Truck, trailer sales remain strong at Stoops Freightliner, Quality Trailer, but questions about demand are clouding their 2020 outlook
Don Ake, FTR’s vice president of commercial vehicles, moderated a truck and trailer dealer forum dubbed “A View From the Sales Front” during FTR’s 2019 Transportation Conference featuring Mark Hall, general manager for trailers at Stoops Freightliner-Quality Trailer, and Brian McCoy, president of Stoops-Quality.
The panel talked everything from current and anticipated sales, quotes, spec’ing and pricing, to predictions for market strength and used truck values in 2020.
Hall and McCoy also fielded questions from attendees, saying, among other things, truck and trailer inventory has been sitting in their lots longer this year than last year, but not much is stock, last year’s long build times cost them business, especially on the truck side, and automated transmissions make their used trucks more attractive.
The following questions and answers are edited for length and clarity.
Ake: What have you seen with sales on the truck side?
Brian: “This year, year to date, we’re up 23% in sales … (and) July we were right on our average and then August we were 10% above our average, for the year. What we have seen is our used trucks the last two months are about 20% down, so that’s the pre-indicator of it slowing down, but we have not slowed down in sales and don’t necessarily expect it to in the next couple months.”
Ake: What are you seeing on the trailer side for sales?
Mark: “Year-to-date, we are, on unit count, right on what we had forecasted for this year. We have seen a slight dip, or we’re off our forecast a little bit, on our average margin per unit sold, but overall the unit count is right at what we forecasted. And I think we will continue to see a strong remainder of this year as we have a lot more build-to-order type of equipment in our pipeline. So we haven’t seen any types of cancellations or any of the big fleets having any nervousness right now on that front.”
Ake: What about quote activity?
Brian: “That’s where it’s slowed down. We really haven’t had a lot of next-model year, next-calendar year trucks that we’ve been quoting. That being said, traditionally that’s an October timeframe, that we would start. Last year, we were ahead of that, but traditionally in an October timeframe is when we’re quoting for next year, especially past first quarter. So quoting activity hasn’t been great for calendar-year 2020, but if it was, it’d be a little bit ahead of schedule.”
Ake: How are the quotes for trailers?
Mark: “Quote activity has not been robust. Because the build times got out so far, customers have been a little bit apprehensive, or they’re not quite sure when they need to really get back into looking at their next-year activities. But when we look at this year, we’ve seen that the retail side has been a little softer, and there hasn’t been as much interest in the short buying cycles from our customer base. What is unique about Brian’s business is that, with Stoops Freightliner-Quality Trailer being both a truck and trailer dealer, we see different cycles, and the trailer side always seems to see a slowness prior to the truck side seeing it, when it comes to new equipment purchases. But then on the flipside, the trailer side is always the last to see the uptick in the buying cycle, vs the trucks, so it’s an interesting dynamic within the dealership that really allows Brian and his team to make educated decisions on inventories.”
Ake: What recent trends have you noticed in specifying or buying habits in trailers?
Mark: “Well, the last couple years, everybody knows, have been really strong, so some of the smaller fleets, because they’re so tied to credit, have seen a tremendous impact on their buying process within the last 18 months. And then you look at how production got so far out, and they potentially missed a trade cycle. So it’s really now getting back to those smaller, mid-size fleets, and trying to be a little more consultative with them.”
Ake: What about pricing on trailers?
Mark: “Early this year we saw some slight increases over last year but it seems like in the last six months it’s somewhat stabilized and every indication for the rest of this year is it should be relatively flat. We have not had the opportunity to quote much business for next year, but on some of the business that we are looking at for next year, we see it to be flat as well, on cost structure.”
Ake: Is there concern with tariffs and the uncertainty of pricing next year?
Mark: “Any time you mention tariffs or potential increases, there is some uncertainty or concern within our customer base, but what’s somewhat different about the trailer side vs the truck side is trucking companies will spend a lot of time and are very diligent on their trade cycles with their power units. So that is a much more robust and long-term conversation with our customers, where on the trailer side it’s very reactive, and so they’re managing their inventories a little bit tighter vs the truck side, and they don’t spend as much time on equipment specs … so for our business we have to manage the inventories a little tighter on the trailer side.”
Ake: What are you hearing from customers for next year?
Brian: “Freight’s definitely slowed down but our customers who have contracted business are still busy and still doing well. The nervousness in the market is maybe from people who are relying more on brokered business and don’t have contracts with customers.”
Ake: Supply was a problem when the market was strong. If you have more supply next year, do you believe you’ll be able to sell it?
Brian: “The base large customer is that guy who’s buying 25 to 75 trucks in a year. Some of those guys who are buying 20 trucks, 25 trucks, which again is our bread and butter as a dealer, got shut out this year, so they’re still going to have demand. They may have missed a trade cycle or may have only gotten 10 trucks instead of the 20 they need, so we see demand as not being as high, but still being able to take care of our customers, and a normal, maybe 90- to 120-day build from our manufacturers, which is, from our standpoint and our customers’ standpoint, right in the sweet spot where they know their demand, they still have that demand and they can plan accordingly and order trucks.”
Ake: Mark, how do you see trailer sales for next year?
Mark: “We’re seeing pretty significant softness in the reefer side of our business right now, in that customer base, so I think potentially next year it may still continue to be a little soft on the reefer side. On vans and flatbeds I think we’ll maintain as strong a position as we did this year. The used market is still pretty tight for used trailers, so there isn’t this vast amount of inventory out there, which has a great impact on new. If we see any changes in the used market, that could potentially have an impact on next year.”
Ake: Can you elaborate more on the flatbed segment?
Mark: “The production was loud, even for flatbeds, so we were sold out early this year. That really put a burden on our customer base on what they felt they could get this year, and obviously we buy a lot of stock trailers to help feather that transition for our customers on the flatbed side. But I think there’s going to be a tremendous impact from housing. If housing continues on the trend it’s in, I think the flatbed market will remain stable.”
Ake: What do we know about demand for next year?
Mark: “That’s the big question. If you ask the OEMs on the flatbed side, they would probably say last year was a record year for them, and this year probably is shaping up to be pretty close to a record year. So the supply is catching up to the demand, and that’s where next year still could be a pretty good year.”
Ake: How do you see the sleeper, straight truck and medium-duty segments playing out next year?
Brian: “Based on our cycle of sales, we’re expecting a lot of trades to be available on the market, really starting the fourth quarter of this year into the first quarter of next year, and that’s going to be the biggest indicator for us—how much demand there is and how well we turn those. With our used truck and trailer sales being down 20%, that’s a profit number, so the truth is we chose to keep our inventory as fresh as possible. As long as dealers choose to do that, they can take new trucks in. We’d all love to make money in all the segments of our business, but with our business at Truck Country and Stoops, we realize inventory is the only thing that can hold us up from continuing to push forward. So we’re down 20% because we’ve chosen to make sure our inventory levels are where they need to be in used trucks.”
Ake: How is your new trailer inventory level, and what do you think about 2020?
Mark: “With the OEM we represent on the van side, they have a stock program, so we can buy trailers for our stock, and having the right inventory at the right time for our customer base is important because, with their cycle of buying equipment, their process is so short, it’s a balancing act. And as I look at the rest of the year, I think we have a sufficient amount of inventory to hit the numbers and keep the commitments we made to the Truck Country family, and then it’s about taking care of our customer business.”
