“Medium and heavy duty commercial vehicle markets are at the beginning of a three year period of steady growth.” according to a press release from ACT Research Co. LLC.
We certainly hope so. In PMPA’s last Business Forecast Report, our industry’s sales to the heavy truck market fell over 16% from 2007 to 2008.
And then 2009 hit.
Here are 6 reasons we think that this truck recovery will be slow and behind GDP throughout the first half of 2010:
- Commercial credit availability is still impaired,
- Reduction of debt throughout the economy,
- Decrease of “stimulus” spending,
- General reticence to invest because of higher than normal risk.
- The economy has lost many years of growth- so fewer trucks are needed. (For instance, The precision machining industry sales are 85 percent of what they were in 2000 according to PMPA Business Trends Report for October.
- The cost of EPA 2010 Regulation compliant trucks is $10,000 higher. *
But according to ACT, things are looking up. The industry bottomed out in 2009, with Class 8 heavy truck production falling to a mere 25,000 units in the second quarter. That is down almost 60% from the prior year. Medium duty (class 5-7) production of 22,000 units in the second quarter was 53% below the prior year.
Slow and faltering growth behind the economy are what we are expecting out of commercial truck market from our vantage point here in Precision Machining Land. We hope it turns out that we’re pessimistic to a fault.
What do you think? Have you managed to maintain sales in this market? New orders for EPA 2010 Technology components?
* (The new EPA 2010 regulations, are designed to reduce heavy truck emissions of Particulate matter, Nitrogen oxides, and Hydrocarbon emissions. While our industry stands to produce components for the new on board compliance technologies (sensors for CEGR (Cooled Exhaust Gas Recirculation Technology) and components for SCR (Selective Catalytic Reduction) systems, until the volume s grow, we’re ‘underwater’ in terms of our outlays for tooling compared to sales. )
Don’t forget there is still a hangover from the pre-buy in 2006. That was a year of record truck sales into the headwind of a slowing economy. It has left a fleet that may be aging on the calendar but not by engine hours. It is creating noise in the system as far as the normal analysis of fleet age.
[…] FTR is forecasting only a 3% increase in demand for class 8 trucks in 2010. Last December, we ran a post about the heavy truck market that gave 6 reasons why we were bearish about prospects for heavy […]