VTNA: 2017 will see continued dip in Class 8 sales, distribution changes

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Fleet Owner  /  October 25, 2016

Volvo Trucks North America (VTNA) still sees North American Class 8 truck sales of 240,000 this year — which an exec said is "more normal" following a banner year in 2015 — but next year, the number will dip somewhat lower, the OEM predicts, noting a few additional trends.

"You know about last year, which was fantastic with over 300,000 [Class 8] units sold across North America," said Magnus Koeck, vice president of marketing and brand management at VTNA. And while the industry could "easily get used to" such numbers, he noted that that expectation was what led truck OEMs to continue higher production rates into a market slowdown, which built up inventory on dealers' lots.

"There's still a lot of inventory out there at the dealers," Koeck said, speaking at the company's first Safety Symposium held at the Michelin Laurens Proving Grounds in Laurens, SC. "That's the major impact we've seen on new orders for the industry. We are seeing those inventories coming down, but they will probably be out there for at least this year and probably into next year, and then we may see an upturn in the market."

Even with a slight increase in sales over the summer, going forward, "we believe there will be a 215,000 total [Class 8] North American market next year," he added. "We believe it's going to continue to decline a little bit."

With VTNA's core business segments — long haul and regional haul — the company continues to observe a shift from the former to the latter in the North American market. Regional haul rose from 27.7% of the North American market last year to about 29% this year, and VTNA believes that will grow to about 35% in the near future.

Long haul, Koeck noted, dropped from 50.4% of the North American market in 2015 to about 46% for this year, and VTNA sees that continuing to settle to about 43%. It's due mostly to continued driver shortages and shifting distribution models, he added, and so far not from the Panama Canal being opened up this year to allow large container ships through.

VTNA has also seen an uptick in the construction sector this year by about 3-4%, which has boosted sales a bit although it's "not our strongest segment," Koeck said. The company predicts that trend will continue in the coming years.

And as far as the fuel behind heavy trucking, not surprisingly, it's diesel, diesel, diesel, and VTNA believes that won't change anytime soon. Koeck noted that the U.S. Dept. of Energy expects diesel prices will climb at a rate of 2.2% annually through 2040.

While crude oil and diesel prices indeed have increased a bit in the second half of 2016, "diesel is still cheap," noted Koeck, and that has held back growth in natural gas. That alternative fuel powers about 2% of the North American heavy trucking market, and VTNA believes that will stay about flat for the time being. 

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Volvo anticipating further decline in Class 8 truck market

Truck News  /  October 25, 2016

Volvo Trucks is projecting North American Class 8 truck sales are going to get worse before they get better.

Magnus Koeck, vice-president of marketing and brand management, told the truck press Monday that Volvo is predicting a total North American Class 8 market of 215,000 units for 2017. That’s down from the 240,000 that will be sold this year and way off 2015’s mark of more than 300,000 units.

“We believe it’s going to continue to decline a bit going into next year,” Koeck said. “We have a lot of inventory for the industry out there at the dealers. When the market came to a halt in June and July of last year, OEMs, including ourselves, continued to produce trucks in our factories as if nothing has happened and eventually that became a lot of trucks at dealers and that’s, I’d say, the major impact that we can see now for new orders for the industry.”

Dealer inventories are being reduced, Koeck said, but they will still be a factor into next year. The inventory glut has been exacerbated by a slowdown in freight volumes. The reduced order intake is especially acute in the long-haul segment, which is down about 35-40% and regional haul, down about 32%, and these are the two segments in which Volvo is strongest, Koeck pointed out. The construction segment is up about 3-4% this year.

This is a trend that could continue. Koeck said the expansion of the Panama Canal will bring more freight to the eastern seaboard, which could be a boon for regional trucking. And the industry’s inability to find linehaul drivers will also drive the regionalization of trucking. Koeck said longhaul’s share of the Class 8 market could fall from about 50% today to 43% of the total market while regional haul increases its share from about 27% today to about 35%.

Natural gas today comprises just 2% of the US market and Koeck said he doesn’t expect that to change in the near future. Koeck made the comments prior to Volvo’s Safety Symposium, where it demonstrated safety systems such as Volvo Enhanced Stability Technology and its new Volvo Active Driver Assist. More than 100 customer and dealers were invited to attend.