Economy, aging fleets spur boom in trucking industry
LAS VEGAS — A strong economy and cyclical truck replacements will spur significant organic growth in demand in the trucking industry through 2019, according to IHS Markit research.
Overall, the trucking market in the U.S. is undergoing changes with new regulations and vehicle technologies, according to Dawn Brusseau, IHS associate director for commercial vehicle solutions, who addressed attendees at an Automotive Aftermarket Products Expo event in Las Vegas last November.
"We've never seen such an influx of emerging technologies, powertrain innovations, as well as legislation changes and just a whole mix of new tires," she said.
- This story appears in the April 15 print edition of Tire Business.
"Your future is secure. Trucking is only gaining in popularity. … The need for trucking is strong and will continue to be strong within the market."
IHS research of U.S. vehicle registrations noted a major increase in registrations of Class 8 tractors in the first half of 2018, a trend that is expected to continue this year.
"Class 8 tractor growth is basically on fire," Ms. Brusseau said, noting IHS expects Class 8 registrations to increase about 8 percent to 340,000 units in 2019, versus 2018.
"Basically this is due to economic improvement and export levels are up. An increase in exports is indicative to more Class 8s since it's linked to line-haul traffic."
She also said fleets are in the process of replacing aging trucks, noting that 2015 was the last time there was a jump in Class 8 volumes.
"2019 will be a peak year in the current buying cycle," she said. "Robust freight conditions have been the primary support of Class 8 registrations in 2018. Order intake is strong, although supply constraints have inhibited the actual final delivery of the vehicles."
With OEM back orders, she expected the replacement cycle to extend into late 2019 and 2020.
"We believe the completion of this buying cycle will be completed by 2020."
As of 2017, 953,000 tractors on the road were five years old or younger, while 457,000 were between six and 10 years old. The latter number has been shrinking in recent years.
"This demonstrates that the fleet is getting younger, but at a relatively modest pace. Typically, line-haul trucks average 80,000 to 100,000 miles a year and are replaced within five years," Ms. Brusseau said.
Fleets with one to 500 vehicles accounted for 63 percent of new Class 4-8 vehicle registrations and 84 percent of vehicles in operation (VIO) in 2017, compared with fleets with more than 500 vehicles.
Because a large portion of the U.S. trucking industry involves very small fleets, "this means any dramatic change in technology is a huge risk to small fleet owners," Ms. Brusseau said.
"It's important to remember that the risk appetite of the smaller fleets when modeling a dramatic technology changeover, it is likely only large fleets will have the capacity to adopt these technologies, at least initially."
Meanwhile, growth in Class 1-3 van/pickup trucks over the past year is tied to growth in the construction and ecommerce market, Ms. Brusseau said, noting the increasing popularity of SUVs and pickup trucks at the expense of passenger vans.
The American Trucking Associations (ATA) reported that the advanced seasonally adjusted For-Hire Truck Tonnage Index increased 6.6 percent in 2018, the largest annual gain since 1998 and an improvement over the 3.8-percent increase in 2017.
"The good news is that 2018 was a banner year for truck tonnage, witnessing the largest annual increase we've seen in two decades," ATA Chief Economist Bob Costello said.
"With that said, there is evidence that the industry and economy is moderating as tonnage fell a combined total of 5.6 percent in October and November after hitting an all-time high in October."
It's a great time to be in trucking, according to Ms. Brusseau, but there are challenges, including:
- Regulatory pressure — There has been an increase in regulatory oversight with the electronic logging-device mandate recording drivers' hours of service and emission requirements to reduce CO2 levels and fuel consumption up to 27 percent for commercial tractors;
- Energy rivalry — In an effort to meet fuel economy demands, interest in alternative fuels, especially biodiesel, is expected to increase in the next decade although currently diesel dominates with two-thirds of commercial vehicles;
- New technologies/logistical opportunities are being considered to speed up delivery of packages; and
- Driver challenges — To address driver shortages, fleets are offering more home time, larger bonuses and better wages.
"Large fleets are competing in the heated marketplace of supply and demand. With a limited supply of drivers and increased demand for shipping, fleets are investing in their fleets to achieve maximum fuel efficiency and attract new drivers," Ms. Brusseau said.
Commercial trucks have never been more comfortable and efficient than they are today, she said, as OEMs try to make trucks safer and more comfortable in order to attract applicants for driving jobs.
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