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March 19, 2007 8:00 AM, EDT
February Truck Sales Fall 19.3%
Class 8 Orders Plunge 70% in Pre-Buy Backlash

Sales of new Class 8 trucks fell 19.3% in February, while orders for new vehicles plunged more than 70%, according to companies tracking the market.

And the primary reason that truck sales so far this year haven’t fallen even more is because the market has been sustained by leftover inventories of trucks with engines built before Jan. 1, when tougher federal exhaust emissions standards kicked in and prices rose.

“Buyers of new trucks are purchasing almost exclusively leftover inventories of ’06 engines from dealers and manufacturers,” Chris Brady, president of Commercial Motor Vehicle Consulting, told Transport Topics. Ward’s Communications reported the decline in sales, to 16,471, in its monthly industry report, which the company provides to TT.

Meanwhile, ACT Research said new heavy-duty truck orders for February totaled 13,200, compared with 44,916 last year, analysts said. In January 2006, new truck orders totaled 43,928, versus 12,420 this January. Truck manufacturers have predicted Class 8 sales would dive by 40% or more this year, following the record 284,008 vehicles sold in 2006.

Fleets, dealers and manufacturers all attributed the 2006 record to the “pre-buy” of trucks with ’06 engines, as buyers sought to avoid the higher cost and uncertainty of 2007 engines built to meet lower federal exhaust emission standards.

Brady said Ward’s reported that at the end of February, the inventory of new trucks with ’06 engines in them still totaled 54,703. Peter Nesvold, transportation analyst for Bear Stearns, cited the ACT data in a March 5 newsletter, in which he said, “Class 8 net new orders for February were 13,200, down 71%” from a year earlier. Nesvold said that 51% of new orders in January, which were down 72%, were for export, compared with 11% of new orders in 2006.

Bruce Plaxton, president of transportation consulting firm BGP Market Solutions, Chicago, said sales will drop more sharply in coming months. “The only thing that’s obvious about the February numbers is that retail sales haven’t dropped precipitously, while orders have fallen off the table,” Plaxton told TT.

“Ward’s and ACT inventory figures mean the bottom is still far away in sales.” “We’ve never hidden the fact that we expect a deep cut in manufacturer orders in the first half of 2007,” Roy Wiley, spokesman for International Truck and Engine Corp., told TT.

Wiley said International expected sales of its new ProStar truck would help. “We have several hundred definite orders for this next-generation heavy truck, and we believe those orders will climb even more sharply by the end of the second or third quarter.”

“It’s difficult to say exactly when we will be completely depleted with the ’06 backlog, but, as expected, they are being drawn down as customers continue to focus on ’04 specifications,” Mack spokesman John Walsh told TT. “We expect sales of trucks with ’07 powertrains to increase as more of these vehicles are delivered in the second quarter.”

“Volvo Trucks North America achieved a U.S. retail market share of 10.9% in February, our second month at that level,” spokesman James McNamara told TT. “Buyer activity for Volvo’s new ’07-engine trucks is currently very strong, running 30% above the same time in 2006.”

Volvo had a market share of 10.8% in 2006. McNamara agreed that, “while this indicates good interest among customers, this has not yet resulted in higher orders. Fleets are still absorbing the large number of trucks delivered during the pre-buy.” Spokesmen from Freightliner LLC, Peterbilt Motors Co. and Kenworth Trucking Co. declined to comment.

Truck dealers representing various manufacturers concurred that their sales through mid-March have consisted almost exclusively of trucks with ’06 engines. “Right now, every new heavy truck we’re selling has a 2006 engine,” Allen Martin, general manager for new truck sales at Colonial Volvo Truck Sales Inc. in Ashland, Va., told TT on March 12.

“I don’t see ’07 engines becoming a factor until the second quarter, because the dealer and corporate backlog will not be exhausted until the second quarter, and even then, we won’t know their acceptance until the third and fourth quarter of this year,” Martin said.

“We don’t have trucks with ’07 engines in stock yet,” Jimmy Spence, salesman for Freightliner of Augusta, Ga., 150 miles east of Atlanta, told TT. “Everything we have in the lot are new trucks with ’06 engines.” Spence said that buyer preference for the older technology is nearly universal. “Everyone wants the old specs,” Spence said.