Summary
FTR Associates President Eric Starks shows North America Class 8 October order numbers at 21,792 trucks. This is a rate more triple than we were seeing February through July of this year - ranging 6,000-8,000 per month and double the August and September numbers. My friend Eric knows the numbers better than most, so we’ll offer some customer comments as to why.
Analysis
Over the last several months, we have written about input directly from end-users and financiers we work with. They showed the current “relative” surge was a mini-prebuy in front of the 2010-compliant engines introduction. It looks like we’re heading back down for 2010, although deliveries will continue into the 2nd quarter as we clean out the pre-2010 engine pipeline.
This coincides well with the 4th Quarter CK Commercial Vehicle Fleet Sentiment Report (Article Link) where their trailer purchase index are off 23% and truck purchases are up notably - mostly again in front of the 2010 engines.. The drop in trailer orders is expected with the surge in truck orders in the current marginal freight and constrained lending markets.
As of this week from our work with financiers and truckers, the queries for new truck financing have fallen off to half of what we were seeing just a month ago. Assessments for used trucks continue, due to the considerable number of good low priced trucks available in the marketplace today. For example, some of the trucks just auctioned are great ex-Walmart trucks with APU’s (auxiliary power units) that sold in the high-teens! This one-sixth the purchase price of new that will buy time. That tells one story.
We know that the OEM order boards are filling up at current ramped up production levels. There is not a desire to ramp up even more than they already have done - only to have it drop dramatically again.
Having just attended another dealer meeting, a growing sentiment toward Navistar’s Exhaust Gas Recirculatin (EGR) approach is - the more you pitch it, the more skeptical the market becomes about the evolving storyline. The initial pitch was that it was no different than current engines, but then there were emissions credits used to bridge until the final solution. It was first that Selective Catalyst Reduction (SCR) was bad, but now it’s good.
Now the pitch is that they don’t have the SCR experience in Europe as the competition does. Well, MAN does (even though they may be moving to EGR in some models). Then there is the 13L v. 15L is issue where many have such big bore v. small bore experience - where the 15L Cat-a-Star / Maxx-Cat / Cat-Force (whatever current field name) isn’t mentioned.
The market loves the Navistar Prostar and their dealer network (so do I), so a suggestion is to quit changing the story! I was in sales in the ‘80’s at Cummins when they came out with the ill-fated Low-Flow-Cooling system. These meetings remind me of when I was presenting at customer forum - and the company line was also met with skepticism. That skepticism turned into reality. Nvistar's Jim Hebe for sure remembers that. I guess I really didn’t believe it either, but the customers voted with their (lack of) orders!
When one asks customers about EGR v. SCR, one gets answers that has been well documented by a number of us. The proof will come likewise in real orders, but there is a truckload of skepticism regarding both - thus the wait-and-see approach to come.
Regardless, market-shares are not changing much from earlier this year with Class 8 Navistar and Freightliner coming in close together around the high-20’s each with Paccar (Peterbilt & Kenworth) coming in not too far behind at a combined 25%. While new orders will be off again to less than 10,000 units per month through the 3rd qtr 2010, expect to see Freightliner to gain share.
