OEMs Avoid Price Cuts Despite Truck Sales Slump
By Frederick Kiel, Staff Reporter
This story appears in the June 9 print edition of Transport Topics.
Heavy-truck manufacturers have refrained from cutting prices or offering large rebates and other significant incentives, partly because their sales overseas are strong and help offset a second straight year of falling domestic sales, analysts and dealers said.
“Most of the manufacturers are doing very well over in Europe, and they can just slug through the year here,” said George Grask, president of Cedar Rapids Truck Center, a Peterbilt dealership in Cedar Rapids, Iowa.
“I don’t think there’s anything they can offer in incentives that will get people to buy anyway, as long as the cost of fuel is so high and truckers can’t make it up in fuel charges or higher bills,” Grask told Transport Topics.
In Europe last year, new heavy-truck registrations rose 7.3% in 2007, and European truck sales surged 23% in January from a year earlier, the European Automobile Manufacturers Association reported (3-3, p. 4).
Meanwhile, U.S. Class 8 truck sales were down 34.5% through April, after plunging 46.8% last year, according to WardsAuto.com.
“One factor is that three of the four main truck manufacturers are either European-owned or have a strong position in Europe,” Bruce Plaxton, president of the global truck consulting firm BGP Marketing Solutions Ltd., told TT.
“With European and global truck sales strong last year and this year, why should they blink on prices in North America?” Plaxton said.
Transportation analyst Peter Nesvold said truck producers do not believe that big incentives will move more vehicles.
“Unlike an automobile, a truck is bought for a very specific purpose, and right now, with a weak economy and shaky freight volume, that purpose just isn’t there,” Nesvold told TT.
Steve Duley, vice president of purchasing for truckload carrier Schneider National Inc., said the company focuses on fuel efficiency when buying new vehicles.
“We don’t buy the lowest-priced trucks because we generally keep them 800,000 to 1 million miles,” Duley told TT. “Still, the best incentive manufacturers could give is to lower the price of the truck.”
Neither Mack Trucks nor Volvo Trucks North America offers any incentives this year, spokesmen told TT.
Although some truck makers offer select incentives to spark sales, they are nothing like the 0% interest or 10% rebates automakers have offered.
For example, Daimler Trucks North America in May offered a discounted 4.5% interest rate for its Cascadia model but not on other Freightliners.
Western Star, another Daimler company, is offering a $4,000 rebate on trucks that have been on dealer lots for at least one year, Gary Gibson, chairman of the American Truck Dealers and president of Tri-State Sterling Trucks Inc., Sharonville, Ohio, told TT.
Kelly Como, a Sterling Trucks spokeswoman, said the company offers “creative” incentives on a case-by-case basis.
“Sometimes we offer fuel purchases, sometimes the down payment, sometimes instead of the normal three-to-four year payment period, we stretch it to four to six years because owners tend to keep our trucks so long,” Como said.
Navistar Financial gave its dealers the right to offer a special 6.5% rate from February through April and on May 8, Navistar said it would offer discount interest rates on its International ProStar, TranStar and 9900 models, as well as on its severe duty WorkStar and PayStar.
The special rates range from 3.9% for 24 months to 5.9% for 48 months.
Trish Reed, vice president of Navistar Financial, told TT that qualified owner-operators and small companies were receiving interest rates between 7.5% and 8.5% at the beginning of 2008.
Navistar also provides a $1,000 rebate on ProStars ordered with specifications to maximize aerodynamics and fuel economy.
Kenworth Truck Co. said it offers rebate programs that include $1,500 for members of the Owner-Operator Independent Drivers Association who buy Kenworth sleepers.
Peterbilt Motors Co. said it offers a prepaid $1,000 fuel card for a limited time with trucks purchased from existing dealer stocks and rebates of up to $2,000 for OOIDA members on some trucks.
Industry observers said truck manufacturers, facing a weak freight economy and rising fuel prices, have cut U.S. production to reduce costs.
“Over the past 18 months, the [original equipment manufacturers] have been reducing production, cutting shifts and laying off people to cut their supply to the low demand,” Chris Brady, president of Commercial Motor Vehicle Consulting, told TT. “That’s the primary reason you’re not seeing fire sales in heavy trucks.”
Brady also said that, unlike the 2000-01 downturn in new truck sales, when a large glut of used trucks also greatly weakened the market, dealers now have much smaller stocks of used trucks.
“A very large market for used Class 8 North American trucks exists now in Eastern Europe and Russia, as well as in South America, which didn’t exist eight years ago before the economies of those regions took off,” Brady said.
