Sluggish ’07 Sales Push Prices Down
By Frederick Kiel, Staff Reporter
This story appears in the July 2 print edition of Transport Topics.
Despite discounts and incentives on new trucks that have narrowed the price gap between them and previous versions, dealers say that few of the models with 2007 engines — which incorporate new pollution controls in them — are selling.
Rather, dealers report, they have done well this year in economically strong regions of the nation by stockpiling trucks made last year and by selling trucks made this year with leftover ’06 engines.
Trucking fleets accelerated buying schedules last year to avoid buying engines made to meet ’07 federal emissions rules, partly because the new-model trucks were expected to cost $7,000 to $12,000 more than last year’s models.
But that price gap quickly shrank as sales have plunged 33% so far this year. “Manufacturers have had to discount,” Gary Gibson, vice chairman of American Truck Dealers, told Transport Topics. “I’d say that the actual gap is $3,000 to $4,000 this year over last year.”
“The retail price of 2008 Class 8 Freightliners is $5,000 more than last year, not the $10,000 to $12,000 the OEMs said,” said Matthew McConnell, chief executive officer of Freightliner of Southern Connecticut.
“Thank goodness, we stocked up heavily on 2006 Class 8 trucks, because that’s saved the year for us,” Paul Schlagenhauf, president of Badger Truck Center Inc. of Milwaukee, told TT. Badger sells Class 8 Sterling Trucks and an array of medium-duty brands.
Schlagenhauf said he has not bought a single 2007 Class 8 to put in his showroom.
“Dealers are doing well because they prepared for the downturn and are living off their parts and service divisions and selling trucks with ’06 engines,” George Grask, chairman of American Truck Dealers, told TT.
“Where dealers estimated the market for ’06 trucks, they’ve done well, but a minority of dealers overbought for the size or strength of their markets,” he said.
Grask said buyers would continue to favor buying trucks with ’06 engines until they sell out.
“Dealers had 56,000 Class 8s on their lots, as of last Dec. 31, and at the end of May, they still had 53,000-plus, and I suspect that the overwhelming majority of those have ’06 engines,” he said.
Some dealers have not sold any 2007 Class 8s.
“We have not sold any Class 8s with ’07 engines yet,” Gibson, who is also president of Tri-State Sterling Truck Inc. of Cincinnati, told TT. “Through May, we’ve sold 61 Class 8 trucks with ’06-emission engines.”
“Like some areas of the country, we got hit with a double dose of bad news — fleet resistance to the new engine and unexpectedly weak freight demand,” McConnell told TT. His company, in Branford, Conn., is laying off 10% of its employees because of the sales drop.
“We had to make a lot of rapid decisions because we bought the company Oct. 1, and one of those was to buy 75 ’06 Class 8s, which turned out to be too many,” McConnell said.
Engine makers legally could make only power plants that met the stricter federal emission mandates after Jan. 1, which truck manufacturers said would add $7,000 to $14,000 to a truck’s cost.
Engine makers made an extra 50,000 of the ’06 engines that could legally be put into 2007 trucks, and dealers said they bought those leftover ’07 models because of customer demand.
Many dealers who have sold trucks with ’07 engines said their clients were municipalities and vocational haulers, not over-the-road fleets.
“Unlike the rest of the country, my Class 8 clients delayed buying trucks last year so that they could get the ’07 emission-compliant engines,” Gerry Dion, chief executive officer of Dion International Trucks LLC, San Diego, told TT.
“We’ve sold 40 to 50 Class 8s with the new engines, all to municipal governments [and] sanitation and construction companies who used them to lower their overall emission output.”
Kyle Treadway, president of a Kenworth dealership based in Salt Lake City, told TT that a combination of a strong local economy, stockpiled ’06 trucks and factory incentives has helped him move new trucks.
“Customers still prefer the ’06 trucks, and we still have enough to meet demand,” Treadway said. “We’re not able to sell them at a premium, though.”
Treadway said that he has sold about 100 of the 2007 trucks because of the Kenworth price cuts and parent company Paccar’s incentive in warranty and financing. Kenworth has offered a $2,000 rebate, and Paccar Financing has offered a free two-year warranty on the truck if Paccar finances it.
Several dealers reported increased overall sales, such as Barloworld Truck Center Inc., a Freightliner dealer based in Memphis, Tenn., whose sales are up 30% this year, and West Texas Peterbilt Inc. of Lubbock, which said sales were 18% over last year, all with ’06 engines.
Not all dealers could offer new-truck discounts.
“Volvo Trucks has offered no incentives, and the gap in price over ’06 trucks is between $7,000 and $14,000,” Ronald Remp, president of Wheeling Truck Center, Wheeling, W.Va., told TT.
Volvo Trucks North America said it has delivered all of its Class 8 trucks with pre-’07 emission standards to dealer inventory or directly to end users.
