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July 22, 2013 1:30 AM, EDT

Medium-Duty Sales Gain 16.6% in June, Driven by Demand for Class 6 Trucks

By Seth Clevenger, Staff Reporter

This story appears in the July 22 print edition of Transport Topics.

Medium-duty truck sales climbed 16.6% in June from a year earlier, led by a 53.1% surge in Class 6 purchases, according to WardsAuto.com.

Combined U.S. retail sales for Classes 4-7 increased to 14,984 last month, up from the 12,846 vehicles sold in June 2012, Ward’s reported.

For the first half of 2013, medium-duty sales totaled 80,810, up 8.5% compared with the first six months of 2012.

ACT Research President Kenny Vieth said the sales growth has been supported by a rebound in residential investment.

“As critical as building houses is to the Class 8 market . . . I don’t think it’s a stretch to say it’s doubly important for the medium-duty market,” he said, citing a number of medium-duty applications connected to housing, including utility companies, site preparation, homebuilding, goods delivery and one-way rental fleets. “For the medium-duty market, housing is really the gift that keeps on giving.”

Vieth also predicted that state and local government fleets will cease to be a drag on the medium-duty market as they replace old vehicles such as public utility and dump trucks.

Class 6 posted the most dramatic gain, with sales jumping to 4,682 units in June, from 3,059 a year earlier. For 2013 to date, Class 6 sales have climbed 26% year-over-year.

June sales of Class 7 trucks, however, slipped to 3,896 units, down 3.1% from a year ago. In the first half of 2013, Class 7 sales declined 5.6%.

Ford Motor Co. told Transport Topics that its sales of Classes 6 and 7 trucks rose 30.5% year-over-year in June, driven in part by demand for the new gas powertrain option for its F-650 truck.

The gas-powered trucks represent about 15% to 20% of the company’s Class 6 sales, but that share could rise to about 40%, said Len Deluca, Ford’s director of commercial vehicles.

Large customers “want to try a few, make sure it is what they think it is, and then order big numbers,” Deluca said.

Meanwhile, Daimler Trucks North America sold 3,855 Classes 6 and 7 Freightliners in June, up from the 2,528 units it sold a year earlier, Ward’s reported.

Classes 6 and 7 sales at Navistar International Corp. declined to 2,071 during the month, down from an industry-leading 2,546 last year.

Industrywide sales of Classes 4 and 5 improved in June, rising 11.1% to a combined 6,406. Year-to-date, Classes 4 and 5 sales have increased 8.1%.

The sales gains in the overall medium-duty market reflect a combination of modest economic growth and high replacement demand, said John Marshall, senior vice president of sales and marketing at Utilimaster Corp., which builds walk-in vans and truck bodies for delivery and service applications.

“You’ve kind of got a double effect,” he said.

After backing away from their equipment replacement cycles during the recession, medium-duty buyers have been coming back to replace vehicles that are often three to four years older than normal and require higher maintenance expenses to keep on the road, Marshall said.

As a result, sales have been stronger than one would expect from looking only at companies’ financial statements or the economy in general, he said.

Utilimaster, a subsidiary of Spartan Motors Inc., still has “a very large backlog,” which was about 20% higher in the first quarter than it was a year earlier, Marshall said.

Medium-duty sales at R&R Inc., a truck dealer based in Youngstown, Ohio, were up in June about 15% from a year earlier, co-owner Bob Savich said. He pointed to replacement demand as the primary source of the upturn.

“I think the average business just needed the update” to replace old equipment, said Savich, whose dealership sells medium-duty Hino and Isuzu trucks, as well as Mack and Volvo brand trucks in the Class 8 market.

“Most of it is strictly replacement,” he added. “Some in there are looking to expand . . . but most are going to hold back like everyone else and see what’s going to happen.”

Industrywide, the medium-duty market has outperformed Class 8 sales, which declined 8.9% in June and fell 13.5% in the first half, according to Ward’s. Utilimaster’s Marshall and R&R’s Savich said that some of their customers are downsizing to smaller trucks.

In some cases, companies don’t have enough work to justify purchasing a Class 8, Savich said.

Marshall said some buyers are moving down the gross vehicle weight rating scale to lower the acquisition cost.

“They’re moving to smaller vehicles where they can,” he said.