Trucks, trailers, and aftermarket parts sales poised for growth
Feb 1, 2010 12:00 PM, By Bruce Sauer
TWO leading market analysts are expecting good things from trailer, truck, and aftermarket sales in the near term, but the reasons to celebrate may be a little muted.
Eric Starks, president of FTR Associates, and Stu MacKay, president of MacKay & Company, both see improving conditions in the industry's future, but underlying forces must continue to strengthen for those improving conditions to produce real prosperity.
Speaking at the annual Heavy Duty Dialogue event sponsored by the Heavy Duty Manufacturers Association (HDMA), Starks gave his views on what the future holds for truck and trailer sales. MacKay spoke about leading economic indicators that his company follows, with a particular emphasis on trends in the heavy-duty aftermarket.
For Starks, the future is clear. People buy trucks to move freight. Figure out the reasons why freight volumes change, and truck (and trailer) sales will follow. And at this moment, the reasons to buy are better than they have been but not as good as they need to be.
Starks highlighted some of the things that are troubling over the next several quarters.
“Order activity in recent months has been a little sporadic,” Starks said. “But there was some strong activity late last year as people bought ahead of the implementation of the EPA mandate. October order activity was high, followed by a decline in November.”
EPA's diesel emissions regulation, which led to new technology and higher new truck prices, continues to affect sales and market forecasts. Starks, for example, was surprised at the strength of the orders that truck manufacturers received in December, but he quickly put those numbers in perspective.
“Don't be too excited about what happened in December,” he said. “More telling will be what happens in January, February, and March. All of this tells us that in the first part of 2010, we will see a little bump up from current projections. But the thing that concerns me is that we will be pulling forward some of the demand.”
Trucks sold early in 2010 may be powered by engines built in 2009. Eventually, however, that supply of engines will be consumed. With trucking conditions improving and freight increasing, the stage should be set for growth in truck sales. But because of the disruption of normal buying patterns, Starks said he can envision that heavy truck sales in 2010 could be lower than they were in 2009.
“That's a big fear of mine right now,” he said. “Obviously the economy is going to play a big factor in that. So it's important that we understand what the economy is going to look like.
“Right now, we are a lot more bullish about the economy than a lot of people. We are thinking that the economy is going to grow close to 5% during the first two quarters of 2010. If we are optimistic about the economy but are saying that the truck market will be in the doldrums, we have some upside potential for the truck market.”
Is this normal?
The magnitude of the economic downturn has led people to question the permanence of current conditions. Starks questioned the use of the phrase “the new normal” and presented a case that markets are behaving the way they can be expected to — given the conditions we have experienced.
“I don't understand this talk about ‘the new normal,’” he said. “Does this mean that the fundamentals have changed? The fundamentals have not changed. You still buy a truck to move freight.”
Starks said people believe that fundamentals have changed because of the severity of the downturn.
“It's possible that you in your lifetime have not seen this before, but what we are seeing is not new to the trucking industry,” he said. “It's just that we have not lived through a recession like we have this time. It's the worst recession since 1946. We haven't seen freight flat like this. It was close to these conditions in the 1980s, but the excess capacity that we have this time around has been phenomenal. We just have so much capacity out there. Equipment is sitting idle, and we are going to have to deal with that over the long term.”
Next Page: So what is normal?
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