From the category archives: Market Analysis and Forecasts

Market Analysis and Forecasts

Fuel Economy and Emissions Regulations – the Basics

The final economy/emissions regulations announced Wednesday may have a wide-ranging impact on the new and used truck market. The ruling is broad and complex, but the main facets are simple enough to lay out. The stated goal of the rule is to reduce GHG (greenhouse gas) emissions and improve energy security. Overall GHG (Greenhouse Gas) emissions will be measured by gram per ton-mile (basically, how many grams of CO2 are emitted per mile, taking weight into account). Fuel economy will be measured by gallon per ton-mile (how many gallons are used per mile, taking weight into account). The standards will phase in for the 2017 model year. Here’s a table outlining the standards for combination tractors: The EPA states that these standards will achieve between 9-23% reduction in emissions and fuel consumption from 2010 baselines. For medium duty trucks, EPA and NHTSA are setting standards similar to the CAFE (Corporate Average Fuel Economy) regulations in effect for light vehicles. Standards for each man ...

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2008 Model Year Anomalies

The 2008 model year is presenting a unique set of challenges when it comes to valuations. You’ve seen the fluctuation in value since January for that model year (see graph below). As with all late-model tractors, supply is constrained. However, another issue is exacerbating the volatility in our data. As you know, a new round of emissions regulations went into effect for trucks built in 2007, carrying over to the 2008 model year. This round required new engine technology and DPF’s (Diesel Particulate Filters). Anecdotal evidence suggests many if not most 2008 trucks were built with stockpiled pre-emissions engines, but a good number were also built to the new standard. Due to regional demand for post-emissions engines (particularly in California, which requires “2008” emissions for many applications), there is a price gap in many markets for trucks equipped with pre- vs. post-emissions engines. We have a strategy in mind to account for this difference in our valuations. Unfortunately, when it comes to ...

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Age and Mileage – Retail vs. Wholesale

We regularly look at average age and mileage of sleeper trucks sold through retail channels in this blog. We’ve traced the upward trend of both measures as buyers snap up the lowest-mileage trucks as they become available. But what about the wholesale market? Has average age and mileage behaved similarly? To investigate, we looked at both measures going back to January of 2010. Retail data reflects sales from individual dealers, OEM’s, and quasi-independent used truck operations. Wholesale data reflects sales from individual dealers and auctions. Looking at mileage, there was more volatility in the wholesale markets. In a supply-constrained market, lower-mileage trucks will be quickly sold to the retail customer, while higher-mileage units might see more dealer-to-dealer activity and perhaps even be returned to the auction channel. So wholesale markets reflect swings in mileage as packages of trucks become available from fleets and other sources. On the retail side, the message is obvious – the lowest- ...

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Unexpected Increase in June Truck Tonnage

The ATA’s Monthly Truck Tonnage Report posted a seasonally-adjusted 2.8% gain over May. Without the seasonal adjustment, the gain was 5.3%. This increase is unexpected, seeing as US Industrial Production was flat overall and down in most trucking-centric segments.

This data plus the continued high rate of new truck sales suggest that there is economic activity that is not readily apparent in IP figures. While new truck sales are still assumed to be attributable mainly to replacement rather than expansion, the tonnage data suggests there is more to the story. One month is not a trend, but the numbers are a bit of a bright spot in an otherwise partly-cloudy economic picture.

June Sales Results

With about 95% of our June sales data received, we can start looking at results. First, as mentioned previously, the number of sales reported by dealers was back in positive territory after a notable drop in May. It looks like June will be up about 10-15% over last month, putting us back near March levels. Second, the average sleeper tractor looks to have brought about $500 more in June than in May, despite (and you knew this was coming) another jump in average mileage, this time by a notable 8000. Four-year-old sleepers should be back in positive territory, rising a mileage-adjusted $800 over May’s unexpected $3000 decrease – but the real story here is a massive increase in average mileage, on the order of 21,500. The takeaway here is that there is still plenty of marketplace headroom for higher mileage. Given that the economy overall is in a slower growth mode, June’s results are clear evidence that the used truck market is still critically undersupplied. Look for complete analysis in our ne ...

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Marketplace Change Since Recession

In case there was any question about how the marketplace mix of trucks has changed since the recession ended, here’s a look at age and mileage of sleeper tractors reported sold (retail). Bottom line – trucks available in the marketplace are older, with higher mileage. Despite this, as mentioned in the latest Guidelines, the average selling price of these trucks hasn’t changed appreciably since February. Buyers continue to pay elevated prices for older, higher-mileage trucks.

Stay tuned for an update including June data.

Another Mixed Month for Industry

June’s Industrial Production figures again provide mixed messages on the progress of the economic recovery. IP overall was essentially unchanged from May with a 0.2% increase. On the Manufacturing side, overall there was no change from May. The important automobile segment recorded a 2.0% decrease, mainly due to continued component shortages from Japan. Increased days’ supply of certain models and early seasonal slowdowns may also have played a role. This drop builds on last month’s revised 1.5% decrease for that sector. If we exclude auto manufacturing, the data shows a 0.2% increase, suggesting auto production had a larger impact on Manufacturing this month. Most consumer-oriented segments such as furniture and electronics were down between 0-2%, while industry-oriented segments such as primary and fabricated metals rose enough to compensate for these decreases. The main takeaway here is the Japan disaster continues to affect Manufacturing, with consumer confidence potentially playing a growin ...

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June Sales Volume Looks Healthier than May

It looks like May might have been an anomaly as far as sales volume goes. Focusing on number of sales reported by individual dealerships (excluding OEM and other data), May volume was down over 20% vs. April. Now, with about 85% of June data received from the dealer segment, we’re already seeing volume just about equal to all of May. The number of dealers reporting to us doesn’t change appreciably from month to month, and, in any case, we can look at the number of sales per dealership to compensate for any minor change there. We are noting a few more multiple-unit package sales reported in June, which is obviously making a difference. But those deals aren’t responsible for the entire increase. Perhaps we are seeing a few more trade-ins hitting the secondary market, despite the contrary factors mentioned in this month’s Guidelines. Demand is still there, and sales volume will fluctuate depending on number of available trucks. In general, we should be prepared for more volatility in this supply-constraine ...

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May Sales Data Shakes Things Up

There is a lot of volatility in May’s data. The benchmark four-year-old sleeper tractor took a dive from April, although the sleeper market overall remains steady. The number of sales reported from individual dealerships was down as well.

Look for a full analysis of these developments in the July edition of Guidelines, which will be available early next week. In the meantime, here are a couple of graphs that illustrate what we’re seeing.

Medium Duty Market Update

As we finalize our June wholesale data, here’s a look at average selling prices for popular segments of the medium duty market from the auction and dealer wholesale channels through May.

No real news to report here. Basically, medium duty selling prices have bounced along the bottom since the downturn began. There was no real improvement in late 2009 like there was with Class 8 highway tractors. The housing market, construction, and consumer spending will need to improve further before I would expect to see much upward movement in this side of the market.

Data in the graph has been adjusted for mileage and age. Those averages are as follows:

Class 3 Conventional:  102,543 mi., 92 months

Class 3-4 Cabover:  118,783 mi., 95 months

Class 6 Conventional:  175,065 mi., 107 months