Class 8 forecast remains all over the map

LOUISVILLE, KY. Will Class 8 sales stay flat this year compared to 2012? Will they decline? Or could they be poised to take a healthy jump as the U.S. economic recovery gains steadier legs? Based on interviews and statements here at the 2013 Mid America Trucking Show with truck OEMs and suppliers, any of those scenarios remain distinct possibilities for the coming year.

Jeff Jones, VP-North American engine business for Cummins, noted that while demand for Class 8 trucks this year is right now trending lower than 2012 – some 237,000 to 240,000 units versus 250,000 units in 2012 – he believes orders will strengthen in the second half of the year, as opposed to 2012, when they strengthened in the first half.

“We see order backlogs increasing, which means confidence is increasing though it is fragile,” added Rich Freeland, president of Cummins’ engine business. “The next move we anticipate in terms of production is up.”

Not so fast, countered Martin Daum, president and CEO of Daimler Trucks North America (DTNA), who believes that there is a “certain uncertainty” about 2013. His “educated guess” for Class 8 retail sales in the U.S. for 2013 ranges between 175,200 and 214,200 units, though Daum stressed that there is “deferred demand of 200,000 to 250,000” Class 8 units.

Bill Kozek, general manager of Peterbilt Motor Co., took a slightly more positive stance on Class 8 demand, estimating that it will range between 210,000 to 240,000 units in the U.S. and Canada for 2013.

Gary Moore, general manager for Peterbilt’s brother company – Kenworth Truck Co. – echoed Kozek’s outlook with a similar forecast for 210,000 to 240,000 Class 8 units for the U.S. and Canada; driven largely by the need to replace aging vehicles, though with the ongoing U.S. expansion encouraging fleets to add some capacity.

“In 2012, we witnessed a very strong first quarter for Class 8 demand following by a ‘softening’ over the summer,” Moore told Fleet Owner. “However, by the fourth quarter, we saw an uptick in sales and while some of that was due to fleets trying to avoid tax depreciation changes, orders continued to pick up into 2013.”

He added that if the U.S. economy continues to pick up, Class 8 orders could increase in the second half of 2013.

Göran Nyberg, president of North American sales & marketing for Volvo Trucks, agreed that the overall direction for Class 8 sales is more positive than not.

“Economic indicators are good and the average age of Class 8 trucks continues to rise and that will build demand for new trucks” and related components, he noted. “As expected, 2013 is off to a bit of a slow start [in terms of Class 8 sales] but should pick up as the year progresses.”

Kevin Flaherty, president of North American sales & marketing for Mack Trucks, believes replacement demand will remain the primary driver behind a major chunk of Class 8 sales but the jury is still out on whether that will be enough to spark a revival in orders.

“We estimate Class 8 sales to be around 250,000 for 2013, compared to 249,000 in 2012 and 216,000 in 2011,” he said. “Right now, 2013 looks to be in the same range of volume as 2012 due to the need to replace aging equipment; it’s not due to a lot of growth. But smaller truck buyers are coming back into the market because they need to; they need to get out of their aging 2006-2008 model trucks and now mid-sized fleets are coming back into the market for the same reason.”

Jack Allen, president of Navistar’s North America Truck and Parts subsidiary, is less sanguine about the potential for a rebound in Class 8 demand this year.

“We think 2013 retail sales for Class 8 and medium-duty trucks in the U.S. and Canada are going to go down 5% to 10% this year – and that’s mostly on the Class 8 side,” he told Fleet Owner. “That’s just the way we see it from the orders coming in. Now, we certainly believe there is an ‘upside’ to the sales picture, it’s going to require a lot more confidence in the economy for it to occur.”

Indeed, Kenny Vieth, president and senior analyst for consulting firm ACT Research Co., thinks Class 8 demand will remain flat for the year simply because trucking companies – and truckload carriers in particular – simply aren’t generating a rate of return beefy enough to afford investmesnts in new iron.

Still, he believes there’s a real opportunity for a spike to occur in Class 8 orders as fleets begin to realize how the greater fuel efficiency of 2013 model trucks could save them significant dollars.

Vieth predicts the North American Class 8 build will reach 263,000 units this year and climb to 300,000 in 2014. Those numbers are driven by the need to replace aging equipment as the average age for Class 8 trucks in the U.S. is over 6.6 years now.

What’s stymieing carriers now is profitability, he noted, as large publicly-traded TL carriers in particular only notched a 4.9% rate of profitability in the fourth quarter last year – almost even with the 4.5% rate they achieved in the fourth quarter of 2010.

Yet the opportunity to significantly reduce fuel consumption could convince many to buy, Vieth stressed. He noted that in 2010 Class 8 trucks averaged 6.1 to 6.2 mpg, where 2013 models now can average about 8 mpg as OEMs comply with federal greenhouse gas (GHG) mandates. That gain in fuel economy translates into 4,200 gallons of fuel savings annually, he said, or roughly $17,000 per year.

Indeed, it is such calculations that give suppliers such as Bendix Commercial Vehicle Systems more confidence that demand for Class 8 units could climb significantly within a year or two.

“This year we expect Class 8 demand will be down 5% compared to 2012, but over the next two years it should grow 10% to 15%,” said Joe McAleese, Bendix’s president and CEO. “We’re heading in the right direction and with only 2.5% GDP [gross domestic product] growth, meaning it’s not a robust economy. But if that GDP growth increases, we’ll see an uptick in Class 8s start to take hold.”

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