Truck Orders Jump 46% in October; Dealers Say Fleets Expanding

This story appears in the Nov. 7 print edition of Transport Topics.

Class 8 truck orders in North America jumped 46% in October over the corresponding month of last year, leading several major truck dealers to conclude both that the industry has begun a multi-year recovery and that some fleets have quietly begun to expand.

Market analysts were more cautious but agreed that truckers were gaining more confidence every month and were more willing to buy new trucks and related equipment.

Customers ordered 27,700 new Class 8 trucks in the United States, Mexico and Canada last month, up from 18,891 in October 2010, ACT Research Co., Columbus, Ind., reported Nov. 2.

FTR Associates, Nashville, Ind., published similar figures the same day.

In the first 10 months of 2011, fleets ordered 254,363 Class 8 vehicles, a 98.7% increase, nearly double the cumulative total of 127,985 last year, ACT said.

On a month-to-month basis, the orders showed improvement. The October total was 17.2% higher than the September orders total of 23,627, which was an 11% gain from August (10-10, p. 1).

“We have seen order intake reach over 20,000 units most months since the fall of 2010, [and] we believe that we are in the beginning of a multi-year improving truck market,” W.M. “Rusty” Rush, CEO of Rush Enterprises Inc., told Transport Topics.

Rush Enterprises, New Braunfels, Texas, is the largest Peterbilt truck dealership in the United States and now sells International trucks at some locations.

“Sales levels of both Class 8 and medium-duty trucks have been below historical replacement levels for the last five years,” Rush said as one reason for his projections of growth. “We continue to expect that U.S. retail sales will remain on pace to reach approximately 165,000 to 170,000 units by year-end in 2011.”

“Year-over-year, we’re up 56% to 57% going into next year, and we’re seeing a fairly strong first quarter already,” Erick Miner, president of Central Illinois Trucks Inc., Normal, Ill., told TT.

CIT Group operates seven locations in Illinois that sell Volvo and Kenworth heavy-duty trucks.

“There are segments that are still hurting, such as home construction, but overall, our customers say that they’re making money, and they seem to feel that this is going to continue,” Miner said. “There may be gloom and doom in the overall economy at times, but there’s no gloom and doom among truckers now.”

He said that midsize fleets began last spring to add trucks to increase their freight capacity, a trend that has continued.

Kyle Treadway, chairman of American Truck Dealers, was similarly confident of a growing, though not booming, truck sales market.

“ACT numbers are consistent with our experience,” Treadway told TT. He also is president of Kenworth Sales Co., West Valley City, Utah, which operates about 20 branches in Mountain and Western states.

He listed six reasons why fleets were deciding to buy now, including their ability to take advantage of the accelerated depreciation rate for equipment purchases, a tax break that is scheduled to end Dec. 31.

“The improved freight rate environment is granting breathing room to other fleets who have postponed their buying cycle,” Treadway said. “Heightened used truck values and reduced availability are pushing other buyers into a new truck, [and] some segments are prospering and expanding — energy, mining, oil and gas exploration,” he added.

Treadway said that the improved fuel economy of 2010 technology trucks and “anticipated” 2012 price hikes also are moving customers to buy now.

“Late fall is usually the start of the traditional ordering system, but the October numbers are coming in at the high end of our estimate,” Jon Starks, FTR Associates’ director of transportation analysis, told TT. “We have seen that some smaller fleets are starting to look at adding to the number of their trucks,” he added.

However, Steve Tam, ACT Research’s vice president for the commercial vehicle sector, told TT, “The underlying story continues to be replacement. . . . The active fleet is older than it has ever been. Truckers really have to replace that fleet.”

ACT Research said in its report that October orders were “stronger than expected.”

Tam said that truckers “are not just looking at the month-over-month changes in freight volumes to judge where the economy is going.”

“They will look at it at a full-year basis, and there, truckers have mostly seen higher volumes,” he said. “Freight has improved to higher than where we were last year, so truckers have a positive outlook on their short and midterm expectations.”

Tam, like Starks, said that some truckers in conversations said they “want to grow their fleet.”

FTR Associates also was sticking to its projections of 250,000 Class 8 sales in North America this year and 292,000 next year, Tam said.

“At this level, there will be incremental increases in some fleets,” he said, “but it will take sustained economic growth to convince most fleets to buy trucks above replacement rates.”