According to an independent survey conducted last July by Columbus, OH-based consulting firm CK Marketing & Communications, many private and for-hire carriers remain uncertain about whether or not they will purchase new vehicles equipped with the industry's latest emission-reduction technology in 2007.
“A significant number of fleets believe there's still enough time to take a ‘wait and see’ attitude towards buying trucks in 2007,” CK Marketing president Chris Kemmer tells Fleet Owner.
Her latest “Fleet Sentiment Report,” which is conducted quarterly with both private and for-hire fleets, found that 44% of those responding remain undecided about buying new trucks in '07. By contrast, 26% said they'd buy trucks in 2007 while 30% said they'd avoid purchasing trucks that year altogether.
Kemmer says she wanted to specifically address concerns about “a possible boom-bust cycle” being brought on by fears of '07 engines. To get at that issue, she unambiguously asked respondents: “As things stand today, will you avoid purchasing new trucks in 2007?”
That question netted the responses noted above that show, at this point in the game, only 26% are very likely to buy new trucks in '07.
Kemmer figures the whopping 44% still undecided on '07 will make up their minds inside 18 months. “By the end of next year is when they'll get off the fence,” she says.
On the other hand, one could view the situation this way: not making a decision is itself a decision-a decision to put off taking action, one way or another.
If all the fleets represented by that 44% pool of uncertainty remain committed to avoiding the unavoidable till late in '04, then there is a good chance there could be a hell of a pre-buy of new trucks in '05 and '06.
To that you may say, “So what?” Well, I'm no expert, but it seems to me if too many fleets stay sitting on the fence of indecision too long, there will be a lot of splinters needing pulling out.
First off, fleets that hold off too long out of fear of how the '07 engines will perform risk throwing their entire vehicle replacement cycles out of whack. This can play havoc not just with capital expenditures but with budgeting and planning for shop operations and personnel.
The second risk is to fleets — and their suppliers, from OEMs on down the line to every firm that supplies what goes into a new truck.
It's easy enough to say, “I think I'll wait to buy until someone else proves out those new-fangled engines the federal government is forcing on us.”
But if everyone — or at least everyone in that wishy-washy 44% — pre-buys to avoid '07, truck makers and suppliers may be driven into an uncomfortable double bind.
On the one hand, they certainly won't want to turn down business in '05 or '06. But on the other, they can't be expected to be thrilled at cranking up production for a year or two just to ratchet it back down till everyone gets over their fear of technological change.
That kind of quick hand on the levers of production may spell financial disaster for some suppliers, causing more to slip from the ranks. And that would leave fleets with still fewer competitors to pit against each other once the good times do come back.
I don't have all the answers but I do know one thing. Fence-sitting is a nice way to avoid trouble. But experience shows that if you sit too long, trouble has a way of finding you.