The current old fleet of vehicles mixed with the introduction of higher-efficiency vehicles will propel truck sales in the next few years.
According to a BB&T Capital Markets Analysis, production will grow from a high end of 263,000 in 2013 to more than 300,000 units in 2014. Truck production for 2012 stood at 278,000 vehicles.
A broadening consumer base will also help truck sales; medium- and smaller-sized carriers will start to look at the market. BB&T Capital Markets predicts truck production will be down through the first quarter of the year, rising in the second half. Orders for 2014 trucks will start to come in at the end of 2013.
BB&T’s A. Rhem Wood Jr. wrote that PACCAR has started to see orders pick up since the middle of January. Accuride and Wabash National are also doing well, he noted.
“Customers are saying they need trucks, and want to take advantage of low interest rates and available financing,” he said. “The medium-duty vocational truck market, particularly for housing, is encouraging, while trailer quote activity remains solid.”
BB&T has seen a clear under-investment in product in recent history, with the current fleet replacement rate published by ACT Research well under the 20-year average. This has lead to an under-built industry full of old trucks.
Also fueling the predicted uptick in truck production is the vast number of trucks being replaced in a normal lifecycle of six to eight years. Since a large number of trucks were purchased between 2004-2006, the analysts reason many of these will be replaced in the coming years. This prediction doesn’t include the larger truckload fleets, which typically buy new trucks after four to five years.
An impending pick up in freight activity will help purchasing activity. The analysts wrote freight is less of a headwind as it has been in the past, with March activity figures trending up. Freight activity will also increase in the spring, according to BB&T. Most important, profitability is getting better and financing for truck purchases is out there.
“Class 8 orders are expected to remain steady in the low-to-mid 20,000 range for the next few months (maybe be slightly lower in the summer months) before potentially ramping early fall as orders come in for 2014,” Wood wrote. “On the other hand, Class 8 production is expected to ramp up through the rest of 2013… and into 2014.”
A future development to the truck supply models will come in the form of natural gas vehicles, but the adoption rate isn’t currently high enough to make a significant impact. Natural gas vehicle sales grew from 3,000 in 2011 to around 6,000 in 2012, but that number still only equates to 3 percent of all trucks in the United States. Various industry watchers see the issue differently; some have made a case for growth at the 5-percent mark for natural gas trucks by 2015, while others see 10 percent or even 15 percent adoption rates by 2017. - Jon Ross