Growth of Class 8 Fleet Slows After Pre-Buy, Cooling Economy
By Daniel P. Bearth, Staff Writer
This story appears in the Sept. 10 print edition of Transport Topics.
Expansion of the U.S. Class 8 truck fleet is slowing as carriers continue to put off new truck purchases and demand for freight hauling remains soft, according to a new report by research firm R.L. Polk & Co.
The number of Class 8 trucks in operation in the United States increased 2.2% between June 30, 2006, and June 30, 2007, the smallest gain since a 1.9% increase at the end of the fourth quarter of 2004, according to Polk, which tracks data on commercial vehicles.
“This trend indicates a basic underlying weakness in the business much greater than just a negative reception and 2006 pull-ahead due to the mandated engine regulations imposed for the 2007 calendar year,” said Gary Meteer Sr., director of the commercial vehicle group at Polk.
Besides engine emissions regulations, Meteer said other factors, including “the economy, higher prices, mechanical issues, fuel availability and production down-time,” all contributed to a drop-off in new vehicle registrations and reducing the number of new trucks put into service.
Meanwhile, freight tonnage has been declining. American Trucking Associations said its index of for-hire truck tonnage declined 3.7% in July and was down year-over-year in 12 of the past 13 months (9-3, p. 1).
Truckload carriers surveyed handled 0.9% more loads in the first five months of 2007 but did so with 0.7% fewer trucks, ATA said.
In 2006, truckload fleets carried 0.3% more loads but added 2.3% more trucks.
The second-quarter fleet increase of 78,000 vehicles from a year earlier, to 3.58 million, followed a gain of 161,000 vehicles at the end of the first quarter.
Trucking capacity has been growing since the U.S. economy emerged from recession in 2002, with the annual growth rate of Class 8 trucks peaking at 7.7%, at the end of second quarter 2006, according to Polk data.
Registrations of new Class 8 trucks fell 28.6% through the first six months of the year, including a 44.7% plunge in June. Class 8s had the steepest drop in registrations for all classes of new commercial vehicles; they were off 16.8% in the first six months.
The drop in heavy-duty truck registrations closely mirrored the drop in retail sales so far this year. Through July, U.S. sales of Class 8 trucks were down 40.1% from the same period a year ago, according to Ward’s Communications (8-20, p. 1).
A record 284,008 Class 8 trucks were sold in 2006 as many carriers stockpiled new vehicles to avoid buying more expensive 2007 models with federally mandated EPA-compliant diesel engines.
The Polk report also noted that registrations of used commercial vehicles increased 2.1% to 272,000 units in the first six months. However, Class 8 used truck registrations fell 4.7%, while all other classes of vehicles were up.
The Polk data bolstered the view that smaller fleets are not scaling back purchases as much as larger fleets are.
Registrations of new Class 8 trucks by fleets with one to five vehicles were down 10.3% in the first six months of 2007, compared with a drop of 36.2% for fleets with more than 500 vehicles, Polk said.
Meanwhile, a report by investment firm Bear, Stearns & Co. last week indicated that shippers expect to increase volumes in line with anticipated economic growth of 3.5% to 4% in the second half of 2007.
More than 80% of shippers surveyed said they believe there is an overcapacity of truckload service providers in the second quarter, up from only 22% that saw overcapacity in the second quarter of 2006.
Despite signs of overcapacity, there is little evidence that truckers are leaving the market in large numbers.
About 43% of shippers surveyed by Bear Stearns said they saw more capacity at small- to medium-size trucking companies. Only 13% of shippers said they saw less capacity.
Another sign of relative strength is a reasonably low rate of motor carrier bankruptcies. The Bear Stearns trucking bankruptcy index reached a high of 81 in May, but posted a reading of 51 in June and July.
This story appears in the Sept. 10 print edition of Transport Topics.
Expansion of the U.S. Class 8 truck fleet is slowing as carriers continue to put off new truck purchases and demand for freight hauling remains soft, according to a new report by research firm R.L. Polk & Co.
The number of Class 8 trucks in operation in the United States increased 2.2% between June 30, 2006, and June 30, 2007, the smallest gain since a 1.9% increase at the end of the fourth quarter of 2004, according to Polk, which tracks data on commercial vehicles.
“This trend indicates a basic underlying weakness in the business much greater than just a negative reception and 2006 pull-ahead due to the mandated engine regulations imposed for the 2007 calendar year,” said Gary Meteer Sr., director of the commercial vehicle group at Polk.
Besides engine emissions regulations, Meteer said other factors, including “the economy, higher prices, mechanical issues, fuel availability and production down-time,” all contributed to a drop-off in new vehicle registrations and reducing the number of new trucks put into service.
Meanwhile, freight tonnage has been declining. American Trucking Associations said its index of for-hire truck tonnage declined 3.7% in July and was down year-over-year in 12 of the past 13 months (9-3, p. 1).
Truckload carriers surveyed handled 0.9% more loads in the first five months of 2007 but did so with 0.7% fewer trucks, ATA said.
In 2006, truckload fleets carried 0.3% more loads but added 2.3% more trucks.
The second-quarter fleet increase of 78,000 vehicles from a year earlier, to 3.58 million, followed a gain of 161,000 vehicles at the end of the first quarter.
Trucking capacity has been growing since the U.S. economy emerged from recession in 2002, with the annual growth rate of Class 8 trucks peaking at 7.7%, at the end of second quarter 2006, according to Polk data.
Registrations of new Class 8 trucks fell 28.6% through the first six months of the year, including a 44.7% plunge in June. Class 8s had the steepest drop in registrations for all classes of new commercial vehicles; they were off 16.8% in the first six months.
The drop in heavy-duty truck registrations closely mirrored the drop in retail sales so far this year. Through July, U.S. sales of Class 8 trucks were down 40.1% from the same period a year ago, according to Ward’s Communications (8-20, p. 1).
A record 284,008 Class 8 trucks were sold in 2006 as many carriers stockpiled new vehicles to avoid buying more expensive 2007 models with federally mandated EPA-compliant diesel engines.
The Polk report also noted that registrations of used commercial vehicles increased 2.1% to 272,000 units in the first six months. However, Class 8 used truck registrations fell 4.7%, while all other classes of vehicles were up.
The Polk data bolstered the view that smaller fleets are not scaling back purchases as much as larger fleets are.
Registrations of new Class 8 trucks by fleets with one to five vehicles were down 10.3% in the first six months of 2007, compared with a drop of 36.2% for fleets with more than 500 vehicles, Polk said.
Meanwhile, a report by investment firm Bear, Stearns & Co. last week indicated that shippers expect to increase volumes in line with anticipated economic growth of 3.5% to 4% in the second half of 2007.
More than 80% of shippers surveyed said they believe there is an overcapacity of truckload service providers in the second quarter, up from only 22% that saw overcapacity in the second quarter of 2006.
Despite signs of overcapacity, there is little evidence that truckers are leaving the market in large numbers.
About 43% of shippers surveyed by Bear Stearns said they saw more capacity at small- to medium-size trucking companies. Only 13% of shippers said they saw less capacity.
Another sign of relative strength is a reasonably low rate of motor carrier bankruptcies. The Bear Stearns trucking bankruptcy index reached a high of 81 in May, but posted a reading of 51 in June and July.
