Concerns about the reliability and high cost of 2010 emission control systems on top of still-anemic freight market conditions are making fleets increasingly reluctant to buy new highway tractors next year, according to a recent survey. As a result, truck orders may spike temporarily in the fourth quarter as fleets with sufficient funding try to obtain new equipment ahead of the 2010 emission regulation changeover.
“Based on our survey, we’re really seeing softening plans for tractor orders for the first half of 2010,” Chris Kemmer, president of CK Commercial Vehicle Research (CKVR), told FleetOwner. “Only 42% of our surveyed fleets said they might place orders for 2010 equipment based on what they know today. There’s only some likelihood that they’ll buy, [but] not much.”
CKVR found in its fourth quarter Fleet Sentiment Report that the reliability and cost of 2010 emission technology remain major concerns among both for-hire and private carriers. Given the continuing softness in freight demand, many fleets don’t really need to buy new equipment, Kemmer noted.
“Many of them said there’s no real reason for them to buy new equipment, not only because the freight market is soft, but also because they’ve parked a lot of equipment as well,” she said. “Many also said they don’t want to be in the position to ‘test out’ new equipment if they don’t have to.”
As a corollary, Kemmer added that her survey indicates there may be a little “surge” in new tractor orders in the fourth quarter as fleets that have thecapital resources to buy new equipment try to obtain units before the 2010-compliant models roll out.
“I talked to one 150-unit fleet that hasn’t bought new tractors for three years that is, in their words, ‘biting the bullet’ and buying 15 new trucks now before 2010 equipment arrives,” she said.
The CK survey information dovetails with the findings of FTR Associates, which found Class 8 net orders for all major North American OEM’s totaled 21,792 units in October, reflecting a definite upsurge in order activity – a 104% increase over September and a 117% year-over-year increase.
“All indications are that the October increase is due to the filling up of remaining 2009 production slots for trucks with the older 2007 engine technology to avoid the new 2010 engines, which due to tighter emission standards will be more expensive and will employ new technology,” said Eric Starks, FTR’s president of FTR said “
For the last three months, total Class 8 orders including the U.S., Canada, Mexico and exports came in at an annualized rate of 172,300, significantly better than early 2009, indicating a minor “pre-buy” may be underway.
Still, Starks stressed to FleetOwner that this surge in orders in only temporary as even without the higher cost of 2010 technology, business conditions for truckers remains weak. For example, FTR’s latest Trucking Conditions Index (TCI) for October did increase for the third consecutive month to minus 16.4, the highest reading since November 2008, but it remains significantly below a neutral reading of zero.
“The continued negative TCI reading is a clear sign that the transportation industry is still struggling from the steep downturn seen late last year and into 2009,” said Starks. “Real acceleration in the trucking fundamentals that we track for this index will likely wait for a substantial recovery in volumes and capacity utilization, which we don’t expect to occur for at least another year.”