Summary
In the midst of the optimism with the recent surge in truck orders, reality is setting back in that 2010 truck orders will be slow due to the mew emissions rules - again! We have written several articles over the last 6-months about the slow truck sales marketplace leading into the current prebuy. So here’s a look ahead....
Analysis
Let’s hope this last big emissions change for a while. One reason is that it keeps whipsawing truck-makers Navistar, Daimler Freightliner, Paccar and Volvo / Mack - along with engine-makers like Cummins and drive train suppliers like Eaton Corp.. While orders are up 100% year-over-year for October, it’s generally accepted that orders will be slow in 2010 until the marketplace gets comfortable with the new engines - and figures out how to get them financed.
The input from ACT Research and FTR Associates match up pretty well - and there is agreement that the current surge is a prebuy. Of interest is the CK Commercial Vehicle Research survey of potential buyers for 2010- technology, where 42% of those surveyed said they “might” buy new trucks in 2010 - but those who “may” would only be buying at 50% levels for the first half of the year.
From our real world work primarily with financiers, we generally agree. The trucking financials we are looking at today for financing are still ugly. Rates and utilization are down for 2010, following 2008’s killer fuel costs - all of such hurting profitability and not painting a pretty picture for financiers.
Even though the new engines will be built in earnest after Jan 1, they will not be hitting the road in numbers until well into the 2nd quarter. There is not only the new Selective Catalyst Reduction technology to think through, but also the increased price and getting it financed. Even the Navistar Advanced- Exhaust Gas Recirculation engines are of concern due to higher pressures, temperatures and also pricing / financing.
The other common issue in all of this is freight demand, expected to not change much through 2010. Even so if the new engines perform well out of the box, we should see orders improve more quickly than in 2007 simply because of the fewer trucks that will be in the pipeline.
