The market for heavy-duty trucks has been up and down in recent times, fluctuating because of economic and regulatory factors.
But in an industry where various conditions align to set the tone for buyers, things have shaped up decently in the past couple years. Economic conditions are improving slowly, with further growth forecasted down the line. This means big things for the trucking industry, which still serves as America’s dominant freight mode.
As freight demand grows and shipping rates rise, fleets are finally able to overcome one of their main hindrances for the last decade – aging equipment.
Many new innovations have taken hold in trucking, from fuel-efficient engines to technologically outfitted systems for logistical, telematic, and safety management. The favorable economic conditions mean these cost-saving investments can finally be made.
Analysts believe that larger carriers are more likely to take advantage of these conditions, overhauling their fleets and preparing for the next generation of trucking.
One major transaction signaled the start of the rebounding market in a big way. Navistar International just got a $200 million deal to provide 1,400 sleeper trucks and 265 day cabs to Chattanooga trucking giant US Xpress.
The multi-year deal between US Xpress and Navistar was decided on based largely on the fuel mileage. A 2018 model used for testing purposes showed best-in-class results according to executive chairman Max Fuller. He also stated the post-purchase perks influenced the decision.
“The things we look at are the total cost of ownership and whether the truck has the proper support programs in place – dealers that have parts, good warranties, things that support the product after the sale – and International does a pretty good job in that area.”
For US Xpress, the move represents a long-term investment. The vehicles are not only designed to help carriers by reducing fuel costs, but they’re backed by a long-term leader in the industry.
Navistar is benefiting heavily from the sale as well, as they’re looking to rebound from their own slump. In recent years, their own aging inventory of used vehicles and diesel engines presented some growth problems. But their new offerings were so impressive they snagged US Xpress from their longtime supplier, Freightliner Cascadia.
Navistar’s third quarter earnings of $37 million are a stark contrast from the $34 million loss during the third quarter of 2016.
ACT Research suggests that Class 8 semi-tractors could see about 140,000 orders this year. 2015 saw a whopping 184,500 orders, while 2016 saw a sharp fall to 85,400.
If economic data is any indication, orders could see a steady increase in the coming years. The American Trucking Associations released an industry report this past summer predicting 2.8 percent growth in freight volumes this year. Volumes are expected to jump 3.4 percent per year through 2023.
Trucking’s turnaround in the heavy-duty sector could also signal a slump in the growth of smaller fleets and independent drivers. With an upcoming ELD mandate going into effect soon, commercial operators may see jobs with larger carriers as the better opportunity for long-term, regulatory-compliant positions.
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