~ Predicting the path of recovery ~
Bill Gates is making headlines again, but not about tech. The Microsoft co-founder and philanthropist is investing $373 million in two major players in the transportation sector, FedEx and Paccar. This has raised eyebrows due to the challenges facing the trucking industry, yet Gates sees an opportunity when others might advise caution. So, why is he placing such a significant bet on the future of trucking? Here Roger Brereton, head of sales at bus steering system manufacturer Pailton Engineering, explains.
The trucking and logistics industry isn’t exactly thriving right now. In 2024, the S&P 500 Transportation Index, which tracks the performance of transportation companies, decreased by 0.5 per cent. This means that, on average, transportation stocks slightly declined in value last year.
It’s been a tough year, with demand for freight services slipping, supply chain issues lingering and uncertainty about the overall economic recovery. However, Gates isn’t deterred by these short-term challenges and is taking a much longer-term view, with conviction.
Why FedEx and Paccar?
Gates is known for making strategic investments when others might be pulling back, and his recent investments in FedEx and Paccar reflect just that. Despite a ten per cent gain in its share price, FedEx has had weaker-than-expected earnings and lowered its fiscal 2025 guidance. However, the company is in the middle of transformation with its DRIVE initiative, restructuring operations and cutting costs.
This includes the planned spinoff of its FedEx Freight division, which generated $9.4 billion in 2023. Gates likely believes that once the restructuring is complete, the company will not only have a sharper focus but also be positioned to capitalise on a recovery in the market.
As for Paccar, the maker of iconic truck brands like Peterbilt and Kenworth, it faced a 5.2 per cent revenue decline in Q3 2024, but saw orders jump 21 per cent in November 2024. What’s more, the company holds a 31.1 per cent market share in Class 8 trucks, which transport goods around the world.
Calculated risk
The US manufacturing sector has been through a tough couple of years, and while there were signs of a rebound on the horizon, fresh tariff concerns have complicated things before Bill Gates made these key moves.
However, it’s likely that Gates saw a recovery in line with expectations that the Federal Reserve will begin cutting interest rates later this year. As borrowing costs decrease, investment across the economy is set to rise, which in turn will drive up demand for freight services.
On top of that, Gates is a strong advocate of the global push toward sustainability. Take FedEx for example, in South Korea, using electric vehicles for last-mile deliveries in Seoul as part of a broader green pilot scheme. While in London, the company has added Mercedes-Benz eSprinters to its fleet to meet the city’s Ultra Low Emissions Zones and its own goal of 100 per cent zero-emissions pickup and delivery vehicles by 2040.
Paccar is also pushing ahead with electric vehicle development. Its Peterbilt brand is producing battery-electric models like the 579EV, designed for short-haul and urban delivery routes. As for Kenworth, its working on both electric and hydrogen fuel cell trucks to reduce emissions across different duty cycles, with serial production planned this year.
These developments come as emissions rules are tightening. In May 2024, the EU approved tougher CO₂ targets for heavy-duty vehicles, 45 per cent cuts by 2030 and 90 per cent by 2040. The US adopted similar measures in March 2024, with plans to sharply reduce truck emissions.
Gates has long been an advocate for climate change solutions and his investment strategy suggests he’s betting on the future of sustainable transport. Time will tell whether both FedEx and Paccar will come out stronger from this period, but given his track record, it’s clear he knows where to place his bets.
For those of us in the industry, it’s a reminder that even in challenging times, there are always opportunities for growth. The road ahead might be uncertain, but with the right focus, it can also be full of potential.
Pailton Engineering supplies steering parts for heavy vehicles, including buses, electric buses and commercial vehicles. To find out more, contact the team at pailton.com.