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Optimism growing for stronger Class 8 truck demand


LOUISVILLE, Ky. – Truck and component manufacturers at the Mid-America Trucking Show indicated they are increasingly optimistic about the Class 8 truck market in 2017.

Joe McAleese, chairman of Bendix, said going into this year, he expected Class 8 builds to be 5-10% lower than last year.

“Today I’m expecting truck build to be up 5% this year versus last year,” he said. “We’ve seen a really significant change in the dynamics of our industry and it’s in a very mixed environment.”

January and February Class 8 truck orders were surprisingly strong and sentiment in the industry seems to be improving, McAleese noted. However, he said there are still a lot of uncertainties. For example, McAleese said a border adjustment tax would hurt the economy.

“We are opposed to a border adjustment tax,” he said. “The most important thing to us as a supplier and an industry, is we want to be at the table as we have these conversations about tax reform. We need to do it in a way that does not harm the economy in the long-term and does not create winners and losers in the market and something like a border adjustment tax would create winners and losers.”

McAleese said the US economy is being boosted by strong consumer confidence, low inflation and gas prices, a low unemployment rate and continued GDP growth. Concerns remain around durable goods orders, industrial production growth and manufacturing. McAleese said the rally is based on US President Donald Trump’s promises to create a pro-business environment, with less of a regulatory burden on businesses, as well as corporate tax reform.

“I think our industry is reacting to that somewhat also,” McAleese said.

Trucking is benefiting from strong for-hire freight tonnage, low interest rates and cheap diesel.

As a result, “I expect build to be a little better than last year,” McAleese said. “I think we have turned the corner.”

That renewed optimism carried over when executives from Paccar addressed industry press. Paccar maintains its 2017 market projections at 190,000-220,000 Class 8 trucks in Canada and the US, but Mike Dozier, Paccar vice-president and Kenworth general manager, says it may now come in on the higher end of the range.

“As we came into the year, we probably would have been at the low end – the low to middle – but as things progress and optimism continues to build, we move to the middle and upper end of this range,” Dozier said in an interview with Truck News. “We finished 2017 at about 217,000, so it leaves some room for growth above that.”

Kyle Quinn, senior vice-president of Paccar and Peterbilt general manager, shares that view.

“In 2017, we expect the truck industry to continue its strong performance,” he said. “Freight tonnage is at near record levels and is expected to go 1-2% higher. In Q4 2016 and early 2017, prices were improving in the spot freight market. The last few months, the energy sector has been strengthening and rig counts are up from their bottom in 2016. The used truck market continues to be a headwind, but we expect used truck prices to stabilize throughout the year. And the legislative agenda is showing some promise that could provide an economic lift.”

Some promised corporate tax relief, Quinn noted, could further improve customer sentiment.

“The market has strengthened since the election and quoting activity indicates that could continue further into the year,” Quinn said.

 


James Menzies

James Menzies

James Menzies is editor of Truck News magazine. He has been covering the Canadian trucking industry for more than 15 years and holds a CDL. Reach him at james@newcom.ca or follow him on Twitter at @JamesMenzies.
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