Class 8 truck sales: Throwing out the gauge

The slow pace of recovery in the U.S. freight market coupled with an over-abundance of under-used equipment is lowering the number of new Class 8 sales expected for 2010, according to industry analyst Eric Starks, president of FTR Associates

The slow pace of recovery in the U.S. freight market coupled with an over-abundance of under-used equipment is lowering the number of new Class 8 sales expected for 2010, according to industry analyst Eric Starks, president of FTR Associates.

Starks told FleetOwner his firm is lowering its projection of Class 8 sales next year from 151,000 down to 133,000 units – a 12% decrease – given that demand for truck freight transportation is still declining and won’t bottom out until the fourth quarter.

“On top of that, we still have a lot of idle and under-used equipment out there, so while it may be old in terms of years, it’s useful life is still quite high,” Starks added. “From where I sit, we think there’s at least a year or two years worth of useful life left in much of that under-used capacity out there, so there won’t be this pressure to go out and replace it with new units.”

With past freight market cycles, Starks said, you could look at the age profile of the equipment and get a good reading on when it needed to be replaced. “Now, at least in the short term, you must throw that gauge out the window,” he explained. “Now it’s all about the ‘useful life’ of equipment, and for the most part, much of what is out there is still relatively young from that perspective.”

He also pointed out that much of the weakness in Class 8 sales will remain in the tractor market across all sectors – private and for-hire – while sales of heavy straight truck configurations, such as dump trucks and concrete mixers, could fare relatively well. “If we see some stimulus money work its way into the construction market, we could see an uptick in dump and concrete mixer sales.”

Still, Starks doesn’t see that happening anytime soon – which is why FTR is reducing its Class 8 sales forecast for 2010 even as the freight market continues to stabilize and his firm’s overall transportation outlook for 2009 remains unchanged. "It will take a substantial improvement in freight demand to soak up the current significant fleet equipment surplus,” he said. “In our view, improvement sufficient to drive new equipment purchases will not occur until 2011.”

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