February Class 8 Sales Fall 11%

Analysts Suggest Fleets Can Find Favorable Deals

This story appears in the March 21 print edition of Transport Topics.

U.S. Class 8 retail sales in February fell below 16,000 units, down 11% from a year earlier, as most truck makers saw declines while inventories remained high and favorable deals were increasingly possible, analysts said.

Sales slipped to 15,876 trucks compared with 17,811 in 2014, WardsAuto.com reported. That was the lowest monthly total since February 2014.

Year-to-date, Class 8 sales stood at 31,825, down 9.5% from the year-earlier period.

While most truck makers in February saw double-digit declines in sales, there were some bright spots, including at Mack Trucks, a unit of the Volvo Group. Mack saw sales improve 4% to 1,254 units, giving it a 7.9% market share for the month. Its year-to-date market share improved to 7.7% from 6.3%.

“While there are positive signs in construction, elevated product inventories throughout the economy affected February’s overall Class 8 retail sales, with freight le vels remaining flat,” said John Walsh, Mack’s vice president of marketing.

Ward’s said that February ended with 52,200 heavy trucks in stock. That was a 79-day supply, up significantly compared with a 58-day supply a year earlier.

“As a result . . . we are lowering our build forecast to [about] 232,000 units in 2016 as OEMs need to cut production in order to normalize their inventory levels by mid-2016. Further cuts may be necessary if orders do not accelerate in the near term,” J.P. Morgan analyst Ann Duignan said, referring to original equipment manufacturers.

Longbow Research analyst Neil Frohnapple said he reduced his 2016 North American Class 8 build rate forecast to 225,000 from 250,000.

“Our more bearish view is based on our recent dealer surveys, which continue to uncover excessive new- and used-truck inventories in the channel along with weaker-than-expected order activity thus far in 1Q16,” Frohnapple wrote in a report.

Opinions among analysts varied as to whether discounted pricing on new tractors was now widespread.

“Attractive deals for new tractors are widely available,” analyst John Larkin with Stifel, Nicolaus & Co., wrote in an investors note.

Don Ake, an analyst with research firm FTR, said to Transport Topics that he’s been told that truck makers “are hurting for orders and need to keep the plants running, even at a decreased level.”

“I would think prices of trucks already at the dealers are being slashed,” Ake said. “And now they have to compete against a large used stock.”

Frohnapple said he recently surveyed dealers at two OEMS, and a majority told him their pricing for orders remained stable, as they said was the case at other truck makers.

They told him, however, the incentives being “offered to help reduce the excess new inventory are not large enough to offset the decline in used-truck values and therefore is not driving incremental demand.”

Meanwhile, February’s numbers show the industry continues to adjust toward “a lower, though still solid, overall Class 8 market in 2016,” said Magnus Koeck, Volvo Trucks North America’s vice president of marketing.

Volvo, a unit of the Volvo Group, saw sales decline 14.6% to 1,888, good for an 11.9% share of the market.

He said Volvo’s sales rebounded strongly from the month prior, when it sold 1,085 trucks, as customers sought “to improve profitability through efficiency, productivity and our unmatched uptime support.”

Daimler Trucks North America brand Freightliner Trucks claimed a 40.9% market share as it sold 6,487 trucks, down 7.4% compared with a year earlier.

“The market is performing as anticipated with Class 8 industry sales slightly down,” said Markus Pfeifer, DTNA’s director of marketing.

Western Star’s sales climbed 11.4% to 371 units and a 2.3% market share. Western Star also is a unit of DTNA.

International Truck, the brand of Navistar International Corp., saw sales drop 21.2% to 1,499 trucks. That was good for a 9.4% market share. But its share year-to-date rose to 12.9% compared with 11.5% in the 2015 period.

“International Truck remains bullish in the Class 8 market,” said Jeff Sass, Navistar’s senior vice president of sales and marketing. “Our trucks are among the industry leaders in fuel economy, performance and uptime, and we expect customers to continue experiencing the high levels of satisfaction.”

Kenworth Truck Co.’s sales fell 17.8% to 2,208, good for a 13.9% market share, Peterbilt Motors Co. saw sales drop 12.2% to 2,169, giving it a 13.7% market share. Both are units of Paccar Inc., which declined to comment for this article.