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Posted by on Aug 30, 2013

Used Heavy Duty Trucks Expected To Flood The Market

Used Heavy Duty Trucks Expected To Flood The Market

Those in the heavy duty commercial truck supply industry have long been waiting for signs that sales of new trucks may increase and provide stimulation for the market. An article published in the August 5 issue of Transport Topics suggests that the wait may soon be over. This article is based on a study performed by Frost and Sullivan in which the reputable consulting firm predicts a marked rise in new truck sales that could begin as early as next year.

Evidence of Coming Growth in New Truck Sales

The Frost and Sullivan study predicts that between 2012 and 2019, new truck sales (specifically, class 8) will increase by around 4.5% annually. This anticipated escalation in new truck sales is expected to track with overall growth in the U.S. economy in coming years.

A recent Bloomberg News survey of major financial institutions revealed that the growth in U.S. GDP is only around 1.8% currently but should jump to approximately 3% by 2015. To put it simply, improvement in the economic climate will generate more freight to be hauled across the nation’s highways.

This increased tonnage load for trucking companies will exert the pressure required to convince them to invest in fleets of new trucks. They will not be able to rely on current fleet levels because the average heavy duty truck in America is nearly 7 years old and has a whooping 1 million miles logged. In the interest of avoiding costly downtime, trucking companies will invest in new trucks to address increased workloads.

Furthermore, the trucking industry is poised for future growth in employment that exceeds the national average. According to a report in the Monthly Labor Review, overall U.S. employment will increase 14% by the year 2020. And according to the Occupational Outlook Handbook, trucking employment specifically is projected to increase 21% between 2010 and 2020 – significantly faster than the national average. These employment predictions align with the conclusion of the Frost and Sullivan study – that there is going to be an increase in new heavy duty truck sales in the near future.

In fact, we are already seeing some moderate increases in sales. Wardsauto.com reported that medium and heavy duty truck sales increased by 5.8% during the month of June. Truck classes 4, 5, and 6 showed the most significant sales boosts.

Resulting Surge in Used Truck Availability

The study by Frost and Sullivan not only predicts a fortuitous increase in new truck sales, it also claims that the market is going to experience a surge in used trucks. As carriers realize that new trucks are indeed expensive but confer the benefits of better gas mileage, fewer maintenance costs, and less downtime, they are going to turn their old trucks over in favor of newer models.

Case in point – Schneider National has recently stated that they will be having a “summer clearance sale” with the goal of relieving themselves of around 450 older, heavy duty trucks. Other major carriers have made similar moves in the past few months. This surge of used semi trucks will, at least for a time, create a surplus where supply exceeds demand. As a result, the prices for these used rigs should be relatively low.

If the predictions of Frost and Sullivan prove to be accurate, we can expect an increase in new truck sales along with a surge in used truck supply. It seems clear that the heavy duty trucking industry will be anything but stagnant in the coming years.

Written by Janet M. Tiedtke of Taylor and Martin.

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