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Investing.com -- European truck manufacturers are set to face continued pressure in the near term, with demand softening and supply chain challenges persisting, according to analysts at Morgan Stanley (NYSE:MS).
The brokerage warns that weakening macroeconomic conditions and slowing order intake will weigh on sector performance despite some resilience in backlogs.
Morgan Stanley analysts flag that truck orders in Europe have been trending downward, with a notable decline in intake rates.
Companies are seeing a normalization in order books following a period of high demand driven by post-pandemic recovery and fleet renewals.
This cooling demand is expected to translate into weaker revenue and profitability for manufacturers in the coming quarters.
Supply chain constraints remain a headwind, though they have eased from peak disruption levels seen over the past two years.
Component shortages, particularly in semiconductors, have improved, but cost pressures from labor and raw materials continue to strain margins.
Additionally, manufacturers are navigating higher inventory levels as demand softens, adding further pressure on pricing and profitability.
The European economic outlook remains a key concern, with GDP growth forecasts remaining subdued.
Freight activity has been sluggish, impacting fleet replacement cycles and limiting upside potential for new truck sales.
Morgan Stanley analysts indicate that while long-term electrification trends provide structural support for the industry, near-term adoption rates for electric trucks remain slow due to high costs and charging infrastructure limitations.
Despite the headwinds, some manufacturers with strong order backlogs may be better positioned to weather the downturn.
However, analysts caution that the sector is unlikely to see a meaningful rebound until demand stabilizes and broader economic conditions improve.
In the meantime, European truck stocks are expected to remain under pressure as investors weigh ongoing risks to earnings and profitability.