At the FTR Conference two weeks ago, Amy Kopin, regulatory and compliance program manager with Daimler Trucks North America, provided details concerning the challenges truckmakers could face meeting the EPA/NHTSA Greenhouse Gas Reduction proposals for 2021-2027 trucks (see this article for a summary of her presentation). Perhaps the most eye-opening revelation was that Daimler’s SuperTruck project – an $80 million initiative funded by Daimler and the Department of Energy – would not meet the 2027 standards as currently proposed.

History shows that a “pre-buy” is not uncommon before each emissions mandate goes into effect. For those new to the industry, a pre-buy is a situation in which sales of new trucks artificially spike in the model year immediately preceding the introduction of a new emissions technology. This practice results in depressed sales of the first emissions-compliant model year, and a wave of trade-ins hitting the used market. Additionally, the increased price of trucks featuring the new technology pushes some new truck intenders to look for late-model used trucks instead.

Let’s look back on how each round of emissions standards has impacted the market:

MY2002 (EGR):

  • The first of the “modern” round of emissions standards introduced Exhaust Gas Recirculation (EGR) plus associated hardware and sensors
  • Originally scheduled for MY2004, pulled ahead to MY2002 to punish truck and engine OEM’s for running non-compliant engine mapping in the ‘90s
  • Potential buyers had little confidence that technology had been adequately tested, plus predicted reduced fuel economy and increased cost
  • Buyers altered purchasing schedules to acquire pre-emissions trucks, resulting in a spike in new truck sales and increased trade-ins
  • Results: Depressed sales of new MY2002 trucks, increased demand for late-model used trucks

 MY2004 (additional EGR):

  • Selected enginemakers brought their EGR engines fully into compliance
  • Moderate increase in sales of MY2003 trucks, little impact to used truck market

MY2008 (DPF):

  • Next phase of emissions standards saw the introduction of the Diesel Particulate Filter (DPF) and associated hardware and sensors
  • Buyers again reluctant to invest in new technology, especially one with increased maintenance requirements (DPF’s require regular cleaning) and driver involvement (must pay attention to regeneration alerts), plus increased cost
  • New truck sales increased through mid-2006 then dropped off a cliff (beginning of Great Recession was a contributing factor); late-model used trucks remain popular
  • Many buyers of MY2007 trucks moved to longer trade cycles to avoid the first few years of DPF

MY2010 (SCR):

  • This round introduced Selective Catalytic Reduction (SCR) and associated hardware and sensors
  • Unlike previous rounds, fuel economy was predicted to increase because SCR enables a reduction of EGR
  • New truck sales, already depressed,  fell even more in late 2008, due to a combination of the recession, hesitation about the new technology, and increased cost
  • Used truck market was already dismal due to the recession

MY2014 (Phase 1):

  • This initial phase of the current regulation regimen was first to include fuel economy along with emissions reductions
  • To be phased in over a 4-year period, culminating in MY2018
  • MY2014 was essentially a non-issue in terms of technology, so no pre-buy in 2012 or 2013

MY2021 (Phase 2):

  • Increasingly-stringent emissions and economy regulations will be phased in between MY2021-2027
  • EPA has yet to codify these standards into law, but a detailed proposal has been disseminated, and development has been underway for some time at the OEM’s
  • Combined truck and trailer strategies are part of the plan
  • Apparently 2027 is not yet achievable with currently-known technologies

It’s hard to believe, but MY2021 trucks will go on sale just over 5 years from now. New or heavily-revised models will most likely be required for this round of mandates. Two factors will determine whether the industry should expect a pre-buy. First, the degree of technological change – and the time available to test and develop it prior to release – will dictate buyer confidence levels. Second, the degree of price increases will determine how many buyers decide to hold on to their existing trucks longer, and/or look to late-model used trucks instead. Keep in mind EPA estimates of price increases have historically turned out much lower than actual increases.

We will continue to monitor all our sales channels – as well as stay in touch with the industry’s decisionmakers and market-movers – to stay on top of EPA-driven developments in the used truck market.