ACT: Truck Sales Will Rise as Fleets’ Profits Increase
This story appears in the March 31 print edition of Transport Topics.
COLUMBUS, Ind. — The expected higher profits of trucking fleets for the next several years will help further boost sales of new heavy-duty trucks in North America, said Kenny Vieth, president of ACT Research Co.
“The rate of economic growth relative to the rate of productivity will be the key determining factor of North American truck production over the next three years,” he said March 25 at the group’s seminar held here on the eve of the Mid-America Trucking Show. “We believe the lack of capacity additions over the past decade is finally catching up with the relationship between freight and trucks.”
This year, North American sales will rise to 281,000 — almost a 13% increase over last year — and will top out at 290,000 in 2015 before leveling off the following four years, ACT predicts. Sales in those years should average 280,000, still higher than the 271,000 total in 2012.
North American Class 8 sales in 2012 were 249,000, with about 188,000 of those coming in the United States, according to ACT data. These figures include vocational units, as well as over-the-road tractors.
Trucking industry profits showed a small upturn in 2010 following the recession, but there has not been exceptional growth yet, Vieth said.
But “in the last few quarters, there has been more profitability,” he told Transport Topics after his presentation. “Truckers have to start making [more] money to drive the cycle.”
Even though American Trucking Associations’ tonnage index has hit records in recent months, “for us, it’s not how much freight is hauled; it’s how much money the truckers are making,” he said.
Stronger spot freight markets have indicated tighter capacity, Vieth said, adding that since August, “we’ve seen a huge increase in spot freight rates,”
Freight volumes and rates have risen in the past 12 months, according to ACT.
This winter’s bad weather, as well as the hours-of-service and other federal regulations, have hurt trucking’s productivity, ACT said.
But Vieth pointed out newer trucks often can achieve 8 mpg or more, up from 5 or 6 mpg on older models. The difference between 6 mpg and 8 mpg at 100,000 miles per year, or 4,200 gallons of diesel, adds up to about $17,000 in savings with the newer trucks.
He also said greater intermodal use by shippers in recent years has kept the growth of truck sales in check.
“Shippers are getting serious about taking transportation costs out of their network,” Vieth said, citing private-fleet statistics that showed backhauls had reduced to 21% last year from 29% in 2007.
“We’ve had three to five years of outsized intermodal growth,” he said, adding that about 95% of all freight loads travel 500 miles or less, which is not optimal for rail travel.
In a separate presentation, ACT economist Sam Kahan said the group was forecasting 2.7% gross domestic product growth this year, followed by 3.2% next year.
Despite a 22% growth in GDP from 2003 to 2013, the growth in heavy-duty trucks was just 8%.
Each percentage point of gross domestic product can add about 16,000 to 17,000 trucks to the nation’s fleet, ACT said.
“If the economy grows as expected, even as productivity growth slows, the next several years will be very good for truckers and, by extension, new truck and trailer demand,” Vieth said.
Since the recession, “the economy has resumed growing, but the Class 8 population has been moving sideways,” he said. “Class 8 [sales] are going to have to start growing with at least some semblance to GDP growth.”
ACT also forecast that total Class 8 North American build will rise gradually this year, from the low 1,100s per day in the first two quarters to 1,220 in the fourth quarter, an increase of almost 11%.
