U.S. Class 8 Fleet Size Contracts; Decline Leaves 3.57 Million in Use

This story appears in the March 1 print edition of Transport Topics.

The lengthy and ongoing truck sales drought caused America’s Class 8 truck fleet to contract 2.1% during the fourth quarter, the first such decline since the third quarter of 2008, according to the year-end report on commercial vehicle registrations by R.L. Polk & Co.

The survey of registration data identified 3.57 million heavy-duty trucks in operation, down from 3.65 million during the final quarter of 2008.

The report by Polk, Southfield, Mich., also described November and December activity for registration of all new trucks in Classes 3-8 as the worst two months in the company’s database, which stretches back to 1985.

“The closing trend for 2009 wasn’t very positive,” said Gary Meteer Sr., Polk’s commercial vehicle account director. “I had expected new registrations would at least be flat, or maybe a slight uptick. But with what we saw in November and December, it got worse as the quarter went on. This was bad across the board.”

For the year, businesses registered 95,600 new Class 8 trucks and 312,400 commercial vehicles in total, Classes 3-8, representing declines from 2008 of 32.6% and 36.8%, respectively.

However, the quarterly report also detected a phenomenon that might show the start of recovery: a substantial increase in the sale of used trucks.

U.S. businesses sold 227,200 heavy-duty tractors to secondary owners during the course of the year, a 17.2% increase in the same sort of registration over the 2008 level. In contrast, the registration of new Class 8 tractors in 2009 fell by 32.6% from the year before.

“There is still business that needs to be conducted and there’s good, clean equipment out there that’s a bargain, compared with new,” Meteer said. “I think the big fleets are still buying new vehicles, but smaller guys are taking the opportunity to freshen their fleets with good used equipment.”

The popularity of used equipment has caused the industry’s normal shape to flip-flop. Last year, the transfer of used trucks made up 63.9% of Classes 3-8 registration transactions. In contrast, new registrations made up a majority of the activity in 2008 at 51.8%.

“We’re starting to see some im-provement in used truck sales,” said Kevin Flaherty, senior vice president of Mack Trucks. “Our day cabs and small sleepers are doing well in resales,” he said in an interview.

Investment bank BMO Capital Markets said it has seen an eagerness among trucking companies to get newer trucks but also a worry about the costs.

“A majority of our trucking clients are noting their concern about the age of their fleets but most are concerned about committing capital expenditures into an uncertain economic environment.

“However, we are starting to reach a point in the age of fleets where reinvestment will be required. As carriers push their trucks beyond the expected life, the incremental maintenance cost to keep the truck running will become exceedingly expensive,” the BMO report said.

The low level of new U.S. truck purchases extends north of the border, too. Polk reported that Canadian companies registered 15,750 new tractors during the year, a 44.9% decrease from 2008.

Among all commercial vehicles, Canadians registered 44,550 new Classes 3-8 trucks, or 39.8% fewer than in 2008.

The registration of new trailers also was at a low point (click here for story).

Last year was the third straight year of declining registrations for new tractors. Activity peaked in 2006, when fleets registered 274,100 new heavy-duty trucks.

In the medium-duty sector, Polk reported that new Classes 4 and 5 registrations are holding up better than Class 6 vehicles, which were described as “a good indicator of the general state of the economy.”

Polk said new Class 6 registrations have been in steady decline since mid-2008, and that last year Class 6 made up the smallest category within the medium-duty sector.

“A Class 6 truck is a one-trick pony, but if you step down to a Class 5 chassis cab you can get more usage in city delivery. They can be more cost-effective,” Meteer said.