With sticker prices set to climb $6,000 to $10,000 and freight volumes – much less rates – still stuck in the doldrums, most truck OEMs expect at best a very lackluster sales environment for most of 2010. That being said, though, conversations with OEM executives reveal some possible bright spots do exist on the road ahead.
Scott Kress, senior vp-sales& marketing for Volvo Trucks North America, told FleetOwner that the selective catalytic reduction (SCR) technology his company is using on its Class 8 trucks to comply with the 2010 emission regulations will improve fuel economy in the neighborhood of 3% to 5%.
“When we look at fuel economy, there will be a payback with this technology,” Kress said. “Longer term, though, SCR will allow the engine to run under less stress. So there are benefits that can offset the higher cost of this new technology. The key is when the clouds will clear on the freight market and whether fleets can get better rates from shippers.”
“Customers are concerned about three major things when it comes to their trucks: fuel economy, weight, and cost,” Kevin Flaherty, senior vp-sales for Mack Trucks, told FleetOwner. “ And those concerns remain consistent.”
As a result, said Flaherty, much of the ongoing research and development by OEMs focuses on ways to offset any changes to those three areas resulting from federal and state regulatory initiatives – from braking distance limits to emission reductions – as well as from general economic trends.
“That means looking at new materials to help take weight out, as well as the wider use of aluminum,” Flaherty noted. “Aerodynamic improvements also remain a focus, as is anything that improves fuel economy, simply because fuel is such a big cost to our customers’ bottom line.”
Bill Jackson, gm of Peterbilt Motors Co., said that these core concerns are driving changes to the way fleets spec their equipment – opening up opportunities for OEMs in some cases.
“We’re not seeing a deviation from what I’d call ‘premium’ specs, but more of a model shift,” he told FleetOwner. “Obviously, we’re seeing more demand for aerodynamic vs. traditional-style cabs, but we’re also seeing a move to smaller displacement engines to drive fuel economy and operating costs savings.”
Though Paccar – Peterbilt’s parent company as well as Kenworth’s– lowered its forecast for Class 8 retail truck sales in the U.S. and Canada to between 100,000 and 110,000 vehicles in 2009 back in August, sales stayed steady through the end of the year. Jackson noted that by November, sales were expected to dip down to 95,000 units, but a small pre-buy emerged and now Class 8 volumes are expected to finish the year at 105,000 units.
ACT Research Co. (ACT) predicts Class 8 vehicle production will grow 22% in 2010, but will still be below vehicle replacement levels. Meanwhile, medium-duty truck (Class 5-7) production is expected to see year-over-year growth of about 30% in both 2010 and 2011.
Paccar is expecting retail sales in 2010 to improve only slightly and range between 110,000 and 140,000 units.
Peterbilt’s Jackson said the fuel price spike back in the summer of 2008 – when diesel soared to nearly $5 per gallon nationwide – “got everyone’s attention” in the trucking industry and hasn’t been forgotten.
“No one wants to get caught like that again, so the lesson learned is that they must watch fuel economy every day,” he explained. “So now they are paying much closer attention to fuel economy, life cycle costs, serviceability, and dealer support – everything that affects their operating costs is getting factored in.”
Volvo’s Kress added that the fuel price spike in tandem with the global economic collapse has helped forge a much more resilient customer base – a key support beam for more consistent, if lower, truck sales volume in the future.
“Carriers that weathered the ‘perfect storm’ of fuel price spikes followed by the freight market crash have a pretty good operating model,” he said. “Also, because the economy was so bad, fleet couldn’t do a major pre-buy in 2009. So with the average age of equipment now up around 7.8 years, they will need new trucks at some point – that’s why there’s still a lot of hope for sales to pick up at the back end of 2010. If we can get a sustained economic and freight market improvement, we could get back to more normalized truck sales numbers by 2011 to 2012.”