Truck sales in 2004: full speed ahead

Every year it seems you can sum up the mood of the trucking industry in one simple phrase. In 2003, the outlook was “cautiously optimistic,” which replaced, “Pre-buy? What pre-buy?” from 2002. And that tag overtook the 2001 motto, “This could get ugly.” The 2004 consensus indicates a strong recovery. In other words, “Full speed ahead.”

Summer’s here and already order books are more than half full. Class-8 truck sales in North America have increased for six straight months. Most OEMs have added production workers, including at the Sterling plant in St. Thomas Ont., and International’s Chatham, Ont., facility. Heavy truck production in North America is expected to hit 240,000 units this year, swelling to 270,000 in 2005, and holding strong the year after that.

“We think there’s reason to be optimistic about not just 2004, but 2005 as well,” Paul Vikner, president of Mack Trucks told Today’s Trucking in a recent interview. He cites low interest rates, a shortage of low-mileage used equipment, a robust economy, and rising freight tonnage as positive signs.

But the catalyst may be the aging North American truck population. “It’s at a level we haven’t seen since the early Nineties,” says Jordan Feiger, vice-president and general manager of International Truck and Engine’s Heavy Vehicle Center. “Older trucks get very expensive, and the demand to replace those trucks is now very high.”

Prior to October 2002, truck buyers timed purchases to avoid engines designed to meet tougher pollution standards in North America. Unsure about how new emission controls would affect fuel economy, maintenance, and resale values, many fleet owners bought used or sat on existing equipment. “A lot of companies that would have preferred to begin that replacement cycle last year, I think it’s fair to say, they have put it off [until now],” says Feiger.

Cummins Canada general manager Alasdair McNellan agrees. Carriers have more confidence in the current diesels, now almost two years in production. “Those who didn’t go through the pre-buy are seeing their maintenance costs starting to go through the roof,” he says. “And really, the fear mongering about the product back then turns out now to be false. People see that.”

Most OEMs brush off suggestions that the spike in sales-and several recent major orders by a handful of large U.S. carriers-is evidence of a run-up on orders as the industry braces for even tougher engine emission regs in 2007.

“Is what’s going on now a pre-buy? Absolutely not. Are people aware of 2007 coming down the road? Are they being more (pro-active) in managing their trade cycles? Of course they are,” Mark Lampert, senior vice-president of sales and marketing for Freightliner Trucks said in an interview. “It was like the world woke up January 2002 and realized October was coming. We’re three years in front of the next deadline right now, so the awareness is there this time.”

Lampert believes that at the end of the day people buy trucks for one reason: demand. Sales may slow in 2007, but they won’t hit a wall unless the economy does. “If we get a weak overall economy, combined with the government-induced [engine emission] situation, then we have a big challenge on our hands,” he says.

Until then, the orders continue. Indeed, sales may be constrained due to a shortage of drivers. “Most carriers could add 100 more trucks today, but for what?” Pat Quinn, co-founder of Chattanooga, Tenn., truckload giant U.S. Xpress asked trucking executives at the Truck World trade show in Toronto in April. “To park them beside the 100 they already have sitting in the yard?”

Lampert agrees that a driver shortage is one factor still “keeping a lid on this thing.” Another, he says, is a more savvy fleet owner who won’t blindly add capacity.

That sort of individual, adds Vikner, makes this sales surge different from the one between 1998 and 2000. “People are planning and investing around the [economic cycles] and aren’t putting their business at risk,” he says. “Before, one guy drove over the cliff and everyone followed. Now, whether it’s an OEM or fleet, we’re much more careful about managing for the future.”