This story appears in the July 2 print edition of Transport Topics.
Despite discounts and incentives on new trucks that have narrowed the price gap between them and previous versions, dealers say that few of the models with 2007 engines — which incorporate new pollution controls in them — are selling.
Rather, dealers report, they have done well this year in economically strong regions of the nation by stockpiling trucks made last year and by selling trucks made this year with leftover ’06 engines.
Trucking fleets accelerated buying schedules last year to avoid buying engines made to meet ’07 federal emissions rules, partly because the new-model trucks were expected to cost $7,000 to $12,000 more than last year’s models.
But that price gap quickly shrank as sales have plunged 33% so far this year. “Manufacturers have had to discount,” Gary Gibson, vice chairman of American Truck Dealers, told Transport Topics. “I’d say that the actual gap is $3,000 to $4,000 this year over last year.”
“The retail price of 2008 Class 8 Freightliners is $5,000 more than last year, not the $10,000 to $12,000 the OEMs said,” said Matthew McConnell, chief executive officer of Freightliner of Southern Connecticut.
“Thank goodness, we stocked up heavily on 2006 Class 8 trucks, because that’s saved the year for us,” Paul Schlagenhauf, president of Badger Truck Center Inc. of Milwaukee, told TT. Badger sells Class 8 Sterling Trucks and an array of medium-duty brands.
Schlagenhauf said he has not bought a single 2007 Class 8 to put in his showroom.
“Dealers are doing well because they prepared for the downturn and are living off their parts and service divisions and selling trucks with ’06 engines,” George Grask, chairman of American Truck Dealers, told TT.
“Where dealers estimated the market for ’06 trucks, they’ve done well, but a minority of dealers overbought for the size or strength of their markets,” he said.
Grask said buyers would continue to favor buying trucks with ’06 engines until they sell out.
“Dealers had 56,000 Class 8s on their lots, as of last Dec. 31, and at the end of May, they still had 53,000-plus, and I suspect that the overwhelming majority of those have ’06 engines,” he said.
Some dealers have not sold any 2007 Class 8s.
“We have not sold any Class 8s with ’07 engines yet,” Gibson, who is also president of Tri-State Sterling Truck Inc. of Cincinnati, told TT. “Through May, we’ve sold 61 Class 8 trucks with ’06-emission engines.”
“Like some areas of the country, we got hit with a double dose of bad news — fleet resistance to the new engine and unexpectedly weak freight demand,” McConnell told TT. His company, in Branford, Conn., is laying off 10% of its employees because of the sales drop.
“We had to make a lot of rapid decisions because we bought the company Oct. 1, and one of those was to buy 75 ’06 Class 8s, which turned out to be too many,” McConnell said.
Engine makers legally could make only power plants that met the stricter federal emission mandates after Jan. 1, which truck manufacturers said would add $7,000 to $14,000 to a truck’s cost.
Engine makers made an extra 50,000 of the ’06 engines that could legally be put into 2007 trucks, and dealers said they bought those leftover ’07 models because of customer demand.
Many dealers who have sold trucks with ’07 engines said their clients were municipalities and vocational haulers, not over-the-road fleets.
“Unlike the rest of the country, my Class 8 clients delayed buying trucks last year so that they could get the ’07 emission-compliant engines,” Gerry Dion, chief executive officer of Dion International Trucks LLC, San Diego, told TT.
“We’ve sold 40 to 50 Class 8s with the new engines, all to municipal governments [and] sanitation and construction companies who used them to lower their overall emission output.”
Kyle Treadway, president of a Kenworth dealership based in Salt Lake City, told TT that a combination of a strong local economy, stockpiled ’06 trucks and factory incentives has helped him move new trucks.
“Customers still prefer the ’06 trucks, and we still have enough to meet demand,” Treadway said. “We’re not able to sell them at a premium, though.”
Treadway said that he has sold about 100 of the 2007 trucks because of the Kenworth price cuts and parent company Paccar’s incentive in warranty and financing. Kenworth has offered a $2,000 rebate, and Paccar Financing has offered a free two-year warranty on the truck if Paccar finances it.
Several dealers reported increased overall sales, such as Barloworld Truck Center Inc., a Freightliner dealer based in Memphis, Tenn., whose sales are up 30% this year, and West Texas Peterbilt Inc. of Lubbock, which said sales were 18% over last year, all with ’06 engines.
Not all dealers could offer new-truck discounts.
“Volvo Trucks has offered no incentives, and the gap in price over ’06 trucks is between $7,000 and $14,000,” Ronald Remp, president of Wheeling Truck Center, Wheeling, W.Va., told TT.
Volvo Trucks North America said it has delivered all of its Class 8 trucks with pre-’07 emission standards to dealer inventory or directly to end users.
