OEM’s Preview What to Expect in 2014

Transport Topics has a nice summary of where truckmakers stand on what will need to be done to meet the 2014/2017 emissions/economy regulations . Basically, it looks like the first stage of the phase-in will consist of incremental enhancements to engine accessories and aerodynamics. Think “smart” cooling fans, more efficient electronic components and pumps, optimized aero fairings, etc. The later stages of the phase-in are where the true investment will be needed. Body redesigns may be needed to meet the fuel economy standards, and I’m assuming more extensive engine changes may be necessary as well. Impact to the new and used truck markets? None of these changes will be free. At this point, it looks like engine technology will not change appreciably at first, so “fear of new technology” should be limited. However, even incremental changes generally carry a price premium, and don’t forget about the aero enhancements. So moderate price increases are likely. Then, as the full 2017 standards are met, the m ...

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Preliminary July Results

With about 90% of our July sales data received, we can start looking at estimated results.

First, it looks like sales volume in the dealer segment basically split the difference between May and June (see graph). As you might recall, May saw a steep decline from April, while June recovered about half of that decline. July puts us at right about the average for 2011 to date.

Price and mileage in both the retail and wholesale channels continue to rise in lockstep (see graphs). Retail and wholesale buyers are paying more for trucks with ever-increasing mileage.
In our supply-constrained market, we should be used to this type of unusual behavior by now. Look for finalized July results the first week of Spetember.

Auto Sector Ramps Back Up

Today’s Industrial Production figures show that the auto industry is well on its way back to full production after the Japan disaster. The Motor Vehicles and Parts segment of the Manufacturing sector jumped 5.2% in July, contributing to a minor rise in Manufacturing overall of 0.6%. This is the first month since the disaster that has exhibited a notable rise in the automotive sector. Consumer segments were up as well, with durable goods (carpeting, furniture, electronics, etc.) up 3.2%, driven primarily by a 5.9% increase in automotive products. Nondurables (fuel, clothing, paper products, etc.) were essentially a wash, with a 0.5% uptick driven mainly by increased utility output in this hot Summer month. The economy overall has of course been exhibiting mixed signals for most of 2011. Consumer confidence took a hit with the Dow swings of the past two weeks, so August’s consumer goods production figures might not be as rosy as July’s. However, consumer confidence is a lagging indicator, and if the stoc ...

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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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August 2011 Commercial Truck Guidelines

With the 3rd Quarter underway, the story is increasing volatility. The shortage of used trucks combined with trends in the wholesale markets is creating larger swings in our averages than we saw earlier. Dealer sales volume is the first measure to show fluctuation. After hitting a 2011 high in April, sales dropped way off for May, only to recover about half of that lost ground for June. To read the full August 2011 Commercial Truck Guidelines, download here.

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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Used Truck Association Newsletter Features Guidelines

The ATD/NADA Official Commercial Truck Guidelines Update is featured in the latest edition of Used Truck Association's Industry Watch newsletter. Chris Visser touches on increasing volatility in the used truck market.