Lots of Trucks, Lots of Sales
A continuing strong economy and recovery from the hurricanes are driving purchases. Plus, a pre-buy could develop next year.
Tom Berg
Senior Equipment Editor
Hurricanes Katrina and Rita ravaged parts of the South and sacked the U.S. oil industry, and some thought for sure the entire economy would be damaged.
However, any effects are apparently short-term, and users still have healthy appetites for all types of trucks – particularly medium-duty models – whose sales rise and fall with the general economy. Sales of Class 6 and 7 vehicles are up by 12 percent to 15 percent from last year, and dealers in areas affected by the hurricanes report strong demand as reconstruction picks up.
Most domestic builders and importers report sales increases, but some have lost ground in the continuing competition brought by aggressive pricing and model updates. Conventional-cab models remain overwhelmingly popular, but some sellers of low-cab-forward vehicles also report gains.
Freightliner and International say their fleet customers have cut back their orders because of high fuel prices, higher interest rates and uncertainty about the economy. Accordingly, International scheduled a production cutback at its Springfield, Ohio, plant from 170 medium-duty trucks a day to 120. International is trying to spark orders with the offer of $1,250 in fuel money on a pre-paid debit card with certain orders.
On the other hand, Ford reports record sales of its F series in general and strong demand for its F-650 and F-750 mediums. One competitor observes that Ford has been very aggressive in selling to markets such as towing, with special equipment packages and pricing. Ford says 53 dealers in the hurricane-devastated areas were affected, but quickly got running again. "I need equipment!" dealers told the factory as buyers began coming in to get vehicles to replace those ruined by the storm. This, along with the healthy economy throughout the country, are expected to continue to drive demand.
Many water-ruined trucks and cars may already be showing up in auctions and independent used-vehicle lots, attendees were warned at a recent meeting of the Technology and Maintenance Council. Mechanical components can be drained and relubed, but electrical systems and electronic parts can't. The trucks may run but will give constant grief. A joke going around the used-car business in the Midwest is, "We're just getting in some bargains from St. Louis" – evidently a transshipment point for vehicles hauled out of the Gulf Coast region.
General Motors is claiming big sales and market share gains, as its C series conventionals have become popular after early problems and equipment shortages were sorted out. It also says that sales of its W and T series LCFs – built in cooperation with partner Isuzu – are up by 50 percent. Isuzu and GM together dominate the LCF market, but LCFs comprise only 10 to 15 percent of total medium-duty sales. In spite of current sales successes, the heavier LCFs serve a dwindling market, Isuzu thinks, and it has begun hedging its bets by introducing its H series – rebadged and refaced GM conventionals.
Hino, which dropped its highly regarded but slow-selling LCFs last year, says its American-made conventionals are a big success, with sales up by nearly three-fourths over 2004. So the switch to conventionals obviously was a wise one. Hino also has expanded its dealer network from 84 to 135, and now has coverage in most populated areas of the United States.
To be sure, there will always be a market for the highly maneuverable LCF, especially in urban delivery roles. Nissan Diesel America says it's busily identifying niche markets where its UD low-cabovers can play a useful role. One is the proliferation of restaurants in the Sunbelt. All need constant deliveries of food and supplies, and LCFs work well in getting into and out of crowded parking lots.
Nearly all Class 6 and 7 trucks now are diesel-powered, but wait 'til 2007, GM says. Its exclusive gasoline V-8 may become attractive to buyers when they're faced with higher prices for diesels built beginning in January of '07. Gasoline engines make sense when annual mileages are less than about 25,000 miles and road speeds are low. They already cost considerably less to buy than diesels, and the difference will be greater in '07. Those who build only diesel-powered trucks disagree, noting that anyone who keeps trucks a long time will benefit from diesel engines' greater durability, longevity and reduced maintenance.
But maintenance on '07 diesels will be higher and their durability will be an unknown. (Fleet reports on post-October '02 heavy-duty diesels range from OK to dismal.) Stricter exhaust emissions limits will require expensive particulate traps, which have to regenerate periodically and/or be cleaned. Other changes include bigger cooling systems to handle greater heat rejection from diesels.
In any case, the new diesels will cost more. Until now, truck and engine builders have declined to guesstimate how much more. But GM now estimates the per-medium-truck price increase at $2,000 to $5,000, and has begun warning customers about it. Ford says most buyers of medium-duty trucks don't follow equipment developments closely and probably won't realize what's happening in the emissions area until next summer. Then they'll begin clamoring for new trucks to beat the January '07 deadline.
So what we'll probably get is another pre-buy of trucks, something like what happened in the months leading up to October '02 and January '04. Then it involved heavy-duty trucks, whose owners were well aware of what was coming and bought the so-called pre-emission vehicles, then stopped buying the new models for many months after the deadline. This time a pre-buy may well include medium-duty trucks. Many builders believe sales will be even stronger all through '06, then fall off in '07.
If there's hope for the '07 picture, it's that diesel particulate filters are already in use in Japan and elsewhere in the world. Those who have been producing PF-equipped trucks say they are gaining experience, which will help both them and their American customers. This includes General Motors-Isuzu and all importers of Japanese engines and trucks – Hino, Mitsubishi Fuso and Nissan UD. Others will have to catch up, and ongoing lab and road testing should help them do that.
Truck Model Roundup continued...
