Class 8 Sales Will Hit Peak in 2015, ACT Forecast Says
This story appears in the March 30 print edition of Transport Topics.
COLUMBUS, Ind. — The Class 8 market will reach a peak in 2015 as a favorable freight market and improved trucker profitability lift the industry, ACT Research Co. projected.
But it’s not necessarily the level of freight demand that is driving truck sales — it’s the amount of money truckers are making hauling that freight, Kenny Vieth, president of ACT Research, said here at the firm’s March 24 seminar.
“They don’t buy trucks to haul freight,” Vieth said. “They buy trucks to make money.”
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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.”
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.
Although the driver shortage can limit fleets’ expansion plans, it’s also compelling some carriers to invest in new equipment as a way to attract drivers, he added.
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 open slots will dwindle to just 20,000 by the end of May.
The high demand and production levels can also give rise to occasional supplier challenges, Vieth said.
He said some truck makers experienced problems securing paint in February, likely due to difficulty in importing pigment from Asia after the recent labor disruptions at West Coast ports.
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 moves to three shifts in a bid to ramp up production, spurring others to follow suit. Such an increase in production would likely pull demand forward from later years, leading to a deeper downturn on the horizon, he said.
Meanwhile, ACT chief economist Sam Kahan predicted that the U.S. economy will continue to accelerate in 2015, despite a decline in retail sales and manufacturing activity in recent months.
“Our outlook on the U.S. economy is very positive,” he said.
However, retail sales declined in December, January and February after posting 4.3% growth in the third quarter and a 1.8% gain in the fourth quarter.
Manufacturing also dipped during those three months after 4.9% and 4.1% increases in the third and fourth quarters, respectively.
Kahan attributed those downturns to inclement weather.
“I think it’s all weather-related, and as we get into spring and summer we should see a fairly strong rebound,” he said.
ACT also looked ahead at how regulatory and business changes and technological advances will reshape trucking and transportation during the next decade.
“Over the course of the next 10 years, we’re probably going to see sweeping changes in the business,” ACT analyst Jim Meil said.
“You’ll probably have to go as far back as 1974 to 1984 — years of deregulation, years of high energy prices, years of significant, transformative change to the business — to get anything like what we’re going to encounter over the next 10 years,” he added.
The research firm is planning a long-term study on the subject. This “Vision 2025” study will develop a “most likely” base case for how the industry will evolve, along with plausible alternate paths, Meil said.
The trend toward consolidation in trucking is likely to continue, he said, driven by growing complexity in technology, regulatory compliance and best practices.
Intelligent vehicles and intelligent highways are technically viable within the next 10 years, but the technologies will need to overcome hurdles such as regulatory, public and liability resistance before they can be implemented, Meil said.
ACT’s current expectation is that crude oil prices will be lower and less volatile in the next 10 years than they were in the 2001-2014 timeframe, he added.
