NEW YORK — Truck industry analysts Bear Stearns believes that the class 8 pre-buy of 2006 is being severely underestimated.

Preliminary data for August orders of heavy-duty trucks was 17,900 (not including last minute cancellations, revised orders, backlog) — down 35 percent year-to-year and 37 percent from the month before.

The drop indicates the 2006 retail sales boom has ceased, but Bear Stearns suggests that most of those orders were for ’07 models with ’06 engines, for delivery in first quarter next year.

Bear Stearns says this year’s boom was based on a
prebuy because the average age of TL fleets fell dramatically.

“Either way — a pre-buy or a pre-build — will likely prove disruptive to ’07 production and pricing,” the firm warns.

Under the EPA rule, truck engines cannot be made after 2007. However if an OEM has an engine in inventory on or before that, the truck can be assembled. Bear Stearns estimated this translates to about between 30,00 and 45,000 truck orders in early 2007. Although the firm suggests that capacity, of about 50,000, is just about sold out.

In recent months truckmakers have been hinting that the expected downturn next year may not be as severe as predicted a year ago.

But according to an informal survey Bear Stearns conducted among senior execs at small and private TL fleets, most carriers indicated they would not actively pursue trucks in ’07 and instead would take “a wait and see approach” with the new low-emission technology, which — mandated by the EPA — is about $10, 000 to $12,000 more expensive than current equipment and must run on ultra low sulfur diesel.

“We were somewhat surprised that many of our contacts did not plan on buying any trucks at all next year,” the firm stated in a report to clients. “Most of the contacts we spoke with said they did indeed pre-buy ahead of the Jan. 1, 2007 emission deadline with most saying they were able to reduce their average respective fleets by at least one year.”

There’s been some ongoing debate whether this year’s sales record is mainly a result of the pre-buy or driven by increasing freight volumes and a strong North American economy.

Bear Stearns has been saying for months that the pre-buy is directly responsible. For one thing, the average age of TL fleets declined from roughly 28 months in ’02 to 17 months in ’05, says the firm, which projects the average age to decline further to 14 months by year’s end.

Meanwhile, in the survey, responses from carriers testing ’07 engines this year has been mixed, according to Bear Stearns. It’s generally accepted that fleets are more comfortable with technology, which has been in place since 2002.

But the cost is the biggest concern. Fuel economy with ULSD was better than expected, indicated the respondents, but there was slight power degradation.

— To read a complete 2007 sales outlook, be sure to check out the upcoming October print issue on Today’s Trucking magazine.