Class 8 Fleet Growth Stalls As Carriers Delay Purchases

By Daniel P. Bearth, Staff Writer

This story appears in the Feb. 25 print edition of Transport Topics.

Growth of the U.S. heavy-duty truck fleet decelerated in the fourth quarter, as freight carriers, led by large fleets, continued to put off buying new equipment in the face of a possible recession, according to truck registration data from market research firm R.L. Polk & Co.

Polk said that the total number of Class 8 vehicles in operation rose 2.2% in the fourth quarter of 2007 from a year earlier, matching the fleet-growth rate in the second quarter, which was the lowest since 2003. Fleet size actually fell slightly from the third quarter to the fourth.

Registrations of new Class 8 trucks fell 37.8% in 2007 from 2006’s pace, and even more sharply — 54.6% — in the fourth quarter, as new Class 8 vehicle registrations for carriers with 101 or more power units dropped 44.6%. Registrations by the smallest fleets, those with one to five trucks, fell 18.6%.

The new data show fleet operators are keeping a tight grip on equipment in the face of rising fuel costs and sluggish business growth. “People that are buying trucks are replacing something that went out of service. There was no business expansion,” said Gary Meteer Sr., director of the commercial vehicle group at Polk.

 Some prominent truckload fleets, such as J.B. Hunt Transport Services and Werner Enterprises, have been cutting back on the number of trucks in their fleets while shifting more business to intermodal and brokering freight to other carriers.

Although truck orders have increased in recent months, Meteer said, some of that could be due to inventory rebuilding by dealers rather than an increase in sales. “I see nothing to suggest a turnaround [in sales],” he said.

Meteer estimated that there were 3,589,000 Class 8 trucks in operation on Dec. 31 — 78,000 more than were in use at the end of 2006, but 3,000 fewer than three months earlier.

The drop in registrations mirrors a decline in overall truck sales. Polk said 169,900 new Class 8 trucks were registered in 2007 — compared with a record 272,700 units in 2006 — as truck manufacturers sold 150,965 Class 8 vehicles in 2007, the lowest number since 2003 and a 46.8% fall from 2006 (1-21, p. 1).

Meteer said that large freight-hauling companies in particular have held off on purchasing new vehicles because of slower economic growth and excess capacity. Smaller fleets tend to buy trucks in response to new contracts, he said.

  A downturn in residential construction has hurt both vocational and for-hire trucking companies, Meteer said.

Bob Costello, American Trucking Associations’ chief economist, said the current economic slowdown is “housing- and financial-industry-driven,” and that the tonnage drop has been relatively mild, compared with the recession that followed the 9/11 terrorist attacks.

Tonnage has declined an average of 2.5% a month since the current downturn started in January 2006, compared with a monthly average drop of 8.4% during the last recession.

Costello said the tonnage drop is the longest since the 1970s. 

The ATA truck tonnage index did increase by 1.4% in December after rising 3.3% in November, marking the first back-to-back improvement in freight volume since May and June 2006 (2-4, p. 1).

The relatively mild downturn in freight may have kept trucking bankruptcies in check, according to Ed Wolfe, an equity research analyst for Bear, Stearns & Co. in New York.

Wolfe said he expects to see an increase in trucking bankruptcies as carriers face registration and licensing fees in a period of relatively weak demand.

While new truck sales and registrations fell in 2007, registrations for Class 8 used trucks increased 8.4%, Polk reported.

“This would indicate a strong demand for good, clean pre-2007 diesel-powered vehicles,” Meteer said.

The increase in used truck registrations also has raised the average age of Class 8 vehicles in use, according to data compiled by MacKay & Co., a market research firm in Lombard, Ill.

The average age for U.S. Class 8 trucks was 7.91 years in 2007, up from 7.73 years in 2006, President Stu MacKay said in a presentation to the Heavy Duty Aftermarket Forum in Las Vegas in January.

MacKay said that since 1985, the average vehicle age has ranged from a high of 8.75 years in 1992 to a low of 7.49 in 2000. And the trend is expected to continue for the next few years, climbing to 8.2 years by 2011, he said.