Used Truck Prices Buoyed by Rising Foreign Demand
By Dan Leone, Staff Reporter
This story appears in the April 28 print edition of Transport Topics.
An unprecedented wave of exports, mostly to Russia, has cushioned a downturn in the Class 8 used-truck business, which has been hurt by high fuel prices and a weak freight market, according to industry executives.
The overseas demand has helped firm up prices for used units, the officials said; historically, economic downturns have sent used heavy-duty truck prices spiraling downward.
While domestic demand for used vehicles has nose-dived because of “a decline in economic activity, high fuel prices and liquidity or credit” issues, Carl Heikel, president of used-truck dealer Arrow Truck Sales in Kansas City, Mo., said, “American trucks are very much in demand within Russia.”
Heikel said robust economic growth in Russia is providing an abundance of freight for a domestic transportation industry that serves an area almost twice the size of the continental United States.
Stock analyst Thom Albrecht recently estimated that Russian buyers have taken 2,000 to 2,500 used Class 8 trucks a month out of the U.S. market over the past year, as freight levels have declined here.
The most recent data from market research firm R.L. Polk & Co. show U.S. Class 8 used-truck sales in the fourth quarter of 2007 fell modestly to 46,317 units from 49,800 in 2006’s fourth quarter. Meanwhile, U.S. sales of new Class 8 trucks have plummeted for 15 straight months, and were down 35.2% in March from year-ago levels.
The decline in used sales isn’t anywhere as severe as it might have been without the foreign used-truck sales and is only a fraction of the last sharp downturn in 2001.
Overseas demand, fueled in part by the slumping U.S. dollar, has “kept our numbers up through this year and last year, with the number of trucks that were being exported to Russia and a lot of other countries,” said H.E. “Eddie” Walker, president of the Used Truck Association in Stockbridge, Ga. Walker is president of Best Used Trucks, a Fort Worth, Texas, dealership.
“The weak U.S. dollar has helped, but Russia’s tremendous infrastructure needs and strong global demand for oil have fueled the demand for good, used U.S. equipment,” said Albrecht, who follows trucking stocks for Stephens Inc.
In addition, Arrow’s Heikel and UTA’s Walker both said used-truck exports to Latin America, the Middle East and Africa have picked up in recent years.
Truckload carrier Werner Enterprises said used-truck pricing has come under some pressure, but the current wave of exports has helped keep pricing concessions mild.
Werner, which supplements its truckload services with a used-truck division called Fleet Truck Sales, said earlier this month that it received a bit less cash per truck for the units it sold in the first quarter.
John Steele, Werner’s chief financial officer, said, “The worst time for used [trucks] was about six years ago [during the last freight downturn] when prices were off 30%.”
Now, “the sale of used trucks overseas is helping provide support,” Steele said last month at JPMorgan’s annual Aviation and Transportation Conference. He said used-truck “pricing is off 3% to . . . 7%, depending on make, model and mileage.”
Stephen Russell, chief executive officer of truckload carrier Celadon Group, said that, because of the steady stream of used-truck exports, the current downturn is the “first freight recession where used-truck prices haven’t gone down.”
Russell also said the foreign sales are helping tighten U.S. freight-hauling capacity, which is “shrinking drastically.”
Werner, Omaha, Neb., and Celadon, Indianapolis, rank No. 14 and No. 56 respectively on the Transport Topics 100 list of the largest for-hire carriers.
Exported trucks generally are sold at the same price as vehicles that remain in the U.S. market, Arrow’s Heikel said.
In part, that is because used equipment tends to pass through an intermediary — usually the U.S. office of a foreign buyer purchasing trucks in wholesale quantities — before they are shipped to overseas markets.
Meanwhile, at least one European truck manufacturer has pointed to signs that truck demand from Russia and neighboring countries is likely to remain strong for several years.
Swedish truck maker Scania AB, in its annual report, said major industry and infrastructure investments in Russia and Eastern Europe are likely to continue “for many years to come,” driving demand for both used and new trucks.
This new export market also is creating opportunities for U.S. truck and parts makers. ArvinMeritor officials recently announced the company would be opening a branch in Moscow to help service the flood of used U.S. trucks.
