A panel of the trucking industry's leading economic analysts offered slightly different numbers on a decline in truck sales due to the new diesel engine emissions regulations taking effect in 2007 but all agreed that a fleet “pre-buy” this year will boost North American retail sales of Class 8 trucks and will be followed by a sharp drop-off in 2007.
The consensus forecast for the four economists speaking at the Heavy Duty Dialog sponsored by the Heavy Duty Manufacturers Assn. was just under 340,000 units this year, and falling to 223,000 units in 2007.
Looking at the truckload segment of the industry, Kenny Vieth, partner and senior analyst for ACT Research, said, “There's no downside to pre-buying for carriers in 2006.” With freight rates high and capacity tight in that segment, those fleets have both reason and financial ability to purchase trucks ahead of price increases and fuel economy decreases expected in 2007.
Vieth forecast North American retail sales of Class 8 trucks at 230,000 units in 2007, with actual production considerably lower at just 207,000 trucks for the year.
Martin Labbe, CEO of Martin Labbe Assoc., said his retail sales forecast was a bit lower than that, but that he expected the next few years to be especially good for less-than-truckload carriers. Increasing traffic congestion and stricter enforcement of the new hours-of-service regulations will make “time more important than miles run,” he said, putting truckload carriers with per-mile freight rates at a disadvantage.
Labbe predicts that between 2005 and 2016, LTL revenues will grow annually by 6.4%, compared to an annual rate of 5.3% for truckload operations.
Pointing out that after two years of solid rate gains, “truckload carriers have the money to support a pre-buy,” Chris Brady, president of Commercial Motor Vehicle Consulting, said he expects U.S. retail sales for Class 8 trucks to fall from 273,600 in 2006 to 221,300 in 2007, largely on the basis of TL carriers pulling ahead truck purchases from 2007 into 2006.
However, if freight demand remains strong throughout 2006, the pre-buy would be lower because truck manufacturers would not have the additional production capacity to support the pull-ahead purchases, he added.
While others spoke of emissions-related price increases between $7,500 and $10,000 for 2007 tractors, Brady believes “competitive pressures [among truck manufacturers] will reduce those increases to the range of $4,500 to $7,500.”
Stu MacKay, CEO of MacKay and Co., said he believes a softening economy will hold U.S. retail sales down to 222,000 Class 8 trucks in 2007. And “if something negative happens with the ‘07 engines,” MacKay said that number could go as low as 140,000 units.
Looking at the vocational markets for heavy trucks, MacKay predicted little pre-buy related to 2007 emissions. While absolute purchase numbers for fleets in construction, refuse, government, service and utility operations should remain steady, he pointed out that they will make up a relatively larger percentage of the 2007 market if predictions hold for lower overall sales.