New Truck Sales Set to Rise

This story appears in the Dec. 6 print edition of Transport Topics.

Even as total heavy-duty truck capacity continued to decline during the third quarter, recent reports on registrations of new and used trucks, rising orders for new vehicles and slowing sales of used tractors appeared to set the stage for a renaissance in new-truck sales.

R.L. Polk & Co. reported on Oct. 11 that the overall number of U.S. heavy-duty vehicles in operation dipped 1.65% to 3.57 million tractors and trucks from 3.63 million during the third quarter of last year as older units were taken out of service. It was the fourth straight quarter of declining overall fleet size.

Meanwhile, registrations of new Class 8 trucks increased during the third quarter by 5.6% to 27,492 vehicles and for the year to date by 9.6% to 82,788 heavy trucks.

“Things are looking better,” said Kyle Treadway, a Kenworth Truck Co. dealer in the Mountain West states and chairman of the American Truck Dealers trade group, on his expectation for better sales volumes.

“We’ve been saying this for three years now, but I think this time it’s actually going to stick. When we order a truck now, it takes 16 weeks to get it, where it used to take half that time or less,” Treadway said.

Treadway said sales were helped because “fuel economy performance on the 2010 engines is coming in better than we’d hoped, even though pricing has caused hesitation.”

Gary Meteer Sr., Polk’s account director for commercial vehicles and aftermarket groups, said, “The third quarter for all commercial vehicles performed better than we expected. Usually there’s a dip in new registrations, compared with the second quarter, but this time it actually increased. Not by a lot, but historically it’s usually gone the other way.”

Polk’s third-quarter survey also showed used truck registrations approaching a high peak, but growing more slowly than earlier in the year, while a separate report by ACT Research Co. said used-truck sales are past their peak, as orders for new heavy trucks in North America continued to rise.

The combination of factors — an increasing demand for trucks but with a diminishing pool of good used trucks — suggests an acceleration of new truck sales could be at hand. In recent assessments, ACT has predicted a 26% increase in Class 8 North American production this year over 2009, and a 57% surge in 2011 over this year (click here for previous story).

“Older units are getting taken out of service,” said Meteer, adding that his statistics have an 18-month lag for subtracting a truck once its registration lapses, although they are prompt in adding new vehicles.

The Polk report also said that used trucks were the heavy-duty vehicle of choice in the third quarter. Registrations springing from used trucks changing ownership outnumbered the registration of new vehicles, as has been the case since the start of 2009 — a measure of the thrift that has gripped fleet managers.

However, there are questions about how long the used-truck bonanza can last. For Classes 3-8 combined, there were 170,050 used-truck registrations during the third quarter, sharply outnumbering the new-truck total of 94,450. However, the year-over-year growth for new trucks was 16.8%, but only 2% for used trucks.

“It’s an indication that while there were a lot of good, clean used trucks out there, but now there are not as many. The supply is starting to dwindle,” Meteer said.

Treadway confirmed that fleets have been eagerly searching for used trucks, but the hunt is now getting tougher.

“Remember that we didn’t sell many new trucks after 2007, so the pool of recent-model new trucks was not that deep to begin with. Buyers are having to reach farther afield to find what they want and are often having to relax the criteria on their specifications,” he said.

A Nov. 29 statement from ACT said Class 8 used truck sales fell 16% from September to October, and that prices for used Class 3-8 trucks increased by 4% over the same time. ACT’s estimate is based on a regular survey it conducts of buyers and sellers of trucking equipment.

“Tighter supplies of equipment of all sizes continues to be a boon for selling prices,” said Steve Tam, ACT vice president for the commercial vehicle sector.

ACT has said it expects modest growth in North American Class 8 production this year, followed by a sharp acceleration in 2011 (click here for previous story). The research firm also noted a growth in the backlog of trucks ordered but not yet produced.

Inventories of used vehicles at Daimler Trucks North America are down significantly, Jorgen Rochert, head of DTNA’s financial division, said in an interview.

“We actually get complaints that we do not offer what we did in the past. We have less than 500 units. We’ve not seen that in years. We had more than 1,000 units eight or nine months ago,” Rochert said.

In assessing the sales environment, Rochert said carrier finances have improved. Daimler Truck Financial restructured “hundreds” of loans to help borrowers get through the recession, mostly by extending the term of loans and accepting lower monthly payments for several months.

Staff Writer Daniel P. Bearth contributed to this story.