This story appears in the April 28 print edition of Transport Topics.
An unprecedented wave of exports, mostly to Russia, has cushioned a downturn in the Class 8 used-truck business, which has been hurt by high fuel prices and a weak freight market, according to industry executives.
The overseas demand has helped firm up prices for used units, the officials said; historically, economic downturns have sent used heavy-duty truck prices spiraling downward.
While domestic demand for used vehicles has nose-dived because of “a decline in economic activity, high fuel prices and liquidity or credit” issues, Carl Heikel, president of used-truck dealer Arrow Truck Sales in Kansas City, Mo., said, “American trucks are very much in demand within Russia.”
Heikel said robust economic growth in Russia is providing an abundance of freight for a domestic transportation industry that serves an area almost twice the size of the continental United States.
Stock analyst Thom Albrecht recently estimated that Russian buyers have taken 2,000 to 2,500 used Class 8 trucks a month out of the U.S. market over the past year, as freight levels have declined here.
The most recent data from market research firm R.L. Polk & Co. show U.S. Class 8 used-truck sales in the fourth quarter of 2007 fell modestly to 46,317 units from 49,800 in 2006’s fourth quarter. Meanwhile, U.S. sales of new Class 8 trucks have plummeted for 15 straight months, and were down 35.2% in March from year-ago levels.
The decline in used sales isn’t anywhere as severe as it might have been without the foreign used-truck sales and is only a fraction of the last sharp downturn in 2001.
Overseas demand, fueled in part by the slumping U.S. dollar, has “kept our numbers up through this year and last year, with the number of trucks that were being exported to Russia and a lot of other countries,” said H.E. “Eddie” Walker, president of the Used Truck Association in Stockbridge, Ga. Walker is president of Best Used Trucks, a Fort Worth, Texas, dealership.
“The weak U.S. dollar has helped, but Russia’s tremendous infrastructure needs and strong global demand for oil have fueled the demand for good, used U.S. equipment,” said Albrecht, who follows trucking stocks for Stephens Inc.
In addition, Arrow’s Heikel and UTA’s Walker both said used-truck exports to Latin America, the Middle East and Africa have picked up in recent years.
Truckload carrier Werner Enterprises said used-truck pricing has come under some pressure, but the current wave of exports has helped keep pricing concessions mild.
Werner, which supplements its truckload services with a used-truck division called Fleet Truck Sales, said earlier this month that it received a bit less cash per truck for the units it sold in the first quarter.
John Steele, Werner’s chief financial officer, said, “The worst time for used [trucks] was about six years ago [during the last freight downturn] when prices were off 30%.”
Now, “the sale of used trucks overseas is helping provide support,” Steele said last month at JPMorgan’s annual Aviation and Transportation Conference. He said used-truck “pricing is off 3% to . . . 7%, depending on make, model and mileage.”
Stephen Russell, chief executive officer of truckload carrier Celadon Group, said that, because of the steady stream of used-truck exports, the current downturn is the “first freight recession where used-truck prices haven’t gone down.”
Russell also said the foreign sales are helping tighten U.S. freight-hauling capacity, which is “shrinking drastically.”
Werner, Omaha, Neb., and Celadon, Indianapolis, rank No. 14 and No. 56 respectively on the Transport Topics 100 list of the largest for-hire carriers.
Exported trucks generally are sold at the same price as vehicles that remain in the U.S. market, Arrow’s Heikel said.
In part, that is because used equipment tends to pass through an intermediary — usually the U.S. office of a foreign buyer purchasing trucks in wholesale quantities — before they are shipped to overseas markets.
Meanwhile, at least one European truck manufacturer has pointed to signs that truck demand from Russia and neighboring countries is likely to remain strong for several years.
Swedish truck maker Scania AB, in its annual report, said major industry and infrastructure investments in Russia and Eastern Europe are likely to continue “for many years to come,” driving demand for both used and new trucks.
This new export market also is creating opportunities for U.S. truck and parts makers. ArvinMeritor officials recently announced the company would be opening a branch in Moscow to help service the flood of used U.S. trucks.
