Vehicle Registrations Fall 40% in 1Q From Year Earlier

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

Registrations of all new trucks in the United States totaled 79,800 in the first quarter — a drop of 40% from a year earlier — according to the latest survey by R.L. Polk & Co. The quarter included the worst-ever single month for heavy-duty registrations on record, the company said.

The May 22 report said the combined U.S. Class 8 fleet grew by only 1.2% for the 12 months ended March 31. A transportation stock analyst said the national fleet probably should be shrinking in size, but that there is no acceptable mechanism available for purging older vehicles.

“People are running their older trucks longer,” said Gary Meteer Sr., the Polk account director for commercial vehicles. “There are no contracts for new business. They’re only buying new vehicles when they have to replace old ones.”

Based on the first-quarter results, Polk projects total new Class 8 registrations will end up just below 100,000 trucks for the year — a level last seen in 1991, when the nation was emerging from a recession.

The Southfield, Mich., research firm found that Class 8 registrations plummeted 36.2% to 20,847 vehicles for the quarter, adding that March was the worst month for Class 8 registrations since Polk began tracking truck data in 1985. The March figure of 5,704 was well below the previous low in February 1986 of 7,500 units.

Class 8 vehicles in operation rose to 3.63 million trucks, up from 3.59 million at the end of the first quarter last year.

In the fourth quarter, the total fleet grew at a 1.7% pace (click here for previous story).

“It’s a stretch to say that anyone’s expanding now. Most customers are standing pat, and other fleets are contracting,” said Thomas Brown, chairman of the NationaLease group of full-service leasing firms. “Overall, demand is contracting.”

Brown, who also is the president of Brown NationaLease in Des Moines, Iowa, said his company “is not buying very many new trucks.” As for used equipment, he said, “the used market is in the tank. It’s very poor.

“Some companies are forced to sell at greatly reduced pricing, while others park the equipment against the fence and wait for better times,” Brown said.

Leasing companies often handle arrangements for manufacturers, wholesalers and retailers that wish to maintain private truck fleets. Brown said the poor economy has unearthed one new source of business, though, in that one-time buyers who have had difficulty in securing financing for purchases are now looking at leasing to obtain vehicles instead.

“Banks have often not liked rolling stock, and it’s especially so now with the current credit markets. So, we are attracting some new business,” Brown said.

Polk’s Meteer said there were about 45,000 used trucks registered to new U.S. owners during the quarter, down from 53,500 in the 2008 first quarter.

The exit mechanism for older U.S. trucks is clogged, said analyst John Larkin, who follows transportation stocks for Stifel, Nicolaus & Co., Baltimore. After attending a seminar on trucking equipment, organized by America’s Commercial Transportation Research Co., Columbus, Ind., Larkin told his firm’s clients on May 26:

“Excess trucks are not being efficiently flushed from the market, as lenders, lessors and the finance arms of truck manufacturers are generally willing to recast payment terms for troubled companies. Presently, the last thing [they] want to do is repossess equipment that has lost 25% of its value over the last year,” Larkin said.

“The trucking industry is plagued with 150,000 excess trucks, relative to current demand levels, which are down roughly 20%, year-over-year,” Larkin said in his summation of the ACT conference.

Not to add bloating to the current excess, Meteer said Polk is predicting only 98,000 new U.S. Class 8 vehicles will be registered this year.

Last year, 136,300 new Class 8s were registered, and that was considered very poor when compared with the high levels from 2004 to 2006.

The record was 273,000 new Class 8s in 2006. The low since Polk has been recording truck data was 108,500 in 1991, Meteer said.

In the medium-duty sector, the Polk report predicts registrations of Class 3-7 vehicles also will decline.

Class 5 is expected to do the least poorly, down 17.4% to 30,000 registrations from 36,300 in 2008. Class 4 is projected to do the worst, down 29.8% to 40,000 units from 57,000 last year.

In other details from the quarterly registration data, Polk found that Navistar Inc. led in engine choice for Classes 3-5, while Cummins Inc. took first place in Classes 6-8.

While all engine makers lost volume, Caterpillar Inc. lost the most, 65.9%, comparing the first quarter this year with that of 2008. Caterpillar said in 2008 that this would be its final year in the North American diesel truck engine market.

In the Canadian market, 524,000 Class 8 vehicles were in operation at the end of the quarter, up from 520,000 registrations at the end of 2008.