Rusty Rush not only operates more truck dealerships than anyone on the planet, he also knows technology. And he has opinions on just about everything. So, buckle up. It’s Rush hour.
Also this week, TuSimple and Plus have rumored suitors, and Nikola is going to the ATM but not the one at the bank on the corner.
The world according to Rusty Rush
Rusty Rush, president, chairman and CEO of Rush Enterprises, is one of those people you could listen to all day. His down-home Texas twang and affable manner mask a superior business intellect with plenty of knowledge of the technologies altering commercial trucking.
No one else profitably owns 150 commercial truck dealerships in the U.S. and Canada with an eye toward adding more. His stores are responsible for a 6.4% share of all Class 8 trucks sold. His principal brands are Navistar International and Peterbilt.
Rush’s quarterly earnings calls are candid and entertaining. There’s little he won’t share. But when he says no, he means it. We got together during a lunch break at the recent ACT Research Seminar 67 in Columbus, Indiana.. Think 10 minutes of rapid-fire Q&A. Here are highlights edited for length and clarity.
How important is Navistar’s new S13 integrated powertrain going to be?
“I don’t think there’s any question about it. I mean, when you come with the collaboration of Scania, right? Scania is recognized globally as a first-class product with a lot of great engineering going into it. So, I think that a lot of this [technology] transfers over and trades on itself. The [Traton Group] acquisition of Navistar is great because of the long-term future with global engineering behind it. So, we’re excited about the platform.
“Navistar had to have something. You couldn’t go into this decade with the financial needs it’s gonna take in this industry with all this changing technology. It takes R&D money. If you don’t have that, you don’t have scale [so] you can’t do it. You’ve got to have scale to spread it over globally and they did not have that. We’re getting off a hundred years of internal combustion and going into all these different technologies.”
What do you see ahead for the Class 8 truck market?
“Well, ACT [Research] took it down from 243,000 to 228,000 [U.S tractor retail sales] for next year because of supply constraints that are still out there and a somewhat slowing economy. But there’s still pent-up demand. We went through three years of probably being 80,000 to 100,000 trucks short of what was being asked for. So, there is some demand that should actually make it a fairly decent year, even at 228,000. This year’s in the 250,000 range. I could see ’24 being [in] the low 215,000 range. And then 2025 and 2026 could be a lot like ’05 and ’06 because of the pre-buy before the 2027 emissions regulations.”
What about the used truck market?
“We’re down 25% and still dropping. But we’re still hitting what I would consider normalized numbers. I’m hoping that it’ll flatten out. But there’s maybe another 10-15% [price drop] in it. You’ve got to remember there’ll be some leveling because of the price of new trucks going up.”
Does the fact that two-thirds of your gross profit comes from parts and service mean truck sales are less important?
“We still make money selling trucks, and financing, trucks, and leasing trucks, and all that other. But it is the parts and service that we do. And because of our scale now we’re able to do business with a lot of companies that we don’t sell trucks to. We do millions of dollars of parts and service work and we don’t sell them trucks.”
Your $205 million purchase of the Summit Group dealerships was a big deal. You also said it was strategic.
“We got through finishing 20 stores and it was perfect. As I was telling everybody, it was like a piece of the puzzle that the dog chewed up and got rid of because we didn’t have anything in Arkansas, Kansas and Missouri. And so it just fit right in there and fit in a hole down there for us. And, yeah, just got finished getting them all on all our systems.”
Where are you on electric truck customer interest and orders?
“We’ve got over 150 or 200 on order right now. We have a little bit of everything. Medium duty also. We’re up in refuse markets in certain cities. We’ve got other [Peterbilt Model] 579 stuff coming. A lot for California. You’re going to have some people wanting it, going to be driven to get to it. But I don’t think that we’re up to speed yet to meet any demand.”
Autonomous rumor mill spins in China
The two autonomous trucking startups with Chinese operations have rumored suitors.
Reports in Chinese media suggest that Geely Autos has made a bid for the Chinese operations of TuSimple, which the San Diego-based startup has indicated it wants to spin off or restructure. The deal could be worth up to $1 billion for TuSimple, which like most autonomous startups has seen its book value plummet along with its share price since going public 16 months ago..
Meanwhile, rival Plus could be folded into Full Truck Alliance, the Chinese entity that is its largest shareholder. A Plus spokeswoman said the company doesn’t comment on rumors. But a story in Pandaily lays out a plausible case. Plus has been more reliant on China for business than TuSimple, including a joint venture with truck giant First Auto Works (FAW).
TuSimple had to undergo scrutiny by the Committee on Foreign Investment in the United States (CFIUS), ultimately agreeing to limited oversight of its U.S. business and promising to keep source code and other software out of the hands of its China operations. Chinese supporter Sina Corp. gave up two board seats around the time of the CFIUS ruling.
Plus avoided the prying eyes of CFIUS because its plans to merge with special purpose acquisition company Hennessy Capital fell apart when Hennessy Capital pulled out as SPAC sponsor in November and the two canceled the planned merger valued at $3.3 billion.
Stay tuned.
Keeping up with Nikola
Try as it might, Nikola Corp. cannot stay out of the news.
Recently named president and incoming CEO MIchael Lohscheller this week shuffled his top executives. Pablo Kozier, who put in place much of the nascent hydrogen infrastructure that will provide fuel for Nikola’s fuel cell trucks, is now the president of commercial at the startup. His work includes the recent announcement of three California hydrogen station locations. Carey Mendes, current global head, energy finance, succeeds him as president, energy.
For his part, Lohscheller said: “Pablo and Carey will place greater focus on two critical parts of our business and help drive our next phase of growth.” That includes Europe, where Lohscheller will reveal the European version of the Nikola Tre fuel cell truck on Sept. 19 with manufacturing joint venture partner Iveco at the IAA Transportation show in Hanover, Germany.
Nikola also is exercising some 75 million shares from a shelf registration, giving Citibank Global a 2.5% cut from gross proceeds of up to $400 million in shares it sells “at the market.” The acronym ATM is not like the machine on the corner that spits out money. But Nikola hopes there is sufficient interest to help raise cash it needs for expansion.
It’s unclear if some of these shares are from Nikola’s hard-earned new share allocation that finally received investor approval in August. In any case, working directly with a bank bypasses the expense of a follow-on stock offering and rules that accompany it.
Oh, and Nikola commenced its formal offer for shares of Romeo Power, its struggling battery pack supplier for which it is paying $144 million in stock to Romeo shareholders.
Briefly noted
Peterbilt delivered two Model 579EVs to Quantix for drayage operations in its Charleston, South Carolina and Savannah, Georgia facilities. … Toyota Motor North America is collaborating with the National Renewable Energy Laboratory (NREL) to build, install and evaluate a 1-megawatt proton exchange membrane (PEM) fuel cell power generation system at NREL’s Flatirons Campus in Arvada, Colorado. … Supply chain services provider McLane Co. is taking delivery of three Volvo VNR Electric trucks to provide zero-tailpipe emission deliveries in Southern California.
That’s it for this week. Thanks for reading. Click here to receive Truck Tech via email on Fridays.
Alan
