In October the number of North American retail Class 8 truck sales totaled 25,069, marking a 6.7% increase over September sales, according to www.WardsAuto.com. In the first ten months of 2006, 235,007 units were sold, a 12.6% increase over the same period a year ago.
Inventories expanded at a much faster rate than retail sales. In October there were 54,977 units, a 15% boost over the same period last year.
To OEMs, fattening inventories are worrisome but to dealers it is a good thing.
Rush Enterprises, which operates a network of heavy-duty truck dealerships, said it is boosting its inventory of ’06 models to insulate itself from a forecasted drop of sales in 2007.
The industry expects truck sales in 2007 could drop as much as 40%, since technology required in ’07-model trucks to meet new emissions standards will add a significant sticker price premium. An ample inventory of cheaper ’06-models would cushion Rush from a severe sales decline—or at least that’s what the company is betting on.
“[By] properly managing Class 8 inventory levels heading into 2007, we hope to soften the earnings impact that will result from fewer Class 8 trucks being sold in 2007,” stated Marvin Rush, chairman of Rush Enterprises, in a third-quarter earnings report.
The industry consensus among dealerships and OEMs is that the first half of 2007 will see weak retail sales, while the latter half will bring a rebound.
“We expect first-quarter  deliveries to remain robust followed by weaker deliveries in the second and third quarters,” Rush said. “However, we believe the market will begin to rebound in the fourth quarter of 2007, followed by strong markets in 2008 and 2009 as customers purchase trucks in advance of even more stringent diesel engine emissions standards that will go into effect in 2010.”
Volvo Group—parent company of Volvo, Mack and Renault brands—has a similar outlook.
“As a result of the large pre-buy of trucks with the old engines in North America during 2006, we expect sharply lower demand during the first half of 2007,” stated Leif Johansson, president & CEO of Volvo Group. “Consequently, we have already begun to prepare for a reduced production capacity in our North American truck plants….we are prepared to increase capacity later in the year.
“We think the market will be coming back in the second half of 2007,” he continued. “While we don’t have any visibility of that yet—we don’t expect the second half of 2007 will have negative news.”
In fact, just last Friday Volvo announced plans to lay off 1,000 workers at its New River Valley plant in Dublin, VA in the first quarter of 2007 in anticipation of the downturn.
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