Truck Market Poised to Grow Through 2015, Analyst Says

By Seth Clevenger, and Bruce Harmon, Staff Reporters

This story appears in the March 17 print edition of Transport Topics.

NASHVILLE, Tenn. — The domestic heavy-duty truck market is poised for significant growth this year and in 2015, an analyst from IHS Automotive told an audience of manufacturing and supplier executives.

“We’re very optimistic for growth in sales and production across all classes this year, and even more so heading into 2015,” Andrej Divis, the firm’s director of global truck research, said here March 10 at Heavy Duty Dialogue.

Also during HDD, a carrier executive said freight demand is very strong, which will enable fleets to look for price increases from their customers. But carriers also are facing a severe driver shortage, which will limit their ability to increase revenue.

The event was sponsored by the Heavy Duty Manufacturers Association and Transport Topics Publishing Group.

IHS Automotive, which last year acquired R.L. Polk & Co., forecasts that U.S. Class 8 retail sales will grow 11% to 205,084 in 2014 and an additional 12% to 229,743 in 2015 compared with the 184,784 sales reported by WardsAuto.com in 2013.

IHS also projected that Class 8 truck production in North America will rise to 278,788 in 2014 and 323,570 in 2015 compared with 243,107 in 2013.

Divis said the heavy-duty truck market is set to reap the benefits of greater investment spending and higher household consumption, which will contribute to a gross domestic product growth rate between 2.5% and 3% this year, up from 1.9% growth in 2013.

He also pointed to recent strength in North American Class 8 orders as a “very positive” sign for the year ahead. ACT Research said net orders totaled 95,455 for December through February — the industry’s best three-month total since early 2006.

Divis said he believes a decline in the truck market is unlikely, even if the housing market doesn’t accelerate or political uncertainty hampers growth.

“Even if we turn out to have a subpar year, we still think we’re going to do no worse than move sideways,” he said.

Meanwhile, Tom Kretsinger Jr., president and chief operating officer at American Central Transport, said the current trucking economy is in sharp contrast to 2008-2009, when rates fell 8% to 10%.

“Either you have freight, or you have drivers. Right now, we have freight; we don’t have drivers,” Kretsinger said.

The biggest “game changer” in trucking now is the driver shortage. If anything is unfavorable in a driver’s experience — for example, the way a shipper treats drivers — it “comes under the microscope” and could lead to the driver leaving, Kretsinger said. Therefore, some carriers are dropping problem shippers.

Another important factor is the increased reach of management made possible by information technology, Kretsinger said. “Today, we’re essentially in the cab with them.”

Information technology enables carriers to pay drivers according to their performance. “Like in other jobs, some are better than others,” he said, and carriers are able to track a driver’s fuel economy, whether he stays on route, and incidents such as hard braking. And soon, most carriers will be able to use in-cab cameras to monitor drivers’ activities.

Government regulation, especially the Federal Motor Carrier Safety Administration’s Compliance, Safety, Accountability program and expected electronic logging regulation, is “shutting down a lot of small carriers,” Kretsinger said.

ELDs are “very effective” at enforcing compliance with hours-of-service rules, he said.

Also during HDD, Bill Strauss, senior economist at the Federal Reserve Bank of Chicago, said the Fed foresees GDP growth of about 3% over the next three years, which would be “not

spectacular” but “better growth than anything we’ve seen since the recession.”

Bob Costello, chief economist at American Trucking Associations, projects that seasonally adjusted tonnage would rise 4.5% in 2014, after 6.3% growth in 2013.

He also forecast that truckload loads would rise 2.5% and less-than-truckload shipments would increase 3.6% this year, compared with 1.4% and 3.1% growth, respectively, in 2013.

Although full truckloads increased last year, miles actually declined 1.4% at the same time.

Strauss said that divergence reflects the industry’s efforts to improve efficiency and get drivers back home at night to make the profession more attractive.

The dry van average length of haul declined to 532 miles in 2013, down 31% from the peak of 773 miles in 2000.