The recently announced EPA27 emissions standards are expected to add roughly US$30,000 to the cost of a Class 8 truck, which is setting the stage for a potentially unprecedented pre-buy.

Pre-buying Class 8 trucks refers to pulling forward orders, to avoid the cost and uncertainty related to new emissions standards, leaving fleets to compete for build slots. Fleets could be more likely to pre-buy, as they continue to feel the sting of the supply chain disruptions and heightened truck demand seen as the economy emerged from the Covid-19 pandemic.

Lead times stretched to as long as 18 months. “And it made fleets think about how they procure their assets,” said Brian Antonellis, senior vice-president, fleet operations, with life-cycle analysts, Fleet Advantage. “I think the new normal is, you have to be preparing [truck orders] three years out.”

That means fleets should – and in some cases, are – already planning their 2027 equipment purchases and whether they should pre-buy to get ahead of the price increases, or delay purchases until the new engine technologies aimed at further curbing NOx are well proven.

ACT Research believes the pieces are all in place for a potentially significant pre-buy.

“For most truckers, the decision to pre-buy is a two-factor equation: Do I want to pre-buy, and, can I afford to pre-buy,” said Kenny Vieth, ACT’s president. “We think that for the first time since EPA07, those two conditions are lining up ahead of EPA27 as the freight cycle should be supportive of carrier profitability in 2025 and 2026 in the lead-up to the mandate.”

Since this marks the first round of EPA emissions standards where technology costs and lead-up conditions support a pre-buy, Vieth added, “There is a strong case to be made that the pre-buy will be bigger this go-round.”

Biggest since EPA07?

Bigger than what? ACT predicts the last major pre-buy ahead of EPA07 totaled about 100,000 units. Against that backdrop, truck OEMs are readying for a spike in demand ahead of 2027. Giving a market update to trucking journalists in February, Volvo Trucks North America’s vice-president of marketing and brand management Magnus Koeck, said the truck maker is projecting a record year for Class 8 demand in 2026.

“We truly believe customers will not wait until 2026 to buy units because they realize if they wait that long, the industry won’t be able to supply [enough] trucks,” Koeck said at the time. “Which means, the pre-buy will start earlier. We probably will see that already this year in the back end and into 2025 and of course 2026.”

Not everyone is convinced. Avery Vise, vice-president of trucking for industry forecaster FTR, noted “FTR currently is not forecasting accelerated replacement in the Class 8 market due to the 2027 NOx regulation. Could it be significant? Yes, but there is still no certainty that it will be so.”

He said March orders were below replacement levels, suggesting there’s no urgency among buyers to pull forward orders to 2024. FTR is already projecting strong Class 8 truck demand over the next two to three years, and Vise questions the OEMs’ abilities to ramp up capacity to meet additional demand stemming from a pre-buy.

‘Wide open questions’

As for the EPA27 standards, Vise asked, “Will that induce more accelerated activity ahead of even more change? Or does that limit how much change the market can handle over the next few years? Wide open questions at this point.”

ACT Research believes private fleets, with their typically longer trade cycles, may already be pre-buying. This is because Class 8 tractor orders are trending at record rates, even while for-hire carrier profitability continues to suffer.

Fleet Advantage’s Antonellis also believes a pre-buy is likely. He said it’s the number one conversation fleet customers are asking about. But to pre-buy, or not to pre-buy, is a complex question and the answer varies.

“It all starts with data,” Antonellis said. “Understanding where you are from a cost-per-mile standpoint and understanding how you’re going to be able to project that cost going forward.”

Fleet Advantage has some 50 billion miles to draw upon to predict cost-per-mile as the fleets age, he added. “We can predict where you’re going to be from a cost standpoint, and how cost is going to affect you in either pushing purchases or leases out past 2027 or pulling them before 2027,” he explained. “And then you can weigh how much risk you want to take with the new technology. It really all starts with having a great grasp on data.”

ACT’s Vieth said fleets should be engaging their OEMs and dealers on the coming emissions standards and their impact on cost. He noted trucking conditions are turning more favorable and “as for-hire economics firm up across 2024, we suspect the lines will get long quickly looking to 2025.”

Understanding allocation

If a pre-buy materializes, fleets would do well to discuss with their OEMs how they plan to allocate build slots. ‘Allocation’ became a dirty word among fleets, through the supply constrained period of Covid, when fleets struggled to get the power units they needed to capitalize on a strong freight market.

“Allocation through Covid was based on a one-for-one, year over year truck build. So, it’s really important that you don’t go out and buy 100 trucks in 2024, which you get in 2025, because then you’ll have zero allocations for 2026,” Antonellis explained. “So along with trying to figure out how many trucks you want to build, how much of the risk you want to take in the new technology in 2027, you also have to think about how you’re going to create your pathway to hold your allocation for the next three years so that you can get that equipment.”

These are the types of strategic conversations Fleet Advantage is having with customers, one of which initially wanted to order about 300 trucks in 2026. “I said, ‘You understand, if you don’t buy trucks in 2025, you’re going to have zero allocation for 2026, so why don’t you split your order between 2025 and 2026? We will split that 300-truck order into two 150 truck orders and that allows us to protect our allocation for 2026.”

“We think the risk into 2027 has double-whammy potential.”

Kenny Vieth, ACT Research

If a significant pre-buy does occur in 2026, truck OEMs may face a grim market the following year, and there could be repercussions for fleets as well.

“What is going to happen after 2026 is another story,” said Volvo’s Koeck. “2027 will be a big dip due to the new emissions legislation, and with that comes quite dramatic increases in the pricing of the trucks.”

Added Vieth: “We think the risk into 2027 has double-whammy potential. Not only will a lot of equipment have been added, as freight cycles ebb and flow, there is a risk that the end of the pre-buy will be occurring into softening freight volumes, leaving upside-down supply-demand dynamics in 2027 that will be bad for carrier profits. And of course, as vehicle sales are pulled forward out of 2027, we expect medium- and heavy-duty truck demand will fall as the market begins the process of rebalancing.”