Slow growth forecast for truck sales

Slow growth forecast for truck sales

Sales of new medium- and heavy-duty commercial vehicles are now projected to be at the start of a three-year period of slow yet steady growth, according to recent analysis by ACT Research Co

Sales of new medium- and heavy-duty commercial vehicles are now projected to be at the start of a three-year period of slow yet steady growth, according to recent analysis by ACT Research Co. However, the Columbus, IN-based firm cautions that this recovery will remain stalled for a time until the trucking industry works its way through several issues.

“Right now, the overall supply of trucks and freight demand are still not in equilibrium, and until that occurs, new truck sales will remain down,” Kenny Vieth, a partner and senior analyst with ACT Research, told FleetOwner. “The other issue is that used truck prices are still down; off some $10,000 year over year. So we’ll also need to see that [used truck] pricing start to improve before we see a recovery in new truck sales.”

According to ACT Research’s North American Commercial Vehicle Outlook, heavy-duty (Class 8) truck production reached a low point of 25,000 units in the second quarter this year; down 57% from the same period in 2008. However, the firm is predicting quarterly heavy-truck production rates will begin a slow climb in the third quarter, though volumes will remain down in year-over-year comparisons until the first quarter of 2010.

“One good thing we’ve been hearing is that many large fleets say they’ve stopped taking capacity out of their fleets,” Vieth noted. “One of the problems had been fleets getting rid of their oldest trucks into the used market but not buying new equipment. That allowed them to maintain their fleet age profiles, but helped drive down used truck pricing.”

With that flow of older equipment shut off, however, the used market should start to see some price recovery – helped along by the surcharges being added to new trucks to cover the cost of 2010 engine emission compliance.

Vieth said with a new heavy truck on average costing $10,000 more in 2010 due to emission control systems, combined with $10,000 in lower used truck value, could make older equipment very attractive despite having a higher mileage profile. “When you’re looking at a 2005 or 2006 truck being $20,000 cheaper compared to a 2010 truck that kind of value is hard to ignore, at least in the short term,” he pointed out.

On the medium-duty side of the ledger, ACT predicts that Class 5-7 production – down 53% to 22,000 units in the second quarter this year compared to the same period in 2008 – should also begin a rebound in the third quarter, but at a slower rate largely due to continued softness in the construction industry.

“Overall, we believe the economy emerged from recession in the third quarter and expect gradual strengthening through 2010,” Vieth added. “However, growth is likely to be slower than in a traditional recovery as consumers and financial institutions pare debt; baby-boomers increase their savings; government stimulus slows; and longer-term, higher taxes, inflation or both impact consumption and investment.”

TAGS: News
Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish