Last year was an excellent year for heavy duty truck sales in the USA, but these are troubled times for the US truck market as 2020 looks uncertain for two reasons, the economic slowdown and the consequences of COVID-19. Charleen Clarke and Gianenrico Griffini report for Diesel News.
Last year the US heavy duty truck market grew by 10.3 per cent, from 250 545 units in 2018 to 276 348 heavy truck sales in 2019. While impressive, this wasn’t a record; back in 2006, more than 284 000 vehicles hit the road.
While the United States market was buoyant last year, the two North American Free Trade Agreement (NAFTA) countries, Canada and Mexico, also had a good 2019. Overall, last year in the NAFTA area, about 340 000 trucks hit the road, compared to the 300 000 units of 2018, which was already considered an excellent year.
The Daimler group, with the Freightliner and Western Star brands dominates the heavy duty segment. Freightliner alone enjoyed a market share of 36.5 per cent in December 2019. Practically, this means that more than one in three new heavy duty trucks in the United States is a Freightliner-badged vehicle. Daimler’s market share in medium duty was 37 per cent in 2019, slightly down from 38.4 per cent in 2018.
The Paccar group, which owns the Kenworth and Peterbilt brands, ranks second. It has done an impressive job of gaining heavy duty market. In 2005, it had 23 per cent but this grew to 29 per cent in 2018 and 30 per cent in 2019. International is the third-largest player, with a 9.2 per cent share of the market.
The other leading players in the heavy sector are Volvo Trucks North America (9.2 per cent market share) and Mack with 7.7 per cent.
In October last year, at the North American Commercial Vehicle Show (NACV) in Atlanta, all the major truck manufacturers announced that they expected a market downturn in 2020. The most credible forecast was for a heavy duty sales volumes around 240,000 units in the three NAFTA countries. “We see next year as a solid replacement volume year,” predicted Peterbilt general manager Jason Skoog, during a media briefing at the NACV.
Of course, at that stage, no one had even heard of Covid-19; the predictions were attributed to the North American economic cycle and the uncertainties as a result of the ongoing trade war between the United States and China.
The predictions for 2020 rested on three assumptions. The first was a decrease in the demand for transport (and vehicles) for long and medium-haul applications. It was expected that this would be partially compensated, however, by substantial stability in the vocational segment, especially within the construction sector. The second was a robust increase in the gross domestic product (GDP), sustained by ongoing and unchanged consumer expenditure. The third assumption was stability of the diesel price.
However, already in November and December 2019, there was a downward trend in heavy-duty truck sales. Last November, in particular, the order book for heavy duty stood at 17 500 units, reflecting a sharp drop of 20 per cent compared to the previous month. If we consider incoming orders for all heavy and medium duty, the decrease was around 15 per cent over the previous month and 38 per cent down on November 2018.
Effects of the epidemic
The downward trend of heavy-duty truck demand in the United States also continued in December, with sales down 11.4 per cent compared to the same month in 2018, and things didn’t improve in the first two months of this year either…
The year started off relatively well for the trucking industry as Americans panic bought whatever they could in the first quarter of 2020. However, this didn’t translate into truck sales. In January 2020, orders for new trucks were 7,300 down on January 2019).
The weakening of the economic cycle in the United States, the increase in stocks of unsold trucks and the possible effects of the pandemic on the transport demand have led market research company Act Research to lower its sale estimates for this year, down from 224,000 truck sales in February to 209,000 at the beginning of March and down again now to 170,000 vehicles.
Who knows if the 170,000 forecast will even be achieved? According to the Wall Street Journal, truck rates are falling as the coronavirus shuts down transport demand. “Truckers that aren’t moving food, medical supplies or other essential items ‘are sucking wind’,” Jeff Tucker, chief executive of New Jersey-based freight broker Tucker Company Worldwide, told the newspaper recently.
Last year was described as a ‘trucking bloodbath’ by many, thanks to the fact that there were more business failures than usual. The most significant was that of Celadon, a truckload carrier that grossed $1 billion as recently as 2015. It filed for bankruptcy in December, leaving 3,000 drivers unemployed. The FreightWaves websiter described this as the largest trucking bankruptcy in history. Now, thanks to the weakening economy and the arrival of the coronavirus, many fear even more bankruptcies in America’s $800 billion trucking industry in 2020.
There is one piece of positive news to emerge from this situation, however. Used truck values are plummeting. Therefore, it’s the right time for transport operators to buy a good quality well-priced second-hand truck.
