Heavy Truck Production Off 22%

Fleet managers are reluctant to 'pre-buy' in 2009 more fuel efficient vehicles to meet 2010 emissions standards

According to a Longbow Research survey of North American trucking fleet managers production of heavy trucks is likely to be off by as much as 22% in 2009 to an estimated 160,000 units, compared to 205,000 in 2008 and 212,000 in 2007 and 377,000 units sold in 2006.

Despite an fleet age of 6.2 year and turnover typically occuring at four to five years, fleet managers are reluctant to 'pre-buy' in 2009 more fuel efficient vehicles to meet 2010 emissions standards. "Economic issues more than offset the impact of new, tighter emissions in 2010," Eli Lustgarten said.

The survey found about 64% of fleet managers do not plan to buy trucks in 2009, with an uptick to 17% from 10% in October 2008 of those unsure about purchases this year. "Most of our contacts (94%) still intending to buy, plan to purchase an equal or lesser number of trucks compared with last year. There was an uptick in those expecting to buy less (47% vs. 40%), due in part to firms integrating the partial fleets of smaller firms they have acquired."

The responses to the January survey demonstrated an increasingly difficult environment for truckers. The report noted that although diesel prices have dropped from their record-highs and the competition has shrunk as many smaller carriers have gone out of business, companies are struggling amidst lower freight tonnage and macro weakness.

Findings include:

  • Demand in January grew substantially weaker, with a 13% increase in those reporting softer markets to 67% from 54% and fewer reports of both flat and increased demand. Specifically, those exposed to the construction and automotive markets are down as there is lower demand for construction materials and auto parts, driven by 20-30% production cuts.
  • Freight rates declined significantly vs. this point in 2008, and is even more dramatic of a decline when fuel surcharges are removed from the equation. ~91% (vs. 71%) of respondents said their base freight rates (excluding fuel) are flat-to-down, with only 9% reporting higher.
  • About 64% (vs. 63%) do not plan to buy trucks in 2009, with an uptick to 17% from 10% of those unsure about purchases this year. Most of the survey respondents (94% vs. 88%) still intending to buy, plan to purchase an equal or lesser number of trucks compared with last year. There was an uptick in those expecting to buy less (47% vs. 40%), due in part to firms integrating the partial fleets of smaller firms they have acquired.
  • Trucking firms continue to take a negative view toward 2009, due to weak freight volumes and a highly competitive pricing environment. In the current survey, 90% expect flat-to-declining conditions vs. 87% in October, reflecting weakening economic conditions. Trucking firms continue to take a negative view toward 2009, due to weak volumes.
  • 1H09 production appears 25-28% below the same period in 2008. Heavy-truck production in 2009 may be down 22%+ to ~160,000 units (150,000 to 175,000 range) compared with 205,000 in 2008 and 212,000 in 2007 vs. the 377,000 units sold in 2006, driven by a pre-buy in front of 2007 emissions.
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