Excess inventory a concern, but truck market remains strong: Volvo

SHIPPENSBURG, Pa. — Sluggish order activity and high dealer inventories are plaguing Volvo and other truck makers this year, but Volvo continues to project North American Class 8 truck sales to come in at around 250,000 units.

Not a bad year, though it may feel that way on the heels of 2015, which was nearly a record year for Class 8 truck sales. That was the message from Magnus Koeck, vice-president of marketing and brand management, who spoke to the truck press this morning before offering the first drives of trucks with Volvo’s 2017 powertrain.

Koeck said an inflated inventory-to-sales ratio across the general economy is slowing freight growth and having an adverse effect on truck manufacturers, who were pumping out trucks to meet last year’s strong demand.

“We are experiencing high inventory levels at dealers,” Koeck said. “Everyone is facing the same challenge and it will, of course, be tough to get the market going when we have so much inventory at the dealers.”

Koeck said demand for new trucks fell sharply last June and OEMs struggled to curtail production quickly enough to prevent an inventory build-up.

“That’s where we are today,” he said. “It is high levels and will continue to be high levels definitely into the third quarter. We anticipate it to fall down a little bit in the fourth quarter.”

Volvo is projecting US manufacturing activity to remain flat, while construction spending increases. It also anticipates oil will remain at about $50 per barrel and diesel prices at about US$2.27 per gallon for the remainder of 2016.

As a result, Koeck said, demand for vocational trucks is now growing relative to longhaul tractors. Last year, linehaul tractors accounted for about half of Class 8 trucks sold into the US market but this year that has decreased to 43% while vocational truck demand has increased. The regional haul market is also expected to grow relative to linehaul. Koeck said Volvo is carefully monitoring shifting trade patterns that may result from the recent expansion of the Panama Canal, which could funnel more containerized freight through the Eastern Seaboard.

Volvo continues to make gains in pushing its integrated powertrain. Koeck said 94.5% of Volvo trucks now carry Volvo engines and 88.8% are ordered with the I-Shift automated manual transmission.

“In five years, we won’t see manuals anymore,” Koeck predicted, noting the addition of low-speed crawler gears to the I-Shift opens it up to a whole new set of vocational applications. The new I-Shift with crawler gears and 2017 engine with enhancements to offer greater fuel economy were demonstrated to the trade press – and more than 100 customers – this week. Trucknews.com will have a review of the new powertrain and I-Shift with crawler gears later this week.

James Menzies is editor of Today's Trucking. He has been covering the Canadian trucking industry for more than 18 years and holds a CDL. Reach him at james@newcom.ca or follow him on Twitter at @JamesMenzies.

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