Class 8 Market to Peak in 2015, Driven by Trucker Profitability, ACT Forecasts
The trucking industry is seeing rising freight rates along with continued tight capacity this year, ACT President Kenny Vieth said here March 24 during the research firm’s latest seminar.
It’s not necessarily the level of freight demand that is driving truck sales but the amount of money truckers are making hauling that freight, he said.
“They don’t buy trucks to haul freight,” Vieth said. “They buy trucks to make money.”
ACT projects that full-year North American Class 8 production will climb to 340,000 units, which would be the second-highest ever after 2006 and represent a 14% gain from 297,000 in 2013.
The firm also expects retail sales in North America to rise to 333,000 units this year, up from 286,000 a year ago.
Given its strong growth projection for 2015, ACT expects the trucking industry to add about 3% capacity this year, Vieth said.
If the various market factors were traffic lights, they would all be green right now, Vieth said, pointing to a good economy, strong carrier profits, an aged truck fleet, pent-up demand among small- and medium-size fleets and the higher fuel economy of new models.
“There is an alignment of heavy-duty demand drivers,” he said. “It all comes together for buying new trucks.”
Although the driver shortage can limit fleet expansion plans, it’s also compelling some carriers to invest in new equipment as a way to attract drivers, he added.
Although the purchase price for a new truck continues to escalate, Vieth said the fuel economy improvement makes up a “huge chunk” of the monthly payments for the new vehicles.
Models that predate the Environmental Protection Agency’s 2010 emissions standards generally get less than 6 mpg, while those equipped with the 2010-2012 technology get 6 to 7 mpg, and those with 2013-2014 technology are achieving greater than 7 mpg, he said.
The influx of new truck orders over the past year has been swiftly filling up manufacturing capacity, Vieth said.
Based on its full-year forecast, ACT projected that there were only 105,000 open build slots for 2015 production remaining at the end of February.
The firm predicted that those slots will dwindle to just 20,000 by the end of May.
As a result, new orders may slow down to baseline levels in June through August but jump back up in October, when large fleets come back into the market, Vieth said.
He also said supplier challenges occasionally surface amid the high demand and production levels.
Vieth said he heard that some truck makers experienced problems securing paint in February, likely stemming from the recent labor disruptions at West Coast ports and difficultly in importing pigment from Asia.
Despite the market’s current strength, ACT predicted that demand will slow in the years ahead as the pent-up replacement demand is sated.
ACT’s long-term forecast calls for production to decline to 313,000 trucks in 2016, 265,000 in 2017 and 242,000 in 2018 before rebounding to 286,000 in 2019.
Sales will decline to 313,000 units in 2016, 275,000 in 2017 and 254,000 in 2018, according to the firm’s forecast.
Vieth said one development that would make him re-evaluate the firm’s projections would be if a truck manufacturer announces that it is moving to three shifts in a bid to ramp up production, spurring others to follow suit. Such an increase in production likely will pull demand forward from 2018 or so, leading to a deeper downturn during that timeframe, he said.
