Dealer Survey: What Downturn?

Truck sales are booming and backlogs are rising. But, according to a survey of truck manufacturers and dealers by Schroder & Co., a New York investment firm, there is little cause for worry about a severe downturn.

That’s because a majority of over-the-road trucks are being purchased to maintain existing fleets rather than to add new capacity.

In addition, the survey found that vocational orders make up a large proportion of Class 8 heavy-duty diesel tractor orders, reflecting both a strong economy and budget surpluses that are leading to increased government spending.

The Schroder report bolsters the view of most investment analysts that the truck market is unlikely to overheat in 1999, even though sales continue to set a torrid pace.

Sixty percent of 40 carriers, original equipment manufacturers and dealers surveyed in the fourth quarter of 1998 said they thought orders were placed to maintain truckload and less-than-truckload capacity and 40% thought orders were being placed to bring on new capacity.

Manufacturers expect demand from both truckload and LTL carriers to increase over the next six months, but to a lesser degree than a year ago, according to the Schroder survey.

When asked to compare the “firmness” of current truck orders, 77% of the respondents said the backlog was firmer than during the 1994-95 equipment cycle, in which cancellations rose sharply in response to a slowing economy.

Cancellations are seen as an early warning sign of overcapacity.

Nearly two-thirds (63%) of dealers and manufacturers said they were “somewhat concerned” about a substantial rise in the cancellation rate in the next 12 months, but a majority (53%) thought it would be at least nine months before a substantial rise in cancellations is noticed.

More than half of the manufacturers and dealers said orders were being placed up to 6 months further in advance than was the case three or four years ago.

ome of the reasons for longer lead times include:

An expanding economy is driving demand.

Truckload carriers are buying newer equipment in an attempt to stay competitive when recruiting drivers.

Equipment purchasing has become a year-round event.

For the full story, see the April 12 print edition of Transport Topics. Subscribe today.