Evidence of Price Ceilings in Retail and Wholesale Markets

As reported in this month’s Guidelines (to be released shortly), the average retail selling price of 4-year-old sleeper tractors has been flat since the beginning of the year. Average mileage has steadily increased throughout that period, which at least partially explains the lack of upward movement. The other likely explanation is that at $60-$65K for a truck with well over 400,000 miles, buyers are finding it easier to make a business case for moving to a new truck purchase or lease. More evidence of a price ceiling lies in the wholesale market. While 4-year-old trucks were flatlining in the retail market, price and mileage were returning to their traditional inverse relationship in the wholesale market. In statistical terms, the correlation between wholesale price and mileage from January to December 2010 was 0.11, indicating essentially no relationship. From January to July of 2011, however, that figure drops to -0.79, indicating a strong negative relationship. Based on this recent data, we can ...

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July Commercial Truck Sales Results

With the last of our “late reporter” dealer sales data in our database, we can look at complete July results. Looking first at volume, this last group of reports pushed the average retail sales per dealership back up equal to March, in a tie for second-highest volume of the year to date. As we’ve repeatedly said, sales volume will fluctuate depending on number of trucks entering the secondary market in a given month. A sustained upward trend would be nice, and based on increased new truck sales volume it would be logical to assume this will be the case – but with fleets increasingly bypassing the dealer network, that assumption is not a sure thing. On the price side, there was an unexpected leap upwards of $2500 in average retail price of all sleeper tractors under one million miles. Mileage was lower by about 8000, which in this climate probably had no impact on price. The population of trucks reported sold was slightly younger on average, but only by two months. However, this decrease was driven mainly by ...

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Looking at the Construction Market

We haven’t posted any data from the construction segment since June because there hasn’t been much marketplace movement since then. With most of our July sales data received, we can at least look at how that segment performed in the first half of the year. Like last time, I’ve combined retail, wholesale, and auction sales into one graph. This is due to the low volume of sales data for that segment, and is legitimate from a statistical standpoint because we’re looking for a segment-wide trend rather than absolute numbers. Trucks included are all body types, all model years, adjusted for mileage and age. I have gone through the data and eliminated trucks with outlying price, mileage, and specs, so month-to-month mix is comparable. Interestingly, the average age of all construction trucks reported sold has varied by just 16 months from January to July of 2011. This makes it easy to apply a model year adjustment. For reference, the year to date average age of this sample is currently 93 months. Average mi ...

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July Truck Tonnage Declines from June

The ATA reports that truck tonnage for July was down 1.3% vs. June. This month again shows a disconnect between Industrial Output/Manufacturing and reported tonnage (Manufacturing increased in July). Logic would suggest that tonnage should rise concurrently with truck-centric industrial measures, but that is not currently the case. Stay tuned for a closer look at this situation in a future blog.

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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