This story appears in the June 9 print edition of Transport Topics.
Heavy-truck manufacturers have refrained from cutting prices or offering large rebates and other significant incentives, partly because their sales overseas are strong and help offset a second straight year of falling domestic sales, analysts and dealers said.
“Most of the manufacturers are doing very well over in Europe, and they can just slug through the year here,” said George Grask, president of Cedar Rapids Truck Center, a Peterbilt dealership in Cedar Rapids, Iowa.
“I don’t think there’s anything they can offer in incentives that will get people to buy anyway, as long as the cost of fuel is so high and truckers can’t make it up in fuel charges or higher bills,” Grask told Transport Topics.
In Europe last year, new heavy-truck registrations rose 7.3% in 2007, and European truck sales surged 23% in January from a year earlier, the European Automobile Manufacturers Association reported (3-3, p. 4).
Meanwhile, U.S. Class 8 truck sales were down 34.5% through April, after plunging 46.8% last year, according to WardsAuto.com.
“One factor is that three of the four main truck manufacturers are either European-owned or have a strong position in Europe,” Bruce Plaxton, president of the global truck consulting firm BGP Marketing Solutions Ltd., told TT.
“With European and global truck sales strong last year and this year, why should they blink on prices in North America?” Plaxton said.
Transportation analyst Peter Nesvold said truck producers do not believe that big incentives will move more vehicles.
“Unlike an automobile, a truck is bought for a very specific purpose, and right now, with a weak economy and shaky freight volume, that purpose just isn’t there,” Nesvold told TT.
Steve Duley, vice president of purchasing for truckload carrier Schneider National Inc., said the company focuses on fuel efficiency when buying new vehicles.
“We don’t buy the lowest-priced trucks because we generally keep them 800,000 to 1 million miles,” Duley told TT. “Still, the best incentive manufacturers could give is to lower the price of the truck.”
Neither Mack Trucks nor Volvo Trucks North America offers any incentives this year, spokesmen told TT.
Although some truck makers offer select incentives to spark sales, they are nothing like the 0% interest or 10% rebates automakers have offered.
For example, Daimler Trucks North America in May offered a discounted 4.5% interest rate for its Cascadia model but not on other Freightliners.
Western Star, another Daimler company, is offering a $4,000 rebate on trucks that have been on dealer lots for at least one year, Gary Gibson, chairman of the American Truck Dealers and president of Tri-State Sterling Trucks Inc., Sharonville, Ohio, told TT.
Kelly Como, a Sterling Trucks spokeswoman, said the company offers “creative” incentives on a case-by-case basis.
“Sometimes we offer fuel purchases, sometimes the down payment, sometimes instead of the normal three-to-four year payment period, we stretch it to four to six years because owners tend to keep our trucks so long,” Como said.
Navistar Financial gave its dealers the right to offer a special 6.5% rate from February through April and on May 8, Navistar said it would offer discount interest rates on its International ProStar, TranStar and 9900 models, as well as on its severe duty WorkStar and PayStar.
The special rates range from 3.9% for 24 months to 5.9% for 48 months.
Trish Reed, vice president of Navistar Financial, told TT that qualified owner-operators and small companies were receiving interest rates between 7.5% and 8.5% at the beginning of 2008.
Navistar also provides a $1,000 rebate on ProStars ordered with specifications to maximize aerodynamics and fuel economy.
Kenworth Truck Co. said it offers rebate programs that include $1,500 for members of the Owner-Operator Independent Drivers Association who buy Kenworth sleepers.
Peterbilt Motors Co. said it offers a prepaid $1,000 fuel card for a limited time with trucks purchased from existing dealer stocks and rebates of up to $2,000 for OOIDA members on some trucks.
Industry observers said truck manufacturers, facing a weak freight economy and rising fuel prices, have cut U.S. production to reduce costs.
“Over the past 18 months, the [original equipment manufacturers] have been reducing production, cutting shifts and laying off people to cut their supply to the low demand,” Chris Brady, president of Commercial Motor Vehicle Consulting, told TT. “That’s the primary reason you’re not seeing fire sales in heavy trucks.”
Brady also said that, unlike the 2000-01 downturn in new truck sales, when a large glut of used trucks also greatly weakened the market, dealers now have much smaller stocks of used trucks.
“A very large market for used Class 8 North American trucks exists now in Eastern Europe and Russia, as well as in South America, which didn’t exist eight years ago before the economies of those regions took off,” Brady said.
