly to buy, bolstering manufacturers’ margins.

For Traton, pressure to reduce costs may rise as its parent Volkswagen is in crisis mode. The automaker is weighing shuttering factories in Germany for the first time and last week slashed its annual earnings forecast for a second time in three months.

— By Wilfried Eckl-Dorna (Bloomberg)