SAN ANTONIO – Sales of new trucks should pick up nicely over the next three years, according to W. M. “Rusty” Rush, president & CEO of Rush Enterprises, which owns one of the largest chains of truck dealerships in the U.S. Yet he cautioned that while motor carriers continue to experience a healthy uptick in freight volumes and rates, it will be slow going for those two critical metrics over the next several years. That means truck sales will be good, but will not necessarily return to the heady peak last seen in 2006.
“Truck sales will gradually keep picking up in 2011, 2012, and 2013, but they won’t be anywhere near the levels we saw before the downturn,” Rush said during an interview with reporters here at the 2010 Technician Skills Rodeo held by its Rush Truck Centers (RTC) division.
RTC operates 59 dealerships in 14 states and employs between 800 and 900 technicians. Rush Enterprises overall survived the downturn and stayed profitable. It generated $1.2 billion in revenues last year and sold 9,490 commercial trucks, yet remained focused on its goal of growing to $5 billion in revenue with a 20% average return on equity.
“One thing about the trucking industry is that it’s always changing,” Rush said. “Different dynamics are in play today,” he explained. “Given the age and mileage of the current fleet, the industry is way behind in its replacement cycle. Tonnage has gone up and customers tell me they’re getting better rates, with increases ranging from 4% to 9%”
Normally, those conditions would spur new truck sales, but that’s not happening at the pace many would expect. “That’s because they cost more due to emission [control] technology – almost 25% to 30% more in some cases,” Rush noted. “Also, the average length of haul has decreased dramatically, with some fleets seeing a 50% drop. Combined with the current rate environment, that won’t support the 36-month trade cycle of the past.”
As a result, fleet owners are lengthening their vehicle trade cycles and starting to change their truck specs, too-- if not change over to different kinds of trucks altogether, Rush said.
“Fleets are now starting to explore configuration changes to their Class 8 trucks,” he explained. “They are moving to smaller sleepers as the length of haul decreases-- with drivers not out on the road as much-- and going to more regional style operations. We also think we’ll see a growing shift to Class 4 and 5 trucks, which we think will result in slower growth for Class 6 and 7 models.”
He said Rush has observed these market trends developing for some time now and took pains to address them. Indeed, seven years ago, RTC started adding more medium-duty products to its offerinsg, which today includes Hino, Isuzu, Ford, UD and Mitsubishi Fuso. Then, in early 2008, the company added school bus franchises.
That year also proved pivotal as RTC began adding International dealerships to its network. Rusty Rush noted that dealer group will remain separate and distinct from its Peterbilt dealership chain.
“We’ve had a long, strong 45-year history with Peterbilt and that won’t change, period,” he said. “What we’re doing is really adding diversity of product to better position us to deal with the cyclical nature of this business.”
RTC currently operates 42 Peterbilt locations in 10 states compared to 12 International shops in 4 states.
Rush added that RTC’s parts and service division proved to be the “shining star” for the company in 2010 and expects business from that segment to keep booming as fleets continue to both lengthen trade cycles and outsource maintenance altogether.
“The next decade is really ‘the solution decade,’” he said. “Fleets aren’t just going to look at cost-per-mile, vehicle depreciation, and maintenance outsourcing. They want us to be a total solution provider: ‘What is your problem? We’ll fix it.’”