Productivity gains sharply reduced truck demand, says ACT’s Vieth

Productivity gains sharply reduced truck demand, says ACT’s Vieth

LOUISVILLE. Increases in shipment density, improved equipment utilization and growth in domestic intermodal volume since 2007 combined to replace an estimated 266,000 Class 8 trucks that otherwise would have been needed to haul the same freight, says Kenny Vieth, president and senior analyst of ACT Research.

“If freight and productivity are growing at the same rate, you don’t need new trucks,” Vieth said in a presentation March 26 at the Fleet Forum held in conjunction with the Mid-America Trucking Show in Louisville. Vieth said that growth in Gross Domestic Product and the Class 8 truck population correlated very closely from the 1970s until about 2006 or 2007. “After the recession, the economy has resumed growth, but we have had no change in truck population.”

The lion’s share of ACT Research’s estimated productivity gains – the equivalent of about 145,000 power units – from 2007 to 2013 resulted from greater shipment density, including a shift in the product hauled, changes in packaging and improvements in loading procedures. Vieth cited as an example one major carrier that told ACT Research recently that 30% to 40% of its loads are weighing out before cubing out today where a decade ago only 10% to 15% did so.

Technological improvements – such as optimization software and lower-cost fleet management tools – replaced an estimated 75,000 trucks, while the growth in for-hire backhauls by private fleets saved another 28,000, Vieth says. Finally, higher domestic intermodal traffic kept another 18,000 trucks off the road.

The situation could have been even worse for truck makers, Vieth said. From 2007 to 2013, 124,000 tractors were exported out of the U.S., including about 100,000 out of North America.

Vieth did have some good news for truck manufacturers and their suppliers, however. ACT’s analysis suggests that the unusual productivity gains of the past decade peaked in 2012. “If the economy grows as expected even as productivity growth slows, the next several years will be very good for truckers and, by extension, new truck and trailer demand.”

How good? For starters, GDP growth in 2014 is expected to be almost a full point above 2013 – 2.7% versus 1.9%, Vieth said. And growth likely will be even stronger in 2015 – perhaps 3.2%. Meanwhile, the active fleet continues to age. While the total active Class 8 truck population was basically unchanged from 2003 to 2013, the population of late-model equipment is down 12%.

Aside from the productivity gains, a big reason fleets haven’t replaced trucks more quickly is the price gap between new and used trucks, which remains large, but higher maintenance costs for old equipment and more robust freight demand are turning that dynamic around, Vieth said. Also, fleets are beginning to realize the fuel economy gains they can realize by replacing their pre-2010 units with the latest technology. Taking all the trends together, ACT Research predicts North American truck makers will build nearly 285,000 Class 8 trucks in 2014 and more than 295,000 in 2015 – up from about 245,000 in 2013.

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