U.S. truck manufacturers had a good year in 2011 when they sold over 246,000 trucks, up more than 50% compared to 2009. The implementation of new emissions regulations in 2009 provided a huge incentive for fleet owners to purchase units in 2008 ahead of the more expensive 2009 trucks. The regulations added more than $10,000 to the price of an on-highway class 6, 7 and 8 truck, as well as higher operating costs. But, freight tonnage has been rising steadily since about mid-2010, up more than 20%. In addition, large fleet owners have adjusted to the higher prices and have been forced to upgrade their fleets as the average truck is now more than seven years old. Both of these elements helped drive an increase in 2011 truck sales.
The truck manufacturers are in the envious position of actually having order backlogs. Many components are in short supply because the lower demand levels, which started in 2008, caused suppliers to decrease inventory capacity.
I am forecasting the U.S. truck market will recover nicely in 2012 with a gain of over 24% to more than 305,000 units. Most industry analysts believe that the U.S. market for large trucks will remain at a high level for a couple of years while fleet owners upgrade their fleets. Companies that build components for the truck manufacturers should have clear sailing through at least 2014.
North American truck manufacturers have been almost universally optimistic about the 2012 market’s prospects. Credit to buy new fleets is readily available at favorable rates making it more feasible for owners to update their fleets.
The only negative at this point is the rest of the world. Europe is expected to remain in a recession this year. Production at European vehicle manufacturing plants has been cut. Volvo, MAN and Scania have all announced layoffs. Some analysts expect a second- half 2012 recovery in Europe, but I think it unlikely.
Emerging markets saved everyone’s bacon last year, but this year as a group they are looking somewhat lackluster. India, Brazil and the rest of South America are expected to be anywhere from flat to down this year. China, which single-handedly propped up the world in 2010 and 2011, looks to be having economic problems that will reduce the amount of growth there, in some cases, such as construction equipment, by as much as 30%.
Truck vehicle manufacturers and component suppliers will be well served if they focus their attention on the U.S. market during 2012.