TAMPA, Fla. — Navistar executive Jim Hebe has proclaimed the days of long nose conventional trucks “dead and gone” among a series of pronouncements that suggest North America’s trucking industry is about to face a series of radical changes.
The outspoken senior vice-president of North American sales operations pointed to the growing use of intermodal shipments, shorter truck hauls, and the greater importance of the top 30 truck fleets in terms of vehicle sales. Equally, he suggested the idea of “phony down payments” is gone in an era where fleets are struggling to deal with the depreciation on vehicles equipped with costly emission controls.
“We’re in a whole new world today,” he said during a keynote address during the annual meeting of the Technology and Maintenance Council.
While classic long-haul conventional trucks accounted for 25% of Class 8 sales in 2000, the market share has since dropped to 5.8%. “It ain’t coming back. That truck is going to be rather unique on the highway,” he said, suggesting that traditional buyers of the equipment will have trouble getting financing. Part of the blame goes to the cost of emission-controlling equipment. Since 2002, emission regulations have added $25,000 to $30,000 to the price of a truck, and the latest 2010 emissions will ask for $10,000 more from an industry that has been unable to reclaim a dime of these investments in the value of the used vehicles.
A $118,000 tractor is depreciating $30,000 in a single year, Hebe said. “What do you think a finance company is going to think about when they look at that amount of risk?” Owner/operators, for example, might need to put down $40,000 on a $130,000 truck. And as fleets adjust the depreciation rates on equipment, they will begin to lose more of the competitive advantage they have over rail. It isn’t the only change to expect in the truck market.
The market for Class 4-8 trucks – once “normalized” at 350,000 units a year – is now half that size. Last year, North American Class 8 sales slumped to around 100,000 trucks, while there were less than 50,000 of the lighter Class 6 and 7 options. The latter trucks account for less than 20% of the business, while Class 4 to 5 trucks have grown to 30% of the market. He also alluded to the fact that the Class 4 and 5 vehicles will have a new manufacturer in the next “couple of weeks.”
The lighter vehicle segment will become even more important if Hebe is right in predictions that would see the trucking industry lose more of the long-haul market to railways. Railways are now competitive in hauls as short as 400 to 600 miles, which will lead trucks to focus on more regional service, he suggested. As a result, the number of Class 8 trucks will continue to decline, and those that remain will be moving higher densities of freight.
“It’s going to be tough on manufacturers, it’s going to be tough on dealers, it’s going to be tough on suppliers,” he added, noting how maintenance services will need to change in the process.
Truck manufacturers who have now integrated their own engines need to establish a service network that the buyers of Cummins, Caterpillar and Detroit Diesel came to expect, he added. Manufacturers might also be focusing more attention on the largest customers of all. The 30 largest carriers and two leasing companies accounted for 47% of 2009 sales, and 60% of the orders in the last 90 days of the year. “The concentration of power in this industry is changing dramatically,” Hebe said, noting how a handful of key buyers can have a dramatic influence on a specific brand’s market share.
In terms of the equipment that everyone buys, he referred to further integration, with electronics and electrical systems becoming a key focus. While he doesn’t expect much growth in the use of fuel cells, he did refer to product introductions that are focusing on natural gas. There will be further “refinement” of technologies to meet 2010 emission standards, he added. The next frontiers in terms of greener vehicles will include fuel economy, parasitic losses such as the amount of drag in the rear axle, and the ability to recapture energy. “There’s a lot of heat generated on that truck and clearly we got to find ways to use it.”
“Five years from now, pouring a second fluid into a truck to meet 2010 emissions will be obsolete,” added Hebe. Navistar remains committed to its in-cylinder solution, but it is exploring the potential use of a solid-based SCR.
Pining for the good old days? Forget it. “Don’t look for it to ever go back where it was,” he said.
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