Emissions Sink Big Truck Sales

May 21, 2007
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GRAND RAPIDS — Local sales of big trucks in 2007 have been slower than an 18-wheeler in a traffic jam.

Thanks to a 2006 rush to beat new Environmental Protection Agency emissions standards that added $8,000 to $10,000 to the price tag of a new tractor, the market has been quiet.

“Things have slowed down,” said Mick Schorle, general manager of Freightliner of Grand Rapids and Kalamazoo, a DaimlerChrysler company that leads the Class 8 market. “We saw an upsurge in sales (in 2006) relative to the emissions standards, which we’re seeing the converse effect of right now.”

Added Joel Love, principal at Kenworth’s Grand Rapids OEM: “Our manufacturer gave us a quota that, unless something really remarkable happens, we won’t get to 60 percent of … this year.”

Over the past three decades, the federal Environmental Protection Agency has issued increasingly stringent requirements on big-rig engines to cut two main components of smog, nitrogen oxide and particulates. The latest round began in 2002, with big emissions drops required in 2007 and 2010 in newly produced engines, said Tom Nienhaus, who is the truck engine account manager for Caterpillar’s western region.

“This drove the industry to a huge pre-buy,” Nienhaus said. “Last year was an all-time blow-out record in Class 8 commercial vehicle sales. Even if they didn’t need vehicles, they bought a few because they didn’t want to risk buying this year’s product. This has really put the industry on a flat spot.”

In 2006, buyers might have had a six- to seven-month wait for a truck to be built, but today that’s down to about 30 days, he added. He expects some scheduled shut-downs for factories this summer to give inventory a chance to align with sales.

Sales in 2006 were pegged beyond 300,000, but predictions put them at 200,000 for 2007 and 220,000 for 2008, according to a Transport Topics report. Another boom year is expected in 2009, followed by a bust year as transportation companies again stock up prior to the 2010 emissions rules changes.

“Now we’re going to have a change in 2010. Once again, there will be a lull, then a spike in sales again to pre-buy before the 2010 emission rules changes,” said Schorle.

In his 37 years in the business, Schorle said, he’s seen cycles but not the drastic peaks and valleys that have mirrored the EPA’s actions this decade. “From then on out, the noxes (nitrogen oxides) should be down enough to carry us through, but who knows what the feds will come up with?”

Transport Topics Online reported in April that first-quarter, heavy-duty truck sales were down 22 percent from first quarter 2006, to about 51,000. Truck manufacturers are predicting sales to drop as much as 40 percent this year, the Web site reported, with orders for new trucks down by around 70 percent. In 2006, nearly 300,000 trucks were sold.

OEMs still have machines with old-technology engines available for sale on their lots. They can be sold as long as the engines were made prior to Jan. 1. And there is no retrofit requirement, so engines in the vast majority of semi-tractor trailers in operation don’t meet the new rules.

“We put some extra trucks in our stock inventory to be able to deliver them in 2007 so that we have some of the older trucks with the previous level of emissions standards,” said Doug Cisler, general manager at Duthler Truck Sales, which handles the Sterling and Western Star lines of vocational trucks for such uses as municipal and construction. “We haven’t seen a real big impact on our truck sales from that standpoint, so much as the economy in Michigan in general.”

Schorle said he’s not worried about surviving a down year. Noting that customers are likely to hang on to older vehicles a little longer — perhaps even until the 2010-compliant engines are available — he expects a brisk business in parts and service.

“We’ve been really focusing on our parts and our service business,” said Love, who employs 88 people. “With any dealership operation, any truck or car you sell is gravy. We focus on absorption, the capacity of repair, parts, service and body work to cover the entire overhead of the dealership.” This year’s absorption rate has slipped by nearly 20 points, he added.

Nienhaus said he expects a tough year, as Caterpillar is losing “a few partners” because of the technology path it plans to take to meet the 2010 regulations.

“The next step in emissions reduction is not as huge as ’07 or ’02/’04, but it’s another step nonetheless that could create another huge cost increase from the standpoint of manufacturing. I’ve heard anywhere from $8,000 to $15,000 to the price of a unit,” Neinhaus said. With price tags on the the big trucks already running well above $100,000, “that’s going to put huge pressure on who can afford to stay in business.”

Companies also are pressured by driver shortages, insurance costs, fuel prices and questions about the efficiency of ultra-low sulfur fuel that was mandated as of Jan. 1, he said.

Cisler said the positive outcome is that air pollutants from trucks have been slashed.

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