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August 5, 2013 5:30 AM, EDT
Study Says Rise in New Heavy-Duty Sales Would Lead to Surge in Used-Truck Supply
By Jonathan S. Reiskin, Associate News Editor

This story appears in the Aug. 5 print edition of Transport Topics.

A long-anticipated rise in new heavy-duty truck sales could take hold starting next year, and if it does, the vehicles fleets trade in will create a surge in U.S. and Canadian used trucks, but at lower prices, according to a new Frost & Sullivan study.

The consulting firm’s work on equipment cycles said new and used truck sales often move in opposite directions, but for the next two years, sales of both types of vehicles will grow. The basic premise of the prediction is that North American economic growth will accelerate, generating more freight on top of the current record tonnage levels, and finally convince fleets to buy more new trucks.

“The average truck is 6.8 years old and has almost 1 million miles on it. These trucks will fail, and downtime is one of the things fleets hate most, so this is long overdue, and it has to happen,” said Sandeep Kar, the research director for the study.

The report predicts that from 2012 to 2019, sales of new Class 8 trucks will grow by 4.5% a year, on average, and for used trucks the rate of increase will be 2.8%. The sales path for new U.S. and Canadian trucks starts with a dip this year from last year — 241,200 to 235,800 — but then shoots up to 298,200 next year and to 325,400 in 2015.

Used truck sales are forecast to follow a similar pattern, dipping this year to 186,100 units from 2012 and then shooting up to 211,400 next year and 225,600 units in 2015.

The truck buying flows directly from continuing economic growth, including U.S. industrial production, which Frost & Sullivan said will go steadily upward at least until 2016. The prediction is consistent with a Bloomberg News survey of 79 large banks and investment banks, which said real gross domestic product growth will only be 1.8% this year but should accelerate to 2.7% next year and 3% in 2015.

ACT Research Co. also forecasts growth in the U.S. and Canadian truck market, but much less than does Frost & Sullivan. ACT anticipates truck production of 264,500 Class 8s next year and 243,900 in 2015, said ACT Vice President Steve Tam, suggesting activity well below the F&S boom level.

Regardless of which forecast turns out to be more accurate, there are some signs of carriers turning over trucks.

Schneider National said in July its fleet sales division is having a summer clearance sale to move 450 trucks with pre-2007 engines. Schneider, which is based in Green Bay, Wis., ranks No. 6 on the Transport Topics Top 100 list of for-hire carriers and is the largest truckload carrier on the list.

Patrick Anderson, controller of Roehl Transport, said his Marshfield, Wis., carrier never bought trucks with engines made from 2007-2009, so it is now time to update the large number of older tractors. The company is No. 68 on the TT100.

“We’re buying lots of trucks. They’re more expensive, but you certainly get better miles per gallon,” Anderson said.

If there is a surge of trade-ins on the secondary market, it will be a mixture of the 2007-2009 generation and the one before that, and that will play an important role in lowering prices, F&S said.

Trucks with the 2007-2009 engines “were found to be tougher sells to fleets due to higher prices and proliferation of EPA-compliant, OEM-branded engines that are yet to prove themselves in the used-truck market,” the study said.

Kar said Frost & Sullivan was asked to do the study by original equipment manufacturers, who had noticed a strong used-truck market in recent years. Surveys of U.S. truck registrations by R.L. Polk & Co. have often shown used-truck deals outnumbering registrations of new trucks.

Research for the report included interviews with executives from all four major truck-making companies: Daimler Trucks North America, Navistar International Corp., Paccar Inc. and Volvo